Press Release No. 21/330

IMF Managing Director Kristalina Georgieva’s Statement at the Paris Peace Forum on Increasing Support for Vulnerable Countries via SDR Rechanneling

November 11, 2021

Washington, DC: The Managing Director made the following remarks at the Paris Peace Forum today:

“The world economy is recovering and is expected to achieve 5.9% growth this year. For low-income developing countries, however, growth is projected to be only half that size—3%. And that dangerous divergence is becoming more entrenched. Why? Because there is still severe inequality in access to vaccines and in available policy space, especially for vulnerable countries. That is a major reason why the IMF’s recent Special Drawing Rights (SDRs) allocation is so important.

SDRs improve a country’s reserve position and create liquidity that is so precious for nations that have very tight fiscal space at this moment in time. Of the new $650 billion allocation, $275 billion went to emerging markets and developing economies and, of this, $21 billion went to the poorest countries, with Africa receiving about $31 billion.

On the one hand, this is great because SDRs do not add to a country’s debt—it is truly an injection of reserves and liquidity. On the other hand, because of shareholding and quota arrangements at the IMF, the countries that are most in need received a relatively small part of the overall allocation. This takes us to the question of how we can improve this situation through the voluntary on-lending or rechanneling of some of the SDR allocation from countries with strong external positions to the more vulnerable countries.

As we prioritize the needs of countries, it has to be done in the context of interdependence. It is morally right to help everyone in need, of course, but it is also in everybody’s self-interest. No-one is safe until everyone is safe. That applies to the fight against the pandemic and also to the fight against climate change. And this again raises the issue of the rechanneling of SDRs.

The G20 has put forward a global ambition of rechanneling $100 billion of the SDR allocation from richer to poorer countries. President Macron—bravo—was actually the first to set that goal which has since gained broad international support.

The IMF already has an instrument—the PRGT (Poverty Reduction and Growth Trust)—to which we can rechannel SDRs and thus boost our provision of zero-interest lending to low-income countries. Moreover, in light of the pandemic crisis and the climate crisis, the IMF has proposed a second instrument that would be longer-term with low interest rates and that would provide funding not only to low-income countries but also to vulnerable middle-income countries as well as, importantly, fragile island economies. Our aspiration for this Resilience and Sustainability Trust (RST) is to start with about $30 billion, building it up to $50 billion and beyond.

The establishment of the RST has already won the support of the IMF’s membership, and the aim is to have its design in place by our Spring Meetings 2022 and implementation by our Annual Meetings in the same year. Via this new RST instrument, the IMF can do significantly more to support policies for the once-in-a-lifetime transformation to the new climate economy—one that is low-carbon and, most importantly, climate resilient. And as well as the PRGT and the RST, we would also be willing to provide technical advice to multilateral development banks which might want to explore other viable options for rechanneling.

In summary, we see the new SDR allocation and the further rechanneling of SDRs from countries with strong reserve positions to the more vulnerable countries as a great example of enlightened self-interest. We are all engaged in fighting a global crisis—and we can only win if we all work together.”