IMF to Give African Countries $33bn from Special Drawing Rights
The International Monetary Fund (IMF) Managing Director, Ms. Kristalina Georgieva, has assured African leaders of $33 billion from the expected Special Drawing Rights (SDR) of $650 billion.
She gave the assurance on Tuesday in Paris, France at the African Finance Summit hosted by French President, Emmanuel Macron, on post COVID-19 recovery.
Georgieva said the fund would boost Africa’s reserves and liquidity without adding to its debt burden.
“Our membership backs an unprecedented new allocation of SDR of 650 billion dollars, by far the largest in our history.
“Once approved, which we intend to achieve by the end of August, it will directly and immediately make about 33 billion dollars available to our African members.
“I am very encouraged by indications of several advanced and emerging market countries of their intentions to on-lend part of their new Special Drawing Rights at highly concessional terms.
“This gives me confidence in building this source of low-cost financing to meet the substantial needs of Africa, including for vaccines,” said the IMF boss.
She said there was an urgency to focus on financing Africa because in 2020, the pandemic-caused recession shrank the Gross Domestic Product (GDP) of the continent by 1.9 per cent, making it the worst performance on record.
The managing director said in 2021, the fund projected global growth at six per cent, but only 3.2 per cent for Africa.
According to her, it is a dangerous divergence that ought to be reversed as Africa needs to grow faster than the world at seven to 10 per cent to meet the aspirations of its youthful populations and become more prosperous and more secure.
“Yes, together we have avoided a much worse economic crisis. Now, we must build on this initial momentum to bring the pandemic to a durable end and boost growth in Africa.
“In other words, to secure a fair shot: a shot in the arm, for everyone, everywhere, and a shot at a better future,” said Georgieva.
She said the price of this fair shot was an estimated additional financing need of about 285 billion dollars for Africa for an adequate COVID-19 response till 2025.
She added that of the figure, 135 billion dollars would be for low-income countries.
On other actions, she said the pandemic had to be ended everywhere by targeting vaccinating at least 40 per cent of the population of all countries by the end of 2021, and at least 60 per cent by mid-2022.
The IMF boss said a crisis was an opportunity for transformational domestic reforms that increased domestic revenue, improved public services and strengthened governance.
“For instance, digitalisation can improve tax administration and revenue collection and the quality of public spending and with radical transparency, Africa can tap into new sources of finance such as carbon offsets.
“There is ample scope for countries to encourage private investment, including in social and physical infrastructure,” she explained.
She added that reforms of international taxation could also support Africa’s growth.
According to her, for a long time, the IMF has been in favour of minimum corporate tax rates to reduce the race to the bottom and tax avoidance.
She added that it was important to secure fair distribution of tax revenues through the Special Drawing Rights (SDRs), so they could contribute to closing Africa’s financial gap.
African leaders and heads of multilateral lenders were hosted to a meeting in Paris to find ways of financing African economies challenged by the COVID-19 pandemic. President Muhammadu Buhari also left Nigeria on Sunday for France to attend the meeting.