Africa wants bigger chunk of IMF cash

LONDON - Rich countries should reallocate at least US$30 billion of new money from the International Monetary Fund towards investments in Africa to help countries battling the effects of coronavirus and climate change, four African finance ministers said.

In an open letter to the leaders of the Group of 20 leading economies, finance ministers from Ghana, the Democratic Republic of Congo, Ivory Coast and Nigeria also urged the rich nations to increase support for poorer countries' Covid vaccination drive.

The IMF has taken steps to implement a new US$650 billion allocation of its reserve currency, so-called Special Drawing Rights (SDRs). The process is expected to be completed in August.

"Make the IMF’s promised new issue of Special Drawing Rights available as soon as possible and define a clear path forward for their maximal re-allocation and on-lending," the ministers wrote in the letter published on Friday.

"The urgency now is to accelerate the disbursement of these SDRs to forestall the current emerging market liquidity crisis devolving into an insolvency crisis."

The economic fallout from the pandemic has exacerbated existing strains on a number of African sovereigns, with Zambia, Chad and Ethiopia all seeking overhauls on their debt burdens.

RELIEF

The new SDR allocation will provide some relief, but the cash gets split among its members based on their shareholdings which means rich ones will benefit most, with only 7% or US$42 billion of the total going to the 44 poorer nations.

G20 finance chiefs, who met on Friday and Saturday in Venice, had on their agenda a recommendation to find ways to ensure a significant part of the US$650 billion goes to countries most in need.

The letter, signed by Ghana's Ken Ofori-Atta, Nigeria's Zainab Shamsuna Ahmed, DRC's Nicolas Kazadi and Ivory Coast's Adama Coulibaly, urged G20 leaders to on-lend at least US$30 billion of that money to a new Liquidity and Sustainability Facility (LSF) and the African Stability Mechanism.

"[This would] catalyse investments to Africa, reduce the liquidity premia on sovereign bonds offered by middle-income countries and incentivise green and sustainability-linked investments," the letter said.

Rich countries also needed to boost their support for vaccination campaigns against coronavirus.

"In June alone there was a 290 million shortfall in vaccine supply," the finance ministers said. "We really need 1 billion doses donated in the next few months."

BIGGEST EVER

IMF managing director Kristalina Georgieva said Friday the Fund's executive board has backed increasing its SDR by US$650 billion as it looks to support countries recover from the Covid-19 crisis.

The increase would be the biggest ever for SDRs, which are international reserve assets that aid governments in protecting their financial reserves against global currency fluctuations, and also help the IMF calculate loans and interest rates.

"The IMF Executive Board yesterday concurred in my proposal for a new general SDR allocation equivalent to US$650 billion - the largest allocation in the IMF's history - to address the long-term global needs for reserves during the worst crisis since the Great Depression," Georgieva said in a statement.

"This is a shot in the arm for the world. The SDR allocation will boost the liquidity and reserves of all our member countries, build confidence and foster the resilience and stability of the global economy."

If approved by the Washington-based crisis lender's board of governors, the new SDR allocation will be completed by the end of August, Georgieva said.

It "will help every IMF member country - particularly vulnerable countries - and strengthen their response to the Covid-19 crisis," she said.

Georgieva has called on the G20 to step up efforts aiding the poorest countries withstand the "devastating double-blow" of the pandemic and the resulting economic damage. – Nampa/Reuters/AFP