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THE African Development Bankk, AfDB, Inter-American Development Bank, IDB, the Rockefeller Foundation, and the Center for Global Development came together to co-host a high-level meeting on October 13th to discuss the rechanneling of Special Drawing Rights, SDRs, from contributing countries through Multilateral Development Banks, MDBs,. The objective is to boost their development and climate resilience lending to countries most in need.
The meeting took place on the sidelines of the Annual Meetings of the International Monetary Fund, IMF, and the World Bank Group in Marrakech, Morocco.
Participating ministers, senior government officials, and civil society representatives discussed the multiple crises facing developing countries as a result of the COVID-19 pandemic, the war in Ukraine, and the resulting food crisis. The meeting also focused on the challenges countries face in accessing international capital markets in a high inflationary and high interest rate environment.
They highlighted the urgent need for additional concessional resources to finance economic recovery, climate change and to give countries the fiscal space to manage debt burdens sustainably.
The African Development Bank and Inter-American Development Bank outlined their proposed hybrid capital-based model for SDR rechannelling. Participants recognized that triple-A ratings and the strong financial track records of both the AfDB and the IDB in mobilising resources at low cost from capital markets, would enable them to leverage SDRs allocated to them by a factor of three to four.
This means that $5 billion of SDRs rechannelled through the AfDB and the IDB can generate up to $20 billion of additional lending for development and climate resilience projects, including directly to the private sector.
The meeting conveners were joined by government and development partner representatives such as the IMF, Egypt, France, Kenya, Spain, Saudi Arabia, United Kingdom, United States, and the COP28 Presidency, UAE.
The Bill and Melinda Gates Foundation, Development Reimagined, ONE Campaign, United Nations Economic Commission for Africa, UNICEF, the World Health Organisation, Asian Development Bank, EBRD, IDB Invest, and the Islamic Development Bank also participated in the deliberations.
The participants welcomed a number of key developments from the meeting:
• Representatives from the IMF set out that the Fund staff had engaged closely with the AfDB and IDB teams in developing the hybrid capital-based proposal, including by sharing relevant experiences gained in setting up SDR channelling for the IMF’s Poverty Reduction and Growth Trust (PRGT) and Resilience and Sustainability Trust (RST). The representatives noted that in the IMF staff’s view, the proposed instrument – with the intended number of participants – meets the criteria for reserve asset status.
• The representatives of countries with unused SDRs expressed strong support for the proposal and committed to working at pace to unlock progress ahead of COP28 in Dubai, with the COP28 Presidency offering full support to showcase the proposal at a high-level event on Finance Day on December 4th. The occasion will also serve as a prestigious platform for countries to announce SDR pledges to the facility.
• France confirmed its participation in the SDR rechannelling to Multilateral Development Banks through the Liquidity Support Arrangement (LSA).
• The participants agreed to establish a working group to identify contributions as soon as possible and resolve any remaining technical issues faced by countries.
The participating leaders recalled the calls made by the African Union, the G7, and the G20 to advance the voluntary channelling of SDRs through MDBs while respecting national legal frameworks and the need to preserve the reserve assets status of SDRs. The solution spearheaded by the AfDB and the IDB will leverage additional capital more effectively for development and climate resilience and for those regions that need it most.
Participants also encouraged other multilateral development banks to follow the leadership shown by the African Development Bank and the Inter-American Development Bank and join the efforts to mobilize SDRs.
Distributed by APO Group on behalf of African Development Bank Group (AfDB).
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-October 26, 2023 @ 16:41 GMT |
Tags: Asian Development Bank Bill and Melinda Gates Foundation Development Reimagined EBRD IDB Invest ONE Campaign the World Health Organisation UNICEF United Nations Economic Commission for Africa
