Economist urges government to leverage Special Drawing Rights for economic growth

Dr Richmond Atta-Ankomah, Economic Researcher, Institute of Statistical Social and Economic Research (ISSER), has urged government to leverage the Special Drawing Rights (SDR) of the International Monetary Fund (IMF) for economic growth.

He said the SDR was a less costly financing regime which offered lower interest rates than commercial loans for countries like Ghana.

“The current SDR interest rate is about 4 per cent, which was substantially cheaper than 7 to 11 per cent charged on Ghana’s Eurobond," he added.

He said the SDR by the IMF is characterised by quotas, which members shared in a general allocation.

He encouraged government to appeal to the IMF to take into account the need for more funds to help Ghana channel liquidity and investment financing into well structured, sustainable, and inclusive developmental projects.

He said the unused funds by developed countries like the G20 could be channeled to African countries which were in dire need of funds for economic recovery.

He said SDRs allocated to developed countries supplemented their trillions of reserves.

Considering the impact of the Covid-19 pandemic, climate change, Russia’s war in Ukraine and other huge threats facing Africa at the moment, it was important to recycle a portion of the SDRs from developed countries to vulnerable countries like Ghana.

Dr Atta-Ankomah asked the IMF to consider and integrate region-specific shocks to allocate more funds to countries predisposed to certain climate shocks and lack resilience capacity.

He said Ghana could not afford to go to the commercial credit markets even if it was still opened due to its unsustainable high debt level.

“The precarious conditions and limited financing options in the global south, particularly in Sub Saharan African countries makes the SDR a valuable option to explore, ”he added.

Mr Atta-Ankomah said a higher allocation of SDRs to Africa offered a unique opportunity to put the continent on track to meeting the United Nations’ Sustainable Development Goals (SDGs) and build the Africa “we want.”

He said:“the money would not be a free money and would be paid back, therefore we must generate enough revenue from it to quantify our income.”

Speaking on domestic reforms, he said digitizing the economy and tax administration would be efficient to reduce the costs associated with tax collection.

This, he said, would create transparency and accountability in the tax system at all levels to help minimize or eliminate corrupt activities from officials.

He said government must implement prudent expenditure measures by cutting the size of ministries to between 40 to 50, adding that, there must be the need for continuous audit of payroll.

SDRs are not a currency but an international reserve asset created by the IMF expected to have reserve assets features, including immediate availability to address financial needs.