G7 Finance Ministers decision to back SDRs for poor developing countries commended

The meeting of the committee of experts of the Conference of African Ministers ended Friday with experts pledging to do more to accelerate the implementation of the AfCFTA.

They will also help to improve domestic resource mobilization, deepen digitalisation and accelerate the implementation of the SDG 2030 and 2063.

Dr Vera Songwe, the Executive Secretary of the Economic Commission for Africa (ECA), welcomed the move by the G7 Finance Ministers to support the issuance of new Special Drawing Rights (SDR) to help developing countries better respond to the COVID-19 crisis.

The Ministers agreed to support a new SDR allocation to assist vulnerable countries to respond adequately to the health and economic crisis triggered by the pandemic.

“This is a very important and strategic step on the road to new issuance of Special Drawing Rights by the G7 Finance Ministers today. The SDRs are our chance to do something transformational for a large number of frontier economies. We are grateful for the leadership shown by the G7 Ministers,” Dr Songwe said.

Dr Songwe has been at the forefront of advocacy for international financial institutions and others to provide more liquidity to allow struggling African countries to build forward better post-COVID-19.

“Now we need to work on mechanisms for on-lending so we can stretch the SDRs for countries that need them most. Additional funding for the IMF PRGT from the SDRs of course is critical for low-income countries. We need to get vaccines to countries and also support the recovery with market access instruments that crowd in the private sector such as the Liquidity and Sustainability Facility.”

She added, “SDRs allow us to think out of the box and bigger. There is now real momentum for collective action at the IMF and World Bank spring meetings and also for the African Finance Ministers meeting next week organized by ECA.”

Created by the IMF in 1969, SDRs play an influential role in global finance and help governments protect their financial reserves against global currency fluctuations. It is also used as the basis of loans from the IMF's crucial crisis-lending facilities with the institution using it to calculate its loans to needy countries, and to set the interest rates on the loans.

The ECA has also been advocating for the extension of the Debt Servicing Suspension Initiative (DSSI) to the end of 2021 to ensure countries have enough liquidity to respond and kick-start the recovery by freeing up resources to pay for much-need vaccines and improve buffers of low-income countries.

The liquidity and sustainability facility is another important vehicle to assist African countries to increase liquidity.