DUBAI — At COP28, 141 civil society organizations, academics and experts are calling for world leaders to make IMF Special Drawing Rights a core tenet of the response to the climate crisis. A new letter launched today urges:
- A new $650 billion issuance of SDRs for immediate global relief, and regular, periodic SDR issuances to support climate investments;
- The creation of targeted future allocations that distribute SDRs more effectively toward all low- and middle-income countries;
- Reforms to broaden SDR rechanneling mechanisms while minimizing debt and conditions attached to their use.
A growing number of developing countries are spending more on debt service than on climate and social spending, combined. Loss and damage from climate change is already costing climate vulnerable countries nearly $200 billion per year. Despite the G20’s commitment to rechannel $100 billion in SDRs in October 2021, as of October 2023 just $702 million of these funds had actually reached vulnerable countries.
The letter notes the need for a new $650 billion issuance of Special Drawing Rights to help meet urgent and climbing financing needs for developing countries in ways that won’t create additional debt burdens and undue policy conditionality.
At this time of crisis, the letter calls for action on SDRs to go much further than that. How Special Drawing Rights work and how they are distributed is decided according to an unequal global financial architecture. The Vulnerable Twenty (V20) group of countries notes that 68 climate-vulnerable members, while accounting for “21.7% of the global population and 44.7% of IMF programs, have only 5.3% of IMF votes. This unbalanced system harms V20 countries in the allocation of Special Drawing Rights (SDRs).”
The fact that the allocation of SDRs is pegged to the IMF’s quota system means that they are distributed first to those who need them least.
This quota system, rooted in colonial legacies, also determines that those same countries hold the largest voice in IMF decision-making. In a few days’ time, it is expected that the IMF’s Governors will again conclude a general review of quotas without realignment of IMF quota shares. Given the failure of the IMF’s quota review to give a greater voice to climate vulnerable countries, we must call for more ambition at COP28. We can – and must – decide now to change the rules to create an international reserve currency system that works for people and the planet.
Quotes for media use:
“Our countries are already living the climate crisis impacts despite not being the main actors responsible for the CO2 emissions. It is not fair to increase our debt levels to tackle the climate crisis. We need access to additional and no-debt-creating financing through Special Drawing Rights allocations, to finance the climate agenda.” – Patricia Miranda, Latindadd
“As we address the climate crisis, the call for a $650 billion issuance of Special Drawing Rights highlights the need for a more equitable global financial system. It’s crucial to rethink distribution mechanisms to ensure all nations, particularly vulnerable ones, receive adequate support. Reforming the IMF’s governance and quota system is essential for a fair and effective response. To survive the global crisis, the global economic system has to start to respond to the nations in need, not to the wealth interests, to guarantee a sustainable future” – Shereen Talaat, MenaFem Movement for Economic, Development and Ecological Justice
“At a time when international negotiations are failing to provide even the minimal climate finance required urgently in most of the world, issuing more of the IMF’s SDRs is a relatively easy and low-cost option, with no downsides.” – Prof. Jayati Ghosh, University of Massachusetts Amherst
“Current SDR rechanneling mechanisms like the IMF’s Resilience and Sustainability Trust (RST) include climate policy conditionalities that transfer the costs to the most vulnerable. According to the RST operational guidance note, countries that implement natural resource pricing and the creation of water markets will receive more money. We need a new issuance of SDRs, and conditionality-free rechanneling.” – Federico Sibaja, Recourse
“Developing countries need fiscal space to tackle crises like climate change. Another issuance of SDRs is urgently needed to provide liquidity without increasing external debt. But this must be accompanied by major reforms to make the economic system centered on care for people and the planet.” – Niranjali Amerasinghe, ActionAid USA
“Special Drawing Rights – while not a silver bullet – can play an important role in confronting the current polycrisis. As the UN Secretary General has noted, the way in which SDRs allocations work could be reformed to make them more needs-based, and less dependent on the political whims of the IMF’s executive board. What is lacking is political will from the IMF’s wealthiest shareholder countries to consider a fresh $650 billion SDRs allocation, or to pursue reforms that would make SDRs fit for purpose to tackle 21st century challenges.” – Jon Sward, Bretton Woods Project
At COP28: Shereen Talaat, MenaFem Movement for Economic, Development and Ecological Justice, <[email protected]>
In the UK: Isabel Alvarez, Communications Manager, Bretton Woods Project <[email protected]>
In the USA: Niranjali Amerasinghe, Executive Director, ActionAid USA. <[email protected]>
- Latindadd and Center for Economic and Policy Research report, More SDRs for Latin America and the Caribbean: An opportunity in a time of multiple crises, November 2023.
- Letter from more than 50 Caribbean civil society organizations to the US government in September, calling for a new $650 billion SDRs allocation, an end to IMF surcharges, and for significant Loss and Damage financing.
- Bretton Woods Project briefing, ‘Reconceptualising SDRs as a tool for development’, October 2023.
- The UN Secretary-General has called for a review of the IMF’s SDRs mechanism as part of his international financial architecture reform agenda, proposing automatic, predictable future allocations of SDRs, as well as reviewing how to make future allocations better respond to the needs of all IMF members, in particular low- and middle-income countries.