SDRs: A Sustainable Pathway to Capital Increases

Scaling Up Financing with SDRs:

• Civil Society Calls for FfD4 to Revive ‘Spirit of Monterrey’ and Reassert UN’s Role in Global Economic Governance (Bretton Woods Project)
• Fix the System: How SDRs Can Bridge the Financing Gap (Our Future Agenda)

Additional Resources:

• SDR Factsheet (International Monetary Fund)
• An SDR Liquidity Line for MDBs (Center for Global Development)

Key Messages:

• SDRs are an efficient, low-cost, and nondistortionary tool to boost countries’ international reserves and liquidity.
• SDR allocations can be leveraged to help developing countries respond to debt and liquidity pressures and create robust financial safety nets. SDRs must be rechanneled where they are most needed to improve LICs’ and LMICs’ access to sufficient, quality financing as an alternative to sovereign borrowing.
• Rechanneling SDRs to MDBs will help investments in international development go further by: (1) Creating more stable financial conditions in-country. (2) Securing and mobilizing more concessional finance. (3) Building MDBs’ capacity to manage SDRs.
• There is precedent: The IMF has increased the allocation of SDRs to boost global liquidity during times of crisis. For example, the IMF released $650 billion to help stabilize the global economy during the COVID-19 pandemic.
• Donor countries with SDRs should aim to answer the Inter-American Development Bank and African Development Bank’s call for five countries to contribute to SDR hybrid-capital channeling solutions. This proposal can help unlock concessional financing where it is most needed.