The president of the African Development Bank (AfDB) argued last week that the bank should redistribute the IMF's Special Drawing Rights (SDR) because it could leverage it four or five times.
"We received a lot of encouragement from our shareholders to be the ADB to receive this allocation from the International Monetary Fund (IMF) because due to our rating of AAA [the highest] we were able to leverage the amount by four or five times," Akinwumi Adesina said during the press conference marking the end of the Annual Meetings, which were held in a virtual format from Abidjan.
"The shareholders, the governors of the bank want us to be the ones to redistribute the amount that will come to Africa, because then we can finance the national development banks and increase the financial envelope that we will have at our disposal to ensure economic recovery," he further announced.
The African continent is entitled to $33 billion of the $650 billion, almost $545 billion, that the IMF is preparing to issue in DES to help economies recover from the pandemic, but that figure is clearly insufficient for Africa's needs, the banker added, even though at the Paris summit in May it was promised that $100 billion will be channeled to African economies from richer countries.
"We agreed in Paris that Africa should receive at least $100 billion of the $650 billion that will be issued, but statutorily, taking into account each country's share, the continent would receive only $33 billion, which is not enough to deal with the issues Africa faces," Adesina pointed out.
"Low-income countries alone need $245 billion by 2030, and all of sub-Saharan Africa needs $425 billion by 2030," he said, following estimates presented by the IMF earlier this year.
According to the official, "Africa doesn't have just one problem, it has three at the same time," since "the continent is simultaneously facing a climate, debt, and pandemic crisis, so the use of DES should not be traditional, since the situation is very different."
Present at the press conference, Ghana's Finance Minister Ken Ofori-Atta summed up, "We need a reallocation of the DES because it is urgent that the money comes directly to the ADB.
The Fund is preparing to make the largest ever injection of resources into its member states, increasing global liquidity and helping lower-income and more struggling countries deal with the economic consequences of the pandemic.
In addition to this, the IMF has been advocating that richer countries be able to channel some of the money they will receive to the countries in greatest difficulty, particularly those in Africa, which are in a particularly vulnerable situation due to the economic and health impacts of the covid-19 pandemic.
This can be done with the current instruments, namely the Poverty Reduction and Growth Fund, which allows for interest-free loans, but the model only applies to countries considered to be low-income, and the IMF wants to extend the model to small archipelago economies and middle- and low-income countries.
This Resilience and Stability Fund, one of the IMF's proposals, could be finalized by December, depending on the necessary approvals, but for now what the most vulnerable countries can count on, including the African ones, is receiving $33 billion from their share of the SDR, and probably another $100 billion that has been pledged by the richest countries.