Accra — The Head of the Institute for Statistical Social and Economic Research (ISSER) Prof. George Aryeetey has called on the government of Ghana to state its position on a new proposed form of financing development in Africa by the international community.

"Speaking on the topic "Innovative ways of financing African Development: The Potential use of Special Drawing Rights," Prof. Aryeetey said the traditional order of going to the IMF and World Bank for additional aid to balance the country's budget every year could be replaced with the issuance of the Special Drawing Rights (SDR) which will benefit donors and recipient countries as well.

He said international NGOs like OXFAM and ACTIONAID are all sensitizing governments about these new possibilities.

"Today, there is hardly any African country which can finance its budget without aid," Prof. Aryeetey said adding, "No African country can achieve its Millennium Development Goals without aid."

To finance the MDGs, which intends among others to halve the world's poverty by the year 2015, there is the need to double aid to poor countries from 50 billion dollars to 100 billion dollars.

Asked whether the SDR will reduce poor countries dependent on aid, Prof. Aryeetey had this to say; "It all depends on what you do with the aid, SDR gives you more opportunity, but whether you will go back in ten years depends on what you do with it"

Prof. Aryeetey said arguments against increasing aid to developing countries is getting bigger and bigger and that is why the UN Secretary General Kofi Annan has tasked some Economists to look for ways of raising money to fund the MDGs.

Prof. Aryeetey is one of such economists.

Developed countries tax their citizens and use the money to provide aid to poor countries.

"They have a perception of extreme corruption and think that is why nothing works in poor countries," he said.

SDR is a special instrument the IMF is empowered to issue to all nations.

It is intended to help the whole world to achieve a certain level of liquidity.

For instance in the case of a global economic recession, the IMF has the power to issue the SDR, which can be exchanged, by countries for hard cash in foreign currency to stimulate global demand for goods and services.

The SDR also serve as additional reserves for countries.

"So long as you hold your SDR you do not pay interest on it, it is also known as a costless reserve," Dr. Aryeetey explained adding, "The more reserves you have, the more you are seen as credit worthy in the capital market."

But this is where a problem was detected. Allocation of SDR was done on quota basis in the past depending on the strength of a country's economy in the world.

Thus rich countries like the US had bigger quotas while poor countries like Ghana got just a fraction of it

SDR was allocated first in 1970 and in 1981 and none has been issued since then.

"This is because the world's largest economies have no need to hold reserves," Prof. Aryeetey explained further.

He said rich countries have reserves against unforeseen future troubles but these are not in SDR but rather in dollars and in gold reserves.

Prof. Aryeetey said in 1997, a new proposal was made to ensure that SDR is distributed equitably among countries depending on their level of need.

Although the US administration was in favour of this, the US congress voted against it.

France also voted against it.

"Because many countries are holding reserves in dollars, the US is buying cheap credit all over the place and does not want to do anything about the plight of poor countries," Prof. Aryeetey said.

He said one of the proposal to help poor countries is the resumption of the first SDR to deal with what has become the frequent shortage of liquidity in developing countries.

The second proposal looks at the occasional injection of additional aid that targets developing countries.

This is intended to be an allocation that may be beyond the scope of the regular SDR. The IMF says it has no objection so long as its constitution is not altered. However economists within the IMF seemly oppose this, they say it might lead to situations where poor countries will spend beyond their means.

Other critics say non-conditional financing encourages bad practices and have said there is the need for the world to find remedy for international liquidity problems.

Also rich countries may be asked to donate their SDR into a global fund known as global public goods to be used for provision of health services such as HIV/AIDS treatment, malaria research, global fund for water, infrastructure among others.

"Ghana should now debate whether it supports this public good issue or it would like to manage its share of the funds on its own," Prof. Aryeetey said.

For instance Ghana can exchange its SDR for cash when world price for its exports like cocoa falls.

Ghana will only pay interest on the SDR when it takes more than its allocation.

The Finance Minister, Yaw Osafo Maafo, recently announced that Ghana has improved on its reserves, that is very good but it is at a higher cost to the country, Prof. Aryeetey said.

"We have sold our cocoa and instead of using the money to buy drugs, build hospital, universities and roads we have to hold them in reserves," Prof. Aryeetey said adding "the special SDR could help us in such situations.

World Economists like George Sorros say to prevent a situation where developing countries will spend anyhow, the global fund is a laudable idea.

Again Economists have said countries with an acceptable growth and development programmes under HIPC, such as Ghana should be the first to benefit from the special SDR.

Before the SDR could start operating, the US congress needs to ratify the 1997 Articles of Agreement on the Special SDR.

Governments in developing countries have to determine how to use the new SDR while poor nations should be convinced that the money going into the global fund would eventually complement what they receive.

Resources going into such countries need not cause global economic instability.

Meanwhile Prof. Aryeetey is yet to explain the terms of payment of the aid poor countries will receive through the SDR.

An advisor to the Governor of the Bank of Ghana, Dr. Mamoud Bawumia, said Ghana is seen as credit worthy among international circles with its recent ratings in the B class by the Sovereign Credit Ratings.

Nonetheless, an opportunity like the SDR will be of help to the country.