The African Development Bank (AfDB), Inter-American Development Bank (IDB), the Rockefeller Foundation, and the Center for Global Development came together to co-host a high-level meeting on October 13th to discuss the rechanneling of Special Drawing Rights (SDRs) from contributing countries through Multilateral Development Banks (MDBs). The objective is to boost their development and climate resilience lending to countries most in need.
The meeting took place on the sidelines of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank Group in Marrakech, Morocco.
Participating ministers, senior government officials, and civil society representatives discussed the multiple crises facing developing countries as a result of the COVID-19 pandemic, the war in Ukraine, and the resulting food crisis. The meeting also focused on the challenges countries face in accessing international capital markets in a high inflationary and high interest rate environment. They highlighted the urgent need for additional concessional resources to finance economic recovery, climate change and to give countries the fiscal space to manage debt burdens sustainably.
The African Development Bank and Inter-American Development Bank outlined their proposed hybrid capital-based model for SDR rechannelling. Participants recognized that triple-A ratings and the strong financial track records of both the AfDB and the IDB in mobilising resources at low cost from capital markets, would enable them to leverage SDRs allocated to them by a factor of three to four. This means that $5 billion of SDRs rechannelled through the AfDB and the IDB can generate up to $20 billion of additional lending for development and climate resilience projects, including directly to the private sector.
The meeting conveners were joined by government and development partner representatives such as the IMF, Egypt, France, Kenya, Spain, Saudi Arabia, United Kingdom, United States, and the COP28 Presidency (UAE). The Bill and Melinda Gates Foundation, Development Reimagined, ONE Campaign, United Nations Economic Commission for Africa, UNICEF, the World Health Organisation, Asian Development Bank, EBRD, IDB Invest, and the Islamic Development Bank also participated in the deliberations.
The participants welcomed a number of key developments from the meeting:
Representatives from the IMF set out that the Fund staff had engaged closely with the AfDB and IDB teams in developing the hybrid capital-based proposal, including by sharing relevant experiences gained in setting up SDR channelling for the IMF's Poverty Reduction and Growth Trust (PRGT) and Resilience and Sustainability Trust (RST). The representatives noted that in the IMF staff's view, the proposed instrument - with the intended number of participants - meets the criteria for reserve asset status.
The representatives of countries with unused SDRs expressed strong support for the proposal and committed to working at pace to unlock progress ahead of COP28 in Dubai, with the COP28 Presidency offering full support to showcase the proposal at a high-level event on Finance Day on December 4th. The occasion will also serve as a prestigious platform for countries to announce SDR pledges to the facility.
France confirmed its participation in the SDR rechannelling to Multilateral Development Banks through the Liquidity Support Arrangement (LSA).
The participants agreed to establish a working group to identify contributions as soon as possible and resolve any remaining technical issues faced by countries.
The participating leaders recalled the calls made by the African Union, the G7, and the G20 to advance the voluntary channelling of SDRs through MDBs while respecting national legal frameworks and the need to preserve the reserve assets status of SDRs. The solution spearheaded by the AfDB and the IDB will leverage additional capital more effectively for development and climate resilience and for those regions that need it most.
Participants also encouraged other multilateral development banks to follow the leadership shown by the African Development Bank and the Inter-American Development Bank and join the efforts to mobilize SDRs.
About the African Development Bank (AfDB)
The African Development Bank Group (AfDB) is Africa's premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 44 African countries with an external office in Japan, the AfDB contributes to the economic development and the social progress of its 54 regional member states. For more information: www.afdb.org
About the Center for Global Development
The Center for Global Development works to reduce global poverty and improve lives through innovative economic research that drives better policy and practice by the world's top decision makers.
About the Inter-American Development Bank (IDB)
The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public- and private-sector clients throughout the region.
About The Rockefeller Foundation
The Rockefeller Foundation is a pioneering philanthropy built on collaborative partnerships at the frontiers of science, technology, and innovation that enable individuals, families, and communities to flourish. We make big bets to promote the well-being of humanity. Today, we are focused on advancing human opportunity and reversing the climate crisis by transforming systems in food, health, energy, and finance. For more information, sign up for our newsletter at rockefellerfoundation.org and follow us on X @RockefellerFdn.
Contact:
Amba Mpoke-Bigg, African Development Bank, email: [email protected]
Jeremy Gaines, Center for Global Development, [email protected], +1-202-416-4058
Pablo Bachelet, Inter-American Development Bank, [email protected]
Ashley Chang, The Rockefeller Foundation, [email protected]
