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African CSOs demand clear roadmap on SDR tool 

By BUUMBA CHIMBULU

AFRICAN Civil Society Organisations have raised concern on the criteria and system used by the African Development Bank (AfDB) on distribution of Special Drawing Rights (SDRs) in its proposed new tool, the Hybrid Capital Instrument (HCI).

The Civil Society Organisations (CSOs) were not clear whether the HCI would act as a loan facility in distributing SDRs to its member states or rechannelling at a zero-interest rate.

These were the African Forum and Network on Debt and Development (AFRODAD), Okoa Uchumi Coalition, AERC, MEJN-Malawi, ANEEJ-Nigeria, UDN-Uganda, Centre for Trade and Development (CTPD)-Zambia, TISA-Kenya, CROSET-Chad, and LAREM-Senegal.

Zambia is among the African countries which accessed SDRs in August 2021 with an allocation of SDR 1.3 billion (US$1.84 billion).

According to the AfDB, the HCI would enable the Bank to multiply the SDR contributions by three or four times and keep them at the IMF as part of its balance sheet. 

The Bank would then borrow money in hard currencies from capital markets and lend it to members in their preferred currency.

Not being clear on the HCI, the CSOs made some demands such as AfDB continuing to champion reform on SDRs allocation system to reflect the need rather than economic might. 

They were confident that this was because with the appropriate use of SDRs, it would help to solve liquidity problems at best, but emphasis also needed to be given to comprehensive debt management strategies to minimise the debt crisis in Africa. 

“Reforming it to include factors like indebtedness and poverty would ensure a fairer allocation of SDRs based on countries’ challenges. For instance, there is a need to expand the scope of the SDRs quota system beyond GDP. 

“Available reports estimate that African countries utilised 85 percent of their allocated SDRs in 2021 compared to their developed counterparts. This demonstrates the need for a review of the SDRs quota system to take into consideration the development needs of each country or region regarding SDRs allocation,” they said.

Another demand was the need to adopt urgent reforms around SDRs allocation governance and reporting framework, stating that SDRs allocations came as a general reserve that was tied to no specific development purposes. 

According to the CSOs, this made it difficult to track and report its uses.

“Besides changing the quota formula, institutional reforms on how the IMF operates should be given greater attention to shift the loopsided Global Financial Architecture to work for all economies equally,” they demanded.

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