Wealthy countries need to share a $650 billion gift from the International Monetary Fund
International Monetary Fund Update
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The author is a Labour Party member, formerly the chief secretary of the British Ministry of Finance, and chairman of the World Bank and the International Monetary Fund’s global parliamentary network
When the International Monetary Fund decided to mint US$650 billion in Special Drawing Rights (SDR), effectively creating funds for distribution to its 190 country members, it became a powerful weapon in the war against want. But this will only work if the shareholders of the International Monetary Fund now agree to take three major steps to move funds from the treasury to the eradication of poverty.
Due to the change of government in Washington, the huge problem of special drawing rights became possible, but it did not come fast enough. The Covid-19 shock caused poverty in the world for the first time in this century.The sum of what the poorest person in the world might spend 120 million years poor. For those governments that are already facing difficulties, the struggle is the hardest: even before Covid, the debt of the world’s poorest country has swelled by 9.5% to $744 billion.
Unless we are bolder, we will face the risk of a huge divergence in the world economy, with the rich recovering and the poor not.International Monetary Fund policymakers are known for their alarmist language, warning of the social structure of vulnerable areas was in danger. The Covid vaccine has only slowly entered the arms of impoverished citizens. Although “rebuild better” is a good idea, the slogan is of little significance to the bankrupt. Now is the time for leaders to support their rallying cry with some checks: Approximately 200 billion U.S. dollars Responding to Covid-19 and investing $250 billion in climate-friendly infrastructure in poorer countries.
The International Monetary Fund’s agreement on special drawing rights will help. Invented in 1969, originally linked to gold, Special Drawing Rights is a unit created by the International Monetary Fund Can be placed in the reserves of member states. They provide important leeway for the government to redeploy funds or exchange its shares for currencies including the U.S. dollar.
The new SDR issue will not be a panacea for poverty. But its impact can be maximized in the following ways.
First, the richer countries must share all their new special drawing rights with the poorer countries. Because of the way they are distributed, only 4% will go to poorer countries. Of the newly issued SDRs, $623 billion will go to richer countries, which, frankly, don’t need it.
We need a bold proposal to issue these special drawing rights, rather than old-fashioned traditions, which means that wealthier countries can only share 50% of the quota. Britain should lead the negotiations.After us, it may help restore our global reputation Cut our aid budget by 4 billion pounds Although every living former prime minister protested, it was in the pandemic.
Second, we need to ensure that SDRs are not simply loaned to poorer countries, even if the interest rate is zero. We can maximize our help by maximizing the value of the SDR that we convert into grants. This is entirely possible.As a charity such as Cafod Already shown, It all depends on how the UK and other countries choose to use the foreign currency and special drawing rights in our reserves. When the new special drawing rights arrive this fall, we can use them to replace part of our dollar stock, sell dollars in pounds sterling, and use this windfall for aid.
This funding from rich countries can be immediately supplemented by grants to fight Covid through donations to Covax, programs to distribute vaccines to poorer countries, or Covid-19 Technology access pool, An initiative of the World Health Organization to promote the global supply of Covid-19 health products. The increased funding will accelerate the launch of global vaccination and slow the mutation of new variants.
Finally, rich countries need to be honest. We must refuse to evade existing aid pledges and try to count the special drawing rights we share as overseas development aid. It would be counterintuitive if the IMF’s step forward triggered a regression in grant funding to the poorest people.
Global cooperation worked wonders during the pandemic, leading to the development and launch of vaccines in just one year. The same efforts must now be made to prevent the subsequent poverty pandemic.