Harare (New Ziana) –African Parliaments should exercise greater oversight on the use of the IMF Special Drawing Rights (SDR) as calls grow for the release of the special fund held by the global lender to assist countries better cope with effects of the COVID-19 pandemic.
Zimbabwean Member of Parliament and delegate to the Southern African Development Community Parliamentary Forum (SADC PF), Anele Ndebele said this on Monday during an online seminar dubbed “IMF Special Drawing Rights, a sustainable option for financing the fight against COVID-19 pandemic and economic recovery in Africa.”
SDRs are an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves and provide liquidity support when experiencing balance of payments crisis.
An SDR allocation provides each recipient country with a costless asset which countries can use as they want, without any conditionalities
SDRs are distributed in proportion to IMF members’ quotas (Around 60 percent to global north, 40 percent to emerging markets and developing economies, of which 3 percent has gone to Low Income Countries).
So far, there have been 3 General Allocations from 1970-72, 1979-81 and 2009 to address the global financial crisis and totaled US$250 billion.
Ndebele said the release of SDR funding, would assist countries such as Zimbabwe reduce domestic borrowing which tends to crowd out the private sector.
“Section 299 of the Constitution of Zimbabwe empowers Parliament to oversee how public resources including resources derived from SDRs are spent. Parliaments should ensure that SDR resources are channeled towards their intended use,” he said.
“Parliaments must engage the central banks and Ministry of Finance in order to monitor and track the use of the SDRs. Otherwise the money can be diverted to other uses. Parliament must hold the power of the purse over SDRs just the way it oversees the executive and the budget process- SDRs are no exception.”
Ndebele said one way of ensuring SDRs were used purposefully was to ensure that Parliament conducted public hearings and stakeholder consultations on the disbursement of the funds while Public Accounts Committees should do thorough audits.
“However, some Parliamentarians are of the view that calling for an increase in SDRs is nothing more than a call for more aid. Though aid may be good in the short term, in the long term Africa needs to build its own resilience,” he said.
Since the onset of the COVID-19 pandemic, calls have grown for the approval of a new SDR allocation.
Approval of a new allocation is first proposed by the (IMF) managing director, then supported by the executive board and requires an 85 percent majority of voting power by the board of governors.
In March 2020, UNCTAD called for a new issuance of SDRs equivalent to $1 trillion, while the Economic Commission for Africa executive secretary Vera Songwe called for an issuance of $500 billion.
European Network on Debt and Development (Eurodad) senior policy and advocacy officer on development finance Dr Chiara Mariotti told the same meeting that a new issuance of SDRs by the IMF would build foreign currency reserves in the central banks.
This, Mariotti said, would make it possible for developing countries to borrow at lower interest rates and engage in a more affordable way, address any balance of payment imbalance or pay for imports while increasing fiscal space for public spending in COVID-19 response and recovery.
“The IMF is keen to make the case for a large allocation (amount to be confirmed). There is still room to push for a large allocation,” she said.