Regional states receive $ 3.2 billion in IMF support to ease Covid shocks
Regional economies received $ 3.17 billion from the International Monetary Fund as part of the newly issued – and largest ever – General Allocation of Special Drawing Rights (SDRs) of $ 650 billion, which the Fund s ‘started earlier this month.
SDRs, issued on August 23, are not loans, and their use will be decided only by recipient countries without any conditions. The money is expected to provide temporary financial relief to countries hit hard by the coronavirus pandemic.
According to IMF members’ quotas, in August Kenya led the region, receiving $ 740 million, followed by Tanzania with $ 540 million. Uganda received $ 490 million, while Ethiopia received $ 410 million. South Sudan received $ 340 million, while Rwanda and Somalia each received $ 220 million. Burundi got 210 million dollars. These funds will come in handy to beneficiaries as they seek to support their economies against the biting effects of the Covid-19 pandemic.
On August 2, the IMF approved the allocation of SDR 650 billion to countries as “a boost to the world economy at a time of unprecedented crisis.” IMF Managing Director Kristalina Georgieva then said the general SDR allocation would come into effect on August 23 and would be credited to IMF member countries in proportion to their existing quotas in the Fund.
“The SDR allocation will benefit all members, meet the long-term global need for reserves, build confidence and promote the resilience and stability of the global economy. This will especially help our most vulnerable countries struggling to cope with the impact of the Covid-19 crisis, ”said Ms. Georgieva.
About $ 275 billion of the new allocation will go to emerging markets and developing countries, including low-income economies. Sub-Saharan Africa received $ 23.61 billion.
“We will continue to actively engage with our members to identify viable options for the voluntary channeling of SDRs from the richer member countries to the poorest and most vulnerable member countries to support their recovery in the event of a pandemic and disease. achieve resilient and sustainable growth, ”said Ms. Georgieva.
“Members do not have to meet any conditions to receive their share of SDRs in a general allocation. They have the right to use SDRs in transactions or operations authorized by the Fund (including payments of financial obligations, loans, swaps and forward transactions, ”she added.
But, in a note, the Fund urged countries to prioritize policy challenges related to the pandemic to avoid prolonged scars, including increased poverty, while being concerned with containing external financing needs and manage debt vulnerabilities.
“The policy space provided by the allocation could thus be used to address the unprecedented health and economic crisis and accelerate the global recovery. Countries that must prioritize the political response to the Covid-19 crisis must act with flexibility and speed, ”the note said.
“Using resources, including SDRs, to help mitigate the impact of the pandemic can generate significant short- and long-term benefits that can, in many cases, outweigh the costs of using the pandemic. political space. “
In a statement, the international charity Oxfam said that “recipient countries have a historic and unique opportunity to use this important debt-free financing to accelerate their response to the pandemic and pave the way for a just and equitable recovery that reduces inequalities”.
On August 24, South Sudan Central Bank Governor Dier Tong confirmed that Juba had received $ 334 million to improve its struggling economy.
“The resources came when South Sudan implements essential economic reforms, including wide-ranging currency reforms and foreign exchange market reforms that involve refraining from deficit financing. The funds will improve South Sudan’s foreign exchange reserves and help build external resilience and support ongoing reforms in the foreign exchange market, ”Tong said in a statement.
Africa urgently needs an economic aid package that includes loan restructuring, debt relief and a reallocation of SDRs from rich countries to meet the challenge of a health and economic crisis.
In April, Rwandan President Paul Kagame said that a new issuance of SDRs would improve the liquidity of regional economies, but called for a system of accountability for how SDRs are used, as well as a method of allocation. based on needs rather than quotas.
“The recovery from the Covid-19 pandemic depends on adequate fiscal space and liquidity. However, there is a sharp dividing line in today’s world. Some countries can finance their own recovery through quantitative easing. The others must borrow from private or public creditors, as individuals do. Without corrective action, this divergence will strengthen a deeply unequal world order, in which the poor have no chance of catching up with the rich, ”President Kagame said at a virtual meeting on the architecture of international debt and liquidity. .