confidentially speaking
The Africa Confidential Blog
IMF votes on cash boost plan
Blue Lines
After the opening of the International Monetary Fund's spring meetings on 5 April, its leading shareholders look set to fire a big bazooka: a US$650 billion issuance of new 'Special Drawing Rights', the IMF's reserve currency. In quantitative terms, this marks a giant leap forward for African treasuries struggling to cope with the hit of recessions or lost growth and new demands on health and other public spending.
SDRs do not discriminate between the deserving and undeserving. Zambia, Zimbabwe and Congo-Brazzaville, whose governments are accused of serial mismanagement may benefit disproportionately. But critics are struggling to develop a viable alternative.
Conditionality slows the pace at which cash can get to those who need it. Since the pandemic struck, the IMF has dispersed over $107bn to 85 poor and middle-income countries. The Group of 20's debt service suspension initiative has been worth a meagre $5bn to 40 countries. Both initiatives amount to drops in the bucket against the trillions that developing economies will need in the next decade, according to the IMF.
The stimulus programmes in the United States and the United Kingdom work because the focus was on getting the money out as quickly as possible.
Without similar programmes, several African countries will face debt distress this year. Although the SDRs benefit some bad governments, its wider boost to economies justifies the initiative as the pandemic pain continues.