African finance ministers have called for 500 billion U.S. dollars in Special Drawing Right (SDR) and an extension in the Debt Service Suspension Initiative (DSSI) to respond to the COVID-19 pandemic.
The call was made during a virtual meeting convened by the Economic Commission for Africa (ECA) and International Monetary Fund (IMF) on Feb. 6, according to a statement from ECA on Tuesday.
According to an IMF Factsheet, the SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
So far, SDR 204.2 billion, equivalent to about 281 billion dollars, have been allocated to members.
The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
Also, according to the World Bank, the DSSI is an initiative by the bank and the IMF urging the Group of 20 (G20) to help countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of people.
The members of the G20 are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
The initiative took effect on May 1, 2020 and has delivered about 5 billion dollars in relief to more than 40 eligible countries.
In all, 73 countries are eligible for a temporary suspension of debt-service payments owed to their official bilateral creditors.
The implementation of the initiative is being supported by the World Bank and the IMF, by monitoring spending, enhancing public debt transparency, and ensuring prudent borrowing.
However, an extension of the initiative was initially announced in Oct. 2020 until June 30.
According to reports, payments covered are not forgiven but delayed, with a repayment period of five years and a one-year grace period.
The African finance ministers, however, called for additional liquidity, better market access and more concessional resources, given the prolonged nature of the pandemic.
Ghana’s Minister of Finance and Economic Planning, Mr Ken Ofori-Atta said: “We all know that the COVID-19 pandemic will persist for the next two to three years.
“Why are we extending the DSSI for six months and not 24 months?”.
Ofori-Atta said the cascading effects of COVID-19 were “a frightening thing for a finance minister to witness when they don’t have the means to respond.”
On access to the markets, Egypt’s Minister of Finance, Mohamed Maait, said: “there’s a strong case for vulnerable countries to access the markets at affordable rates to afford essentials such as PPEs and food for their populations.”
Equitable access to COVID-19 vaccines was highlighted as an imperative for building forward better.
Managing Director of the IMF, Ms. Kristalina Georgieva, said the world stands to lose “an estimated $9 trillion if only the rich get COVID-19 vaccines”.
“Forty per cent of this loss will be in advanced economies,” she said.
Georgieva noted that in order to build forward better, there was a need for “bold and immediate action for response, recovery, and reset of African economies”.
She added that “liquidity and financing response is the bridge to vaccines and recovery”.
“Now is the moment to demonstrate that SDR allocation can be part of a comprehensive support framework, together with debt reduction, debt relief and policy support actions in the countries.”
She also urged the ministers to prepare for a focused and practical discussion during the 2021 Spring Meetings, following the call to triple concessional financing.
Georgieva stressed that it was “critical in the spring meetings’ conversations last year”.
The meeting agreed on the need for a concerted effort to accelerate reforms to increase revenues, improve expenditure and manage debt to attract more private sector investments into Africa.