In reaching a windfall for poor countries


Near the earth Agreed to create new special drawing rights up to 650bn Within the IMF. The initial allocation of this money will follow the general principle of international affairs: it will be given to those who have it. Above all it is possible to estimate a large amount of the benefits of this free money worldwide by helping low-income countries recover their epidemic-damaged potential, and desi des des should seize this opportunity.

Lots of new SDRs were created Divided Presumably early in the epidemic, it was vetoed by the Trump administration. Under the Biden administration, that has changed. Since the United States has a veto in the IMF, it is very important. The planned allocation is also huge by historical historical criteria, increasing the value of outstanding SDRs by 120 percent (see chart).

The world has created SDR As a reserve asset of multicurrency in the 1960s. Four allocations were made in 2009, the largest in response to the financial crisis. The latter was proposed in response to the epidemic. It is still relevant, not only because the state of emergency has not ended, but because the recovery has deviated, leaving the poor behind.

By itself, a new allocation of SDRs will not do much in this regard, as the new reserve resources will initially go to countries in proportion to their quotas at the IMF. As a result, the United States will receive 17 percent, 44 percent of the group of seven high-income countries, 58 percent of all high-income countries, 6 percent of China, 33 percent of other middle-income developing countries, and a low percentage of -1.2 billion (equivalent to all high-income countries). ) Income countries with population, only 3.2 percent.

Partner pie charts for the allocation of special drawing rights, which show a small fraction (3.2%) of low-income countries.  G7 share 43.5%

Even in the fixed liquid assets of low-income countries it would be 21 billion. It is far from anything for them. More importantly, high-income recipients of these new assets, who do not need them, can be offered discounts. This can make a huge difference. Why shouldn’t high-income countries be given all the credit for their unchanged SDR windfall? That would be 380bn.

A recent IMF Blog And Prospects report on low-income countries Explains why this would be important. According to this perfect analysis, low-income countries have lost significant economic potential compared to high-income countries since the Covid-19 hit. This is partly because they are so weaker than what happens in the world economy. This is partly because they have very little space to handle financial fraud. This is partly because, despite their young population, they are unable to respond to health care and Their vaccine capacity is so small. According to the fund, 55 percent of these countries are now either in a debt crisis or at high risk of that condition.

Chart of Low-Income Countries Real GDP Growth 2011-2020 (Percentage, PPP Weighted) which shows that the epidemic has hit low-income countries hard

At the same time, there is a real chance of recovery. The IMF’s baseline forecast is that low-income countries are permanently affected by the epidemic. However, b 200 billion for Covid-related funding and an additional $ 250bn- $ 350bn spent over five years, these countries could return to their pre-epidemic synthesis path.

Achieving this will require a combination of grants, discounts and debt relief. It will also require reforms to encourage private domestic and foreign investment. As always, government support will ultimately be the catalyst. However, SDR grants and loans can be a huge help.

Two charts of changes in Covid's revenue balance / GDP ratio and prudent revenue response show that low-income countries were limited in their revenue response to Covid.

The plan of the fund is to divide the available money into three buckets. The first will expand the poverty reduction and growth trust that provides Extremely discounted loans In low-income countries. However, there are limitations to the amount that the IMF can pay through this vehicle, for a number of reasons, among which it is not always a senior creditor and therefore cannot take the risk of becoming influential.

Thus, the higher the value paid to SDRs, the higher the proportion that early recipients will have to bear at their own risk through new grant funds. The idea of ​​the fund is that some of these funds may go to other developing countries and for specific purposes such as climate, digital transformation or health. Until the end, some money can go through a trust to provide nding by multilateral development banks such as trusted banks.

The list of low-income countries by the Debt Stability Assessment (DSA) department, shows that concerns about debt are growing.  The share of low-income countries in the debt crisis was 4% in 2010, and by 2020 it was 12%.

How this national money is provided and for what purpose is always political. My vision is to bring the epidemic under control Global public good, Which must be provided through grants from rich countries. It is a crime and a flawed thing that it has not already understood and has been.

Low-income countries will not be asked to take purpose, even on the condition of concessions, which should divert resources from their long-term development goals. I am skeptical about asking them to invest in the priorities of high-income countries Of the day. Spending on renewable energy, digital transformation and health-related countries should be part of its own proprietary and edited development program, although it has been developed in collaboration with international organizations.

The list of low-income countries' per capita GDP (PPP) in developed economies shows that low-income countries have a way to get back on track.

In short, regardless of the specific forms, the goal is to use as much of this airflow as possible to support governments that have credible plans to restore lost development foundations. But don’t try to buy conditional reforms. It often doesn’t work. It is likely that the money will not go to every unprotected country.

Properly used SDR windfalls can help the world’s poorest, most vulnerable and most vulnerable countries. Agreeing with this would be a global blessing. It’s time to dump her.

martin.wolf@ft.com .com

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