This letter has been originaly pulished in Financial Times, 05/03/2021
The editorial board was right in its support of a new issue of special drawing rights (“Poorer countries need more global assistance”, FT View, March 2). However, it was too ambiguous about who should be the intended and potential beneficiaries of such a move.
SDRs, the IMF’s equivalent of central bank reserves, definitely help the developing world in closing some of the financial gaps they face, especially in terms of their post-Covid recovery packages. This is important, as emerging regions have borne (in contrast to the financial crisis) the brunt of the socio-economic damage caused by the present pandemic.
Yet these “gaps” are not confined to the poorest countries alone. They increasingly affect so-called middle-income economies, where close to two-thirds of the world’s poor live.
My home region of Latin America, where only a small minority of countries fit the poorer, low-income category, had the world’s worst recession last year and has some of the worst regional medium term prospects.
Such regions, which also cover India, Asia, the Middle East and north Africa, have been deemed too rich to receive international help, yet are too poor to escape this crisis by themselves.
As correctly highlighted in your editorial, if a new issue takes place most SDRs would go to advanced economies that don’t need them, signalling the need to develop better reallocation instruments for the unused SDRs.
It is important these instruments also include middle-income countries, as the only other vehicle currently in place (the IMF’s “Poverty Reduction and Growth Trust” strategy) only benefits low-income economies.
Past crises have been moments of tremendous multilateral innovation. This one should be no different. SDRs can be integral parts of a new, fairer, financial ecosystem for emerging regions, low and middle-income alike.
So we need to be clear that poverty is not only confined to the poorest countries. I would have liked your editorial to have made this distinction.
Rebeca Grynspan
Ibero-American Secretary General Member, G20 High Level Independent Panel On Financing the Global Commons for Pandemic Preparedness and Response, Former UN Under-Secretary-General Former Vice-President of Costa Rica Madrid, Spain
See related topics
