Share
AfDB Annual Meetings: Calls for reform of the IMF’s Special Drawing Rights system
CNBC Africa’s Godfrey Mutizwa sat down with Hanan Morsy, Deputy Executive Secretary & Chief Economist at United Nations Economic Commission for Africa at the on-going 58th Annual Meetings of the AfDB in Egypt.
Tue, 23 May 2023 16:33:30 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Disparity in SDR allocations disproportionately affects African countries, leading to delays in receiving necessary liquidity support during crises.
- Advocacy for a more analytical and evidence-based approach in SDR allocation decisions to better align with countries' liquidity needs.
- Focus on reforming the IMF-SDR system as part of broader efforts to create a more equitable and efficient global financial framework, particularly for developing economies.
The 58th Annual Meetings of the African Development Bank (AfDB) in Egypt have brought to the forefront crucial discussions regarding the urgent need for reform in the global financial architecture, specifically focusing on the International Monetary Fund's Special Drawing Rights (SDR) system. The United Nations Economic Commission for Africa's Deputy Executive Secretary and Chief Economist, Hanan Morsy, emphasized the necessity for inclusivity, equity, and effectiveness in the financial system to better meet the needs of developing countries, particularly those in Africa.
Morsy reiterated the importance of 2023 as a pivotal year for taking action to address the existing challenges faced by many African nations. The discussions at the ongoing meetings have underscored the ongoing efforts towards advocating for a more representative voice for Africa in the global financial reforms.
One of the key topics discussed was the reform of the IMF-SDR system, with an emphasis on the inadequacies and delays in the allocation of SDRs, especially during crises such as the global financial crisis in 2009 and the COVID-19 pandemic in 2021.
The issue of disparity in SDR allocations based on IMF quotas was highlighted, revealing that African countries receive a disproportionately small share compared to developed nations. Morsy pointed out that despite Africa's significant population size, its share in the allocation system is equivalent to countries with much smaller populations, such as Germany. This discrepancy leads to delays in receiving the necessary liquidity support during emergencies, as evidenced by the lengthy waiting periods post-crisis.
Furthermore, the distribution of SDRs based solely on economic size and financial position was criticized for failing to address the actual liquidity needs of countries. Morsy argued for a reform that takes into account a more analytical and evidence-based approach, reducing the political and discretionary aspects of decision-making in SDR allocations. By aligning the allocation formula with countries' liquidity needs, Morsy believes that the system can better serve its intended purpose of providing timely and sufficient support during crises.
The call for reforming the IMF-SDR system resonates with the broader initiative to revamp the global financial architecture to better cater to the requirements of developing economies, particularly in Africa. The ongoing discussions at the AfDB Annual Meetings reflect a collective push towards a more equitable and efficient financial system that prioritizes the needs of all member nations.
With the spotlight on the reform of the IMF's SDR system, stakeholders are urged to consider the recommendations put forth by Morsy and other experts to ensure a fair and effective framework that supports global financial stability and liquidity in times of need.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.