Rising interest rates around the world and the downward trend in concessional loans (at low interest rates) as well as grants from rich countries are making it difficult for African states to finance their development programs.
However in 2021, at the end of the Covid crisis and to revive the world economy, the IMF decided on the largest allocation of SDRs in its history. Each country received an envelope according to its weight. The rich countries did not really need it, and they had offered to return their SDRs to the least developed countries.
Since then, the redistribution mechanism has been put in place, as Luc Eyraud, head of regional studies for sub-Saharan Africa at the IMF, explains. A three-step plan.
« The first is to finance the fund for poverty reduction and growth of the IMF, which allows us to make loans to developing countries at zero rates. On this, I would say that we are well advanced, we are regarding two thirds of the objective. Then there is a second way to mobilize these SDRs which is to invest them in a new fund of the IMF which is called the fund for resilience and sustainability. And there, the financing objective of this fund has almost been achieved. And we have started to make long-term programs to help States fight once morest climate change. »
Last step, give part of these SDRs to institutions like the African Development Bank to strengthen their capital and enable them to borrow and therefore to lend more. At this level, the long and complex work is still in progress.
