The ministers made the call at the ongoing 2023 African Development Bank Group Annual meeting in Sharm El Sheikh, Egypt.
According to the ministers, the reforms will help strengthen the global financial safety net and make more liquidity available to developing countries.
The News Agency of Nigeria reports that the call was made during a meeting of the Africa High-Level Working Group on Global Financial Architecture on the margins of the annual meetings.
Coordinated by the Economic Commission for Africa, the high-level working group comprised African Ministers of Finance, Planning and Economic Development, the African Union, the AfDB, Afreximbank, and the World Bank.
The group serves as a forum to develop reform proposals for global financial architecture and strengthen Africa’s voice on the global stage.
Ms. Hanan Morsy, ECA’s Deputy Executive Secretary and Chief Economist, said the SDR system came into existence in 1968 with the aim of supplementing official reserves and facilitating global liquidity. Morsy said the IMF’s Articles of Agreement stipulated that SDR allocations were meant to be considered every five years, referred to as the “basic period”.
She said the articles also allowed for SDR allocations in response to unexpected major developments.
“Throughout the 12 `basic periods’ since the inception of the SDR system, there have been merely four general allocations and one special allocation with two notable ones in 2009 and 2021.
“This is in spite of the fact that global macroeconomic conditions will have warranted more frequent allocations during this time,’’ she said.
According to Morsy, when SDRs are allocated, they tend to disproportionately benefit countries that are less in need of them.
She said this was because SDRs are distributed in proportion to existing IMF quotas, which are primarily a function of an economy’s size and relative position in the world economy.
“For instance, during the 2021 general SDR allocation of $650 billion, high-income countries, which are least likely to require or utilise SDRs, received approximately 450 billion dollars.
“This constitutes almost 70 per cent of the total allocation. Africa, with a population exceeding 1.4 billion, received fewer SDRs than Germany, a country with a population of only 83 million.
“Making SDR allocation decisions more rule-based and analytical,’’ Morsy said.
She underscored the importance of ensuring that SDRs are directed to countries that require them the most.
She advocated for the rechanneling of SDRs to multilateral development banks, such as the AfDB, as a means to achieve this goal.
“The proposal for SDR rechanneling put forward by the AfDB and the Inter-American Development Bank provides a viable technical solution to leverage SDRs to provide much-needed liquidity to African countries.
“SDR donor countries should participate in the proposal and thereby enable its implementation.
“More so, there should be reforming of the SDR rechanneling mechanism to promote greater utilisation,” she said.
NAN
