This proposal seeks to expand the allocations of Special Drawing Rights, an IMF-managed international reserve asset that acts as liquidity without adding to debt or imposing conditionalities, as an immediate and scalable mechanism to ease balance of payment pressures, finance essential imports, and expand fiscal space in low- and middle-income countries. This proposal envisions a greater utilisation of SDRs through an immediate new issuance of SDRs, the establishment of a mechanism for regular and automatic SDR issuances as proposed by the UN Secretary General, reforms to SDR accounting mechanisms, and an allocation of SDRs based on the individual countries’ needs rather than on their IMF quota shares. The COVID-19 pandemic offers a clear illustration of the potential of this proposal. As public spending needs surged and borrowing options narrowed during the pandemic, the IMF issued roughly 650 billion dollars in SDRs in 2021, the largest allocation in its history to help avert balance of payments crises across countries. In the same vein, a reoriented use of SDRs would treat them as a global public resource rather than idle reserves concentrated in high-income economies. Expanded allocations of SDRs could help close the social protection financing gap in low-income countries, without relying on economic growth as a precondition.
