The African Union has called for an additional $67 billion to support the continent, with part of it channeled through its regional lender. Under an AfDB proposal, wealthy nations would lend their SDRs to the Abidjan-based bank, which could account for these assets as equity and leverage them to raise three to four times as much funding to support African economies.
The SDRs, which can be converted into reserve currencies, would however remain with the IMF and earn interest that would be paid back to countries that had lent them. The AfDB, which has 54 African shareholders and 27 non-regional shareholders, including the US, Japan and France, has a AAA credit rating, allowing it to raise funds on capital markets at lower costs than African sovereign issuers.
Utilizing other IMF funding vehicles such as the Poverty Reduction and Growth Trust, which provides concessional loans, and the new Resilience and Sustainability Trust, which targets issues such as the impact of climate change, means “it’s one dollar in, one dollar out,” said N’Sele. “Through MDBs, it’s one dollar in and three to four dollars out.”
While IMF Managing Director Kristalina Georgieva has urged wealthy states to redirect some of their SDR allocation to more needy countries and touted the idea of channeling their support