Be ensmann, Ka h in e al.
Resea ch Repo
Channelling special d awing igh s o mul ila e al
de elopmen banks: O e coming emaining legal and
poli ical obs acles
IDOS Policy B ie , No. 30/2024
P o ided in Coope a ion wi h:
Ge man Ins i u e o De elopmen and Sus ainabili y (IDOS), Bonn
Sugges ed Ci a ion: Be ensmann, Ka h in e al. (2024) : Channelling special d awing igh s o
mul ila e al de elopmen banks: O e coming emaining legal and poli ical obs acles, IDOS Policy
B ie , No. 30/2024, Ge man Ins i u e o De elopmen and Sus ainabili y (IDOS), Bonn,
h ps://doi.o g/10.23661/ipb30.2024
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h ps://hdl.handle.ne /10419/305237
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Channelling Special D awing
Righ s o Mul ila e al De elopmen
Banks: O e coming Remaining
Legal and Poli ical Obs acles
Ka h in Be ensmann, Yabibal Walle, Elise Du ie ,
Paulo Es e es, Rob Floyd & Yu Ye
Summa y
In 2021, he G20 commi ed o ealloca e USD 100
billion o he In e na ional Mone a y Fund’s (IMF)
ecen alloca ion o Special D awing Righ s (SDRs)
o low-income and ulne able middle-income
coun ies. Howe e , mos o hese dona ions ha e
been made o he IMF’s Po e y Reduc ion and
G ow h T us (PRGT) and Resilience and Sus ain-
abili y T us (RST), which ha e a le e age a io o
less han one. As a esul , he e ha e been g owing
calls o channel SDRs o mul ila e al de elopmen
banks (MDBs), which can le e age hem up o h ee
o six imes. In his espec , he A ican De elopmen
Bank (A DB) and he In e -Ame ican De elopmen
Bank (IDB) ha e p oposed an inno a i e mechanism
s uc u ed as a hyb id capi al ins umen comple-
men ed by a Liquidi y Suppo Ag eemen (LSA). In
May 2024, he IMF Execu i e Boa d app o ed using
SDRs o pu chasing hyb id capi al ins umen s om
p esc ibed holde s, signi ican ly boos ing he p ospec
o his ini ia i e. Ne e heless, he le el o
pa icipa ion in bo h he SDR channelling and he
LSA emains ela i ely low.
Agains his backg ound, his Policy B ie assesses
he cu en posi ions as well as he ins i u ional and
poli ical challenges o key playe s conce ning he
hyb id capi al p oposal, and i ou lines how hese
challenges could be o e come. Some coun ies, in-
cluding F ance, Japan, Spain and he Uni ed
Kingdom, ha e announced hei suppo o he
p oposal. Ne e heless, hese coun ies ha e ye o
ansla e hei suppo in o conc e e ac ion, and he
p ecise ex en o hei con ibu ions emains un-
ce ain. O he po en ial dono coun ies wi h s ong
ex e nal posi ions and no legal es ic ions, such as
China, Qa a , Saudi A abia, Canada and Aus alia,
ha e no exp essed in e es in his p oposal o ha e
no done so openly. A hi d g oup o po en ial dono
coun ies ace legal challenges in channelling hei
SDRs o MDBs. In pa icula , i is unlikely ha he
Uni ed S a es will use i s SDRs o pu chase hyb id
capi al issued by MDBs, as his would equi e
cong essional au ho isa ion, which seems unlikely
gi en he cu en poli ical clima e. Simila ly, EU
membe s a es a e being ad ised agains using
SDRs ou side o he IMF by a – s ill in o mal –
posi ion o he Eu opean Cen al Bank (ECB). To
o e come hese challenges, se e al ac ions a e
equi ed o he a ious s akeholde s.
• Fi s , po en ial dono s wi h minimal legal
cons ain s should ac o channel hei SDRs
h ough he p oposed hyb id capi al ehicle.
• Second, Eu ozone coun ies should eques ha
he ECB p o ide a cla i ica ion o i s in o mal
posi ion on he channelling o Eu opean SDRs o
MDBs. We discuss in his Policy B ie ha he e
a e sound easons why he ECB could and should
decide a ou ably.
• Thi d, in he e en ha he ECB ails o o mally
ule on his mechanism in a imely manne , o ules
un a ou ably, EU membe s a es should suppo
his p oposal by pa icipa ing in he “second laye ”
LSA h ough hei de elopmen budge s.
• Fou h, A ican go e nmen s and he A ican
Union (AU) should ad oca e on behal o he A DB
in di e en o a such as he Wo ld Bank and IMF’s
Sp ing and Annual Mee ings, he G20 and egula
summi s such as wi h China and he EU.
• Finally, global and local ci il socie y o ganisa ions
(CSOs) and hink anks should ad oca e o
po en ial dono coun ies o channel hei SDRs o
MDBs and p o ide enhanced analysis and
esea ch on he opic o in o m policymake s and
leade s bo h in dono and ecipien coun ies.
IDOS POLICY BRIEF
30/2024
IDOS Policy B ie 30/2024
2
In oduc ion
In he ace o mul iple c ises – including clima e,
heal h and deb c ises, as well as ongoing wa s in
Uk aine and he Middle Eas and o he geopoli ical
ensions – achie ing he Sus ainable De elopmen
Goals (SDGs) has become a dis an p ospec .
Fu he mo e, inequali ies bo h be ween and wi hin
ich and poo coun ies ha e widened. The
con empo a y economic con ex is cha ac e ised
by high in e es a es and sus ained in la iona y
p essu es, accompanied by an inc ease in he
le el o indeb edness (Be ensmann, Laudage
Teles, Somme , & Walle, 2023). These de elop-
men s ha e esul ed in a sho age o de elopmen
inance, while he need o inancial esou ces o
achie e he 17 SDGs is accele a ing.
The alloca ion o SDRs o alling USD 650 billion by
he IMF in 2021 ep esen s a signi ican sou ce o
inancing o de eloping coun ies. The alloca ion
o new SDRs p o ides addi ional ese e unds o
all coun ies wi hou any condi ions being im-
posed. Mo eo e , i does no esul in an inc ease
in a coun y’s deb le el. In his manne , he IMF
hus con ibu es o he s abili y o he global
economy in acco dance wi h i s o iginal manda e.
Ne e heless, he e ec i eness o he new SDR
alloca ion was cons ained by he ac ha a con-
side able p opo ion o he SDRs we e alloca ed
o weal hy coun ies ha we e no in need o
hem, due o he quo a dis ibu ion wi hin he IMF.
The IMF essen ially calcula es he quo a sha es
acco ding o a coun y’s ela i e weigh in he
global economy and hei sha e in global ade. A
app oxima ely USD 21 billion, low-income coun ies
ha e only ecei ed 3.2 pe cen o ecen SDR
alloca ions. To pa ially add ess his inequi able
dis ibu ion and help ulne able coun ies close
he inancing gaps exace ba ed by he mul iple
c ises, he G20 ag eed in he summe o 2021 o
edis ibu e SDRs wo h USD 100 billion om
weal hy o ulne able coun ies. Howe e , he
ques ion o how o e ec i ely use hese dona ed
SDRs has emained a con o e sial opic.
Th ee op ions ha e eme ged as he mos p omi-
nen : (i) he PRGT, which p o ides loans a pa ic-
ula ly a ou able condi ions, cu en ly a 0 pe cen
in e es , o low-income coun ies; (ii) he RST,
which was es ablished in 2022 wi h he objec i e
o assis ing low- and ulne able middle-income
coun ies in building esilience o ex e nal shocks
and add essing clima e and pandemic challenges;
and (iii) he channelling o SDRs o MDBs. Addi-
ional p oposals and a comp ehensi e compa a-
i e analysis o he h ee a o emen ioned channels
can be ound, o ins ance, in Za le (2024).
The channelling o SDRs al e s hei na u e o
ecipien coun ies, as addi ional ese e unds
ha a e eely a ailable a e ans o med in o loans
ha a e con ingen upon ce ain condi ions. This is
exempli ied by he PRGT and he RST, which a e
he only ehicles used o channel SDRs hus a .
A he same ime, he e is a g owing call o a mo e
e ec i e u ilisa ion o hese SDRs h ough MDBs,
as hey ha e he po en ial o le e age he SDRs
up o h ee o six imes. The A DB and IDB ha e
p oposed a mechanism s uc u ed as a hyb id
capi al ins umen , complemen ed by an LSA. This
app oach would ea he SDRs as equi y on
MDBs’ balance shee s. In May 2024, he IMF
Execu i e Boa d app o ed using SDRs o
pu chasing hyb id capi al ins umen s om
p esc ibed holde s, which includes mos MDBs,
signi ican ly boos ing he p ospec o his ini ia i e
(IMF, 2024b).
This ins umen enjoys a wide ange o in e -
na ional suppo , no only om A ican coun ies,
he B idge own Ini ia i e and ci il socie ies, bu
also om Wes e n go e nmen s, including hose
o F ance, Spain, Japan and he Uni ed Kingdom.
Howe e , he willingness o pa icipa e in he
p oposal – by channelling SDRs o con ibu ing o
he wo laye s o LSA – emains ela i ely low. This
inno a i e mechanism o e s a iable al e na i e o
di ec capi al inc eases o MDBs, which a e
becoming inc easingly challenging due o budge
cu s o he de elopmen minis ies in se e al
OECD coun ies. The e o e, i is c ucial o iden i y
and add ess he key challenges associa ed wi h
IDOS Policy B ie 30/2024
3
implemen ing his p oposal. Agains his back-
g ound, his Policy B ie has h ee main objec i es.
Fi s , i assesses he cu en posi ions as well as he
ins i u ional challenges o key playe s – including
China, Eu opean coun ies and he Uni ed S a es
– on his opic. Second, i analyses he legal and
poli ical a gumen s o he ECB and he na ional
cen al banks (NCBs) as o why hey appea o
ad ise agains he channelling o Eu opean SDRs
o MDBs, while de eloping coun e a gumen s o
why hey should econside hei s ance and
con ibu e o global sus ainable de elopmen .
Thi d, i highligh s he impo ance o con inued
ad ocacy by po en ial ecipien coun ies, hink
anks and CSOs o ge he equi ed le el o
pa icipan coun ies o make his inno a i e
mechanism a eali y.
SDR channelling o MDBs
Since he majo i y o MDBs a e p esc ibed holde s
o SDRs, hey ep esen an al e na i e o he IMF
us unds. Addi ionally, as pa o p oposals o
e o m In e na ional Financial A chi ec u e (IFA),
he e is cu en ly an ongoing deba e abou enhan-
cing MDBs’ inancing capaci ies. The channelling
o SDRs o MDBs is one elemen o his.
SDR channelling o MDBs has h ee main ad an-
ages o e using IMF us unds. Fi s , MDBs can
le e age he SDRs hey ob ain by selling hyb id
capi al. Acco ding o he A DB, his could gene a e
a h ee- o ou - old le e age e ec ( his could be
highe o o he MDBs such as he Wo ld Bank
(Za le , 2024)). This is a pa icula ad an age o
channelling o MDBs, especially conside ing ha
nei he he PRGT no he RST ypically has a
le e age a io g ea e han one. Secondly, MDBs
ha e aluable egional knowledge when wo king
wi h hei clien s. In his con ex , MDBs a e in a
unique posi ion o be able o combine long- e m
unding wi h echnical assis ance, policy dialogue
and ad iso y se ices (A ican De elopmen Bank
[A DB], 2024; Plan , 2023; Za le , 2024). Thi dly,
a key ad an age o dono coun ies is ha chan-
nelling SDRs o MDBs does no necessi a e
aising addi ional unds. This is no he case o he
PRGT o he RST, o which dono coun ies
p o ide SDRs as loans o us unds a SDR
in e es a es, bu dona ions mus be made o
co e hese a es, so ha ecipien s ecei e loans
on concessiona y e ms ( o example, 0 pe cen
o he PRGT).
Box 1: Wha a e Special D awing Righ s?
In 1969, he IMF in oduced SDRs as a o m o global
cu ency ese e. Fu he mo e, SDRs se e as he
IMF’s uni o accoun . The alue o SDRs is de e -
mined by a weigh ed baske o i e cu encies, wi h
he US dolla , he eu o, he enminbi, he yen and
he pound acco ded a ce ain deg ee o weigh in
his calcula ion.
I is impo an o no e ha SDRs a e no a cu ency
in hemsel es; a he , hey a e a igh o exchange
hem o o he cu encies. This igh can be
exe cised when needed, o example o inance
impo s. The exchange is conduc ed by he IMF on
he basis o ag eemen s in which coun ies decla e
hei willingness o engage in olun a y exchanges
o SDRs up o a speci ied limi (Volun a y T ading
A angemen s, VTAs). SDRs can only be u ilised
as a means o paymen o a limi ed ex en , wi h
hei use being es ic
ed o he IMF, membe
s a es and a selec g oup o en i ies designa ed as
p esc ibed holde s (cu en ly p ima ily comp ising
MDBs).
Fou SDR alloca ions
ha e been made o da e
(1970-72, 1979-
81, 2009 and 2021). The mos
ecen SDR alloca ion has led o he global SDR
s ock mo e han ipling, and i now s ands a 660.6
billion SDRs. When he IMF dis ibu es SDRs, all
coun ies ecei e mo e money. This has a posi i e
impac on he coun ies’ balance o paymen s and
is no linked o any condi ions. As soon as coun ies
u ilise hese SDRs, hey ha e o pay in e es , bu he
amoun used does no ha e o be epaid (IMF,
2024a).
The A DB-IDB hyb id capi al
p oposal
The A DB, oge he wi h he IDB, ha e pu o wa d
one highly inno a i e p oposal o SDR channel-
ling o MDBs. Unde his p oposal, coun ies would
lend hei SDRs o he A DB (IDB) as a pe manen
loan in he o m o hyb id capi al. The capi al is
IDOS Policy B ie 30/2024
4
“hyb id” because i is paid in he o m o a ixed-
a e bond and does no g an o ing igh s. How-
e e , he bond’s ma u i y mus be long enough o
quali y as equi y and be a ed as such by a ing
agencies. In e u n, he dono coun ies ecei e
he cu en SDR in e es a e, which hey in u n
ha e o pay on hei educed SDR holdings. The
ans e is he e o e cos -neu al.
In a second pilla , all pa icipa ing coun ies sign a
Liquidi y Suppo Ag eemen (LSA), which egu-
la es epaymen s in he e en o a balance o
paymen s c isis and hus – oge he wi h MDBs’
mul ilaye ed c edi - isk managemen amewo k –
secu es he ese e asse cha ac e o SDRs used
o buy he hyb id capi al ins umen . This equi es
ha a leas i e coun ies pa icipa e in he A DB-
IDB p oposal (A DB, 2024; K öss, 2023; Plan ,
2023, 2024). O he coun ies ha a e no di ec ly
channelling hei SDRs a e also in i ed o pa i-
cipa e in he “second laye ” LSA so ha hey can
p o ide a liquidi y gua an ee o con ibu o s in he
e en ha he p ima y liquidi y a angemen alls
sho o mee ing he liquidi y need ha has been
igge ed.
In May 2024, he IMF Execu i e Boa d app o ed
he use o SDRs by IMF membe s o he pu chase
o hyb id capi al ins umen s issued by p esc ibed
holde s, up o a cumula i e limi o SDR 15 billion
(IMF, 2024b). IMF membe s ha channel SDRs o
p esc ibed holde s unde such capi al con ibu-
ions a e expec ed o ha e Volun a y T ading
Ag eemen s (VTAs) in place o ensu e su icien
liquidi y and an equi able dis ibu ion o he
po en ial SDR exchange in o cu encies in he VTA
ma ke .
The channelling o SDRs ia MDBs is pa icula ly
impo an o A ica because he inancial
esou ces o A ica ( o he A DB) could inc ease
by a ound USD 46.2 billion annually o e he nex
10 yea s (A DB, 2024). Ne e heless, i is an i-
cipa ed ha o he egional MDBs and he Wo ld
Bank will ollow sui once he A DB-IDB p oposal
has ob ained su icien pa icipa ion le els and
made SDR channelling o MDBs a eali y.
Ins i u ional challenges: he
Eu opean Cen al Bank and SDR
channelling
The ECB’s opposi ion o channelling SDRs om
EU membe s a es o MDBs has signi ican ly e-
duced he pool o po en ial con ibu o s o he
A DB-IDB p oposal. Al hough he e has been no
uling by he ECB as o whe he and why i is
opposed o his ins umen , he e ha e been un-
o icial s a emen s indica ing his posi ion. Fo
ins ance, Ch is ine Laga de, he cu en P esiden
o he ECB, men ioned in he speech a he 2021
IMF Annual Mee ings ha “Na ional cen al banks
o EU Membe S a es may only lend hei SDRs o
he IMF i his is compa ible wi h he mone a y
inancing p ohibi ion included in he T ea y on he
Func ioning o he Eu opean Union. Re aining he
ese e asse s a us o he esul ing claims is pa a-
moun . This equi es ha he claims emain highly
liquid and o high c edi quali y. The di ec inan-
cing o MDBs by NCBs o EU Membe S a es
h ough SDR channelling is no compa ible wi h he
mone a y inancing p ohibi ion” (Laga de, 2021).
Since 2021, inno a i e solu ions, such as he
A DB-IDB hyb id capi al p oposal, ha e been pu
o wa d o add ess he conce n ha channelled
SDRs will main ain hei quali y as a ese e asse .
Mo eo e , he ecen decision by he IMF Execu-
i e Boa d (IMF, 2024b) au ho ising he channel-
ling o up o SDR 15 billion (abou USD 20 billion)
o p esc ibed holde s (including mos MDBs)
answe he impo an ques ion o whe he SDRs
used as hyb id capi al could s ill be conside ed as
e aining hei ese e asse s a us.
Wha emains un esol ed is whe he channelling
SDRs o MDBs could iola e he mone a y inan-
cing p ohibi ion o he EU. Al hough i is no o he
IMF o decide on he la e issue, he same docu-
men s a es ha “unde Union law SDR channel-
ling by Eu opean Union (EU) na ional cen al
banks o MDBs is incompa ible wi h he p ohibi ion
o mone a y inancing” (IMF, 2024b, p. 8). This
s a emen may e lec ei he he posi ion o some
EU membe s a e Execu i e Di ec o s on he IMF
IDOS Policy B ie 30/2024
5
Boa d – po en ially unde pinned by he posi ion o
hei espec i e NCBs – o a gene al unde s and-
ing among IMF s a ha wha Laga de said in
2021 has no changed.
Se e al au ho s ha e p esen ed a gumen s why
he ECB could and should ule in a ou o he
channelling o Eu opean SDRs o MDBs (Mu awski,
Chikowo e, Mu azu, & an Tilbu g, 2024; Padua-
no, 2023; Za le , 2024). These a gumen s a e dis-
cussed in de ail below.
1. The ECB has al eady app o ed he channelling
o SDRs o he IMF’s PRGT and RST. A key
di e ence be ween channelling SDRs o he
PRGT and especially he RST, e sus o
MDBs, has been ha SDRs channelled o
MDBs may no main ain he ese e asse
s a us. Howe e , wi h he A DB-IDB inno a i e
hyb id capi al p oposal and he IMF’s decision,
his dis inc ion has become i ele an . Mo e-
o e , he e seems o be no good eason why
he wo o ms o channelling should be di e en
in e ms o espec ing he EU’s p ohibi ion on
mone a y inancing (Mu awski, Chikowo e,
Mu azu, & an Tilbu g, 2024). This p ohibi ion
pe ains o si ua ions whe e he ECB o NCBs
di ec ly o indi ec ly inance budge s o EU
membe s a es. The p ohibi ion is based on he
p emise ha mone a y inancing comp omises
he independence o cen al banks, which is
conside ed essen ial o p e en ing mac o-
economic imp udence and mi iga ing he isk o
in la ion (Paduano, 2023). Since he ECB has
al eady uled ha he channelling o SDRs o
he IMF’s PRGT and RST does no amoun o
mone a y inancing, i ollows ha he channel-
ling o SDRs o MDBs should no be income-
pa ible ei he .
2. The e a e p eceden s whe e he Eu opean
In es men Bank (EIB) – a Eu opean MDB –
has bo owed om Eu osys em NCBs and
been gi en access o he ECB’s epo acili y.
This has no been conside ed o be in con lic
wi h he p ohibi ion on mone a y inancing. This
p eceden demons a es ha he ac ha
MDBs a e no mone a y ins i u ions does no
necessa ily mean ha hei holding o Eu o-
pean SDRs should amoun o a iola ion o he
mone a y inancing p ohibi ion (Paduano,
2023). Mo eo e , he A DB p o ides loans o
A ican go e nmen s, in con as o he EIB,
which lends o EU go e nmen s. This dis inc-
ion u he weakens he a ionale o p ohibi -
ing SDR channelling o he A DB on he basis
ha i may amoun o mone a y inancing o EU
go e nmen s.
3. In ligh o he ac ha he channelling o EU
membe s a es’ SDRs does no appea o be in
iola ion o EU egula ions, emo ing his legal
hu dle o he channelling o Eu opean SDRs o
MDBs o e s he ECB a aluable oppo uni y o
play i s pa in comba ing clima e change,
which could endange inancial s abili y. MDBs
a e key playe s in p o iding much-needed
inance o mi iga e and adap o he e ec s o
clima e change, and SDR channelling as hyb id
capi al would inc ease he inancing powe o
MDBs by up o USD 80 billion, depending on
he le e aging powe o he espec i e MDB.
Con e sely, ailing o ind a solu ion ha allows
EU membe s a es o channel hei SDRs o
MDBs – po en ially jeopa dising he A DB-IDB
p oposal due o insu icien pa icipa ion –
would be incong uen wi h he ECB’s p o essed
ecogni ion ha clima e change poses
signi ican isks o he Eu opean and global
economies. This would also aise doub s abou
i s s a ed commi men o doing i s pa o
add ess clima e change, wi hin i s manda e
(ECB, 2024) and may esul in epu a ional isk
o he ECB in e ms o i s clima e-ac ion
c eden ials. I is wo h no ing ha he IMF
s essed in i s no e ha “No app o ing he
cu en p oposal [o channelling SDRs h ough
MDBs as hyb id capi al] may en ail business
and epu a ional isks” (IMF, 2024b).
IDOS Policy B ie 30/2024
6
Posi ions o key ac o s on SDR
channelling o MDBs
Dono coun ies
China
In No embe o 2021, Chinese P esiden Xi
Jinping was among he i s o announce China’s
eadiness o channel 30 pe cen o i s newly allo-
ca ed SDRs – an equi alen o USD 10 billion – o
A ican coun ies a he opening ce emony o he
Eigh h Minis e ial Con e ence o The Fo um on
China-A ica Coope a ion (Xi, 2021). As ega ds
he channels o he ealloca ion, China has ex-
p essed suppo o he IMF’s PRGT and RST, bu
i lacks a clea posi ion on channelling SDRs o
MDBs.
The e migh be h ee easons. Fi s ly, mo e
analysis is needed o compa e he ad an ages
and disad an ages o he al e na i e channels and
hei policy implica ions o China. No such
assessmen is publicly a ailable cu en ly in e ms
o China’s p e e ence owa ds channelling SDRs
h ough he IMF’s us s e sus MDBs, o be ween
di e en MDBs. A ican expe s ha e called on
China o p io i ise i s ealloca ion o he A DB
(Ryde , Keb e , & Chen, 2023), bu no public posi-
ion can be seen ye om China on his p oposal.
Secondly, mo e coo dina ion wi hin he go e n-
men is needed on his issue. E en hough he e
a e no o mal legal es ic ions acing Chinese
au ho i ies, hey s ill need o go h ough some
“ echnical p ac ice and p ocedu e” as many o he
coun ies do, such as he Uni ed Kingdom, Japan
and Canada (Paduano, 2024). The People’s Bank
o China (PBoC) and he Minis y o Finance
(MOF) sha e esponsibili ies on IMF- and MDB-
ela ed issues. The Wo ld Bank, he Asian De el-
opmen Bank (ADB) and he newly es ablished
Asian In as uc u e In es men Bank and he New
De elopmen Bank a e aken ca e o by he MOF,
while he IMF, A DB and IDB, among o he s, a e
unde he au ho i y o he PBoC. A highe le el o
coo dina ion is needed as ega ds he channels o
be chosen.
Thi dly, he cu en A DB-IDB join p oposal abou
using he SDRs as hyb id capi al o MDBs may no
be ully aligned wi h China’s p e e ence. China
conside s a capi al inc ease ha is accompanied
by he o ing powe e o m as he ideal solu ion o
s eng hen he capaci y and enhance he legi -
imacy o MDBs, whe eas he hyb id capi al dis-
cussion is mainly abou an op ion o inc ease non-
o ing capi al.
China would p obably like o see a b oade a ay
o op ions o he use o he SDRs channelled o
MDBs, o example in suppo o he highly in-
deb ed coun ies o he implemen a ion o he
G20’s Common F amewo k. How he Wo ld Bank
can sha e he bu den by inc easing he amoun o
new concessional inancing o deb o coun ies
has been a co e conce n o China in he G20’s
deb agenda. Mo e low-cos SDRs could help he
Wo ld Bank deli e i s p omise and incen i ise
China’s mo e ac i e pa icipa ion in u u e Common
F amewo k cases. Chinese schola s p opose
using he new SDRs as a mul ila e al gua an ee o
suppo lowe -income coun ies’ deb es uc-
u ing, some hing simila o he B ady Plan in he
1980s (Xu, Sun, & Xiong, 2023).
In sum, e en wi hou o mal legal obs acles, i is
he o ma and pu pose o he channelling ha
could inally a ec China’s posi ion on he
p oposal.
F ance
In line wi h he decisions o he G7 and G20 o
ealloca e pa o SDRs o he IMF o ulne able
and low-income coun ies, he F ench au ho i ies
announced an ini ial 20 pe cen channelling a ge
in 2021 and inc eased i o 40 pe cen (a ound 8
billion SDRs o USD 10.6 billion) a he Pa is
Summi in June 2023 (Delame & Liu, 2023).
When he A DB and IDB la e pu o wa d a
p oposal o SDR channelling o MDBs, he F ench
au ho i ies also suppo ed he p oposal o le e age
mo e inance o clima e and de elopmen . This
posi ion was made o icial a COP 28 (A DB, 2023).
Howe e , simila o o he Eu ozone coun ies,
F ance is being blocked by he ECB’s s ance on
IDOS Policy B ie 30/2024
7
his p oposal and canno di ec ly channel i s SDRs
o MDBs. Ins ead, a he 2023 Wo ld Bank and IMF
Annual Mee ings and COP 28, F ance announced
i s willingness o pa icipa e in he (second laye )
LSA (A DB, 2023). This posi ion s ill s ands bu
cau ion emains on wo aspec s. Fi s , F ance has
no ye speci ied he olume i is p epa ed o
gua an ee as pa o he LSA. This is pa ly
because he ele ance o he LSA i sel depends
on a minimum o i e coun ies channelling hei
SDRs o MDBs. As men ioned ea lie , hese
coun ies a e no o icially known ye , as dis-
cussions a e s ill ongoing. Second, F ance is also
unde going changes o i s na ional go e nmen .
Al hough no adical e o ms a e expec ed a his
s age on his issue and he adminis a ion emains
suppo i e o he scheme, a ce ain le el o
unce ain y will p e ail un il he new budge is
app o ed.
Ge many
The Ge man Finance Minis e a he ime, Ola
Scholz, welcomed he SDR alloca ion decision in
ea ly Augus 2021, emphasising he bene i o
eme ging and de eloping coun ies (Ge man
Fede al Minis y o Finance, 2021) and suppo ing
he decision o he G7 o edis ibu e USD 100
billion o SDRs o de eloping coun ies. Howe e ,
he Ge man cen al bank (Deu sche Bundesbank)
does no seem o be p epa ed o ans e SDRs
(Ellme s, 2021). In Ge many, he Deu sche Bun-
desbank is he holde o he SDRs unde Ge man
law, acco ding o which he Fede al Republic o
Ge many ans e ed he SDRs o he Deu sche
Bundesbank (Deu sche Bundes egie ung, 1978).
This legal si ua ion is unusual unde in e na ional
law because – as se o h in he A icles o Ag ee-
men o he IMF – i s ipula es ha only s a es can
be membe s o he IMF, and hus holde s o SDRs
(K öss, 2023). The Bundesbank and he Fede al
Minis y o Finance ha e exp essed hei opposi-
ion o wha hey called he inancing o a de elop-
men policy agenda wi h SDRs. They a gue ha
his is no an o iginal ask o he IMF and should
ins ead be le o ins i u ions such as he Wo ld
Bank. They u he a gue ha doing so could lead
o he expec a ion ha he IMF will inc easingly
g an SDRs o easons o he han i s o iginal
unc ion as a cu ency ese e (Nagel & Lindne ,
2024). In he cou se o he SDR alloca ion in 2021,
he Ge man go e nmen said ha i would no be
able o pass on SDRs and ins ead con ibu ed o
he RST ia i s budge (K öss, 2023). Fo hese
easons, Ge many (i.e. he Bundesbank) is no
expec ed o pa icipa e in schemes o ans e
SDRs o MDBs. Mo eo e , he Ge man go e n-
men has ye o indica e whe he i plans o
pa icipa e – using i s budge o de elopmen co-
ope a ion – in he second laye LSA o he A DB-
IDB p oposal. Despi e Ge many’s epu a ion o
u ilising i s de elopmen budge o suppo MDBs
(e.g. h ough i s pionee ing con ibu ion o p o ide
hyb id capi al o he Wo ld Bank) and honou i s
commi men s o he RST (ins ead o using i s SDR
holdings), i appea s unlikely ha i will con ibu e
o he second laye LSA. This is because, in addi-
ion o he ecen signi ican cu s o i s de elop-
men budge , he e is s ong opposi ion on he pa
o he go e nmen o he use o SDRs as a ool o
de elopmen inance (Nagel & Lindne , 2024).
The Uni ed S a es
The US go e nmen has no aken an o icial
posi ion on channelling SDRs o MDBs. I is gen-
e ally unde s ood ha o icials wi hin he US
T easu y a e suppo i e o he p inciple o chan-
nelling, bu i is highly unlikely he Uni ed S a es
will channel SDRs ha i holds. This is because he
US Cong ess mus au ho ise any such ac ion, and
he e is li le poli ical suppo wi hin Cong ess o
channelling SDRs o MDBs. Cu en poli ical
ensions, upcoming p esiden ial elec ions and
conce ns abou Uk aine and Gaza a e no con-
duci e ac o s o gene a ing he poli ical will and
bipa isanship needed o he Uni ed S a es o
channel i s SDR holdings.
IDOS Policy B ie 30/2024
8
Recipien coun ies and hei
ins i u ions
A ican coun ies
A ican Minis e s o Finance ha e clea ly en-
do sed e o s o accele a e he channelling o
SDRs. As coun ies con inue o ace iscal
cons ain s and high bo owing cos s, he chan-
nelling o SDRs can lead o a signi ican inc ease
in concessional inance o A ican coun ies.
Indeed, hey could de i e g ea e bene i s om
SDR channelling han om Wo ld Bank balance
shee op imisa ion, which appea s o p ima ily
bene i middle-income coun ies.
In Ap il 2023 A ican Minis e s eques ed suppo
o align messaging on key IFA e o ms, which led o
he Ma akech Decla a ion. The Ac ion F amewo k
o he decla a ion included in en ions o con inue
ad ocacy o secu e i e SDR holding coun ies o
he A DB’s p oposal and begin analysis on
app oaches o addi ional SDR channelling o
o he A ican ins i u ions.
The channelling o SDRs o A ica would also help
add ess his o ical imbalances o a ce ain ex en .
AU membe s a es collec i ely own only 5.2 pe
cen o all IMF quo as. Sou h A ica, Nige ia, Egyp
and Alge ia a e he la ges holde s o quo as, and
39 coun ies each ep esen less han 0.1 pe cen
o all IMF quo as. A ica also did no bene i ade-
qua ely om he 2021 alloca ion o SDRs, whe eby
USD 650 billion was alloca ed, bu A ica ecei ed
only 5 pe cen o he o al: oughly USD 33 billion.
A he same ime, he G20 and o he ad anced
economies collec i ely ecei ed mo e han USD
500 billion.
Addi ionally, h ee A ican Heads o S a e who
a e championing IFA e o ms a he AU published
an a icle in The Economis , whe e hey speci-
ically called o “channeling special d awing igh s
cu en ly held a he IMF o A ican inancial ins i u-
ions so hey can be le e aged o de elopmen
inance” (Aku o-Addo, Ru o, & Hichilema, 2024).
As ea ly as Feb ua y 2022 he AU, a i s Heads o
S a e Summi , u ged weal hy na ions o channel
pa o hei SDRs o he A DB.
The B idge own Ini ia i e
The B idge own Ini ia i e, in oduced a e P ime
Minis e Mia Mo ley o Ba bados hos ed a high-
le el e ea in B idge own in 2022, has been ad o-
ca ing o signi ican e o ms o he in e na ional
inancial sys em. In i s la es i e a ion, he
B idge own Ini ia i e 3.0 ook ad an age o he IMF
Execu i e Boa d’s ecen app o al o he use o
SDRs as hyb id capi al o ecall ha “coun ies
mus u gen ly deli e on hei commi men s o
ensu e he expansion o scope and scale o e-
channelling SDRs h ough MDBs, leading wi h he
A DB and IADB” (B idge own Ini ia i e, 2024).
Fu he mo e, al hough channelling SDRs o MDBs
could signi ican ly enhance he lending powe o
MDBs, he unding would ul ima ely each ul-
ne able coun ies in he o m o loans, albei wi h
a ou able e ms. Consequen ly, i is essen ial o
ensu e ha hese loans do no con ibu e o he
indeb edness o ecipien coun ies. One way o
achie e his is by di ec ing hem owa ds ans-
o ma ional p og ammes ha a e no “expendi u e-
based” (Za le , 2024).
Conclusion and ecommenda ions
The channelling o SDRs o MDBs has signi ican
po en ial o inc ease MDBs’ inancing capaci ies a
a ime when de elopmen inancing needs in low-
and middle-income coun ies a e ising due o a
di icul mac oeconomic en i onmen esul ing
om mul iple c ises, anging om he COVID-19
pandemic o clima e change and he wa s in
Uk aine and he Middle Eas . In con as o chan-
nelling h ough he IMF’s PRGT and RST, chan-
nelling SDRs h ough MDBs is highly e icien in
he sense ha SDRs can be le e aged up o h ee
o six imes.
Howe e , as his Policy B ie has shown, he e is
s ill a long way o go o secu e su icien le els o
pa icipa ion in his mechanism om coun ies wi h
s ong ex e nal posi ions (a leas i e coun ies)
and o he con ibu o s o he second laye LSA. On
he one hand, he go e nmen s o F ance, Japan,
Spain and he Uni ed Kingdom ha e announced
hei suppo o he use o he SDR hyb id capi al
