African countries have been lobbying for the International Monetary Fund to provide emergency financing known as Special Drawing Rights (SDRs) to help them cope with the economic consequences of the COVID-19 outbreak. But David Dollar, a senior fellow in the John L. Thornton China Center at the Brookings Institution, warns that the issuance of additional SDRs could potentially get caught up in the increasingly acrimonious U.S.-China standoff.
In the latest episode of The Brookings Trade Podcast, “Dollars and Sense,” Dollar speaks with his Brookings Institution colleague Brahima Coulibaly, director of the Africa Growth Initiative at the Brookings Institution, about how to ensure that Africa gets the financial resources it needs to deal with COVID-19:
During their discussion, Dollar raised U.S. concerns that any additional SDRs could diminish Washington’s influence in the global financial body and benefit China, India and other countries.
“I mean, the IMF creating more SDR is very analogous to central banks creating money, which obviously Europe, the United States, Japan, China, all the central banks are dramatically expanding their balance sheets. And I think we should be frank. …you need an 85 percent supermajority in the IMF to issue new SDR.
“The U.S. share, I think, is right around 17 percent, so the U.S. has veto power.
“And if there were new SDR they would be allocated, to some extent, in proportion to the current global economic weights, meaning China would get a larger share than it had in the past and probably India and some other countries.
“So you’ve got the existing powers, led by the United States, who are reluctant to expand the SDR because it would be giving more influence to China, India, and other countries. So like you, I’m disappointed that they couldn’t resolve that bottleneck.”
Listen to the podcast or download a copy of the transcript on The Brookings Institution website.
