Recent issuances of special drawing rights (SDRs) have demonstrated that SDRs are effective in addressing global emergencies and primarily benefit developing countries. As one of the most important alternative financing mechanisms for countries in the Global South, SDR issuances play a crucial role in the international monetary system, allowing countries to access resources without increasing their debt levels or being subject to the imposition of regressive conditionalities (Cashman et al, 2022).

Many developing countries – mostly in sub-Saharan Africa and Latin America and the Caribbean – have benefited from using SDRs, mainly for fiscal support but also to raise foreign exchange and make payments to the International Monetary Fund (IMF). The active use of SDRs for fiscal purposes can boost economic growth, contribute to the guarantee of rights, and reduce inequalities. Such use can also help to reduce the lingering effects of the pandemic and address the need for mitigation and adaptation to the climate crisis.

Published on September 26, 2024