TWN Info Service on Climate Change
ACTIONAID INTERNATIONAL & THIRD WORLD NETWORK:
NEW REPORT ON REFORMING GLOBAL MONETARY SYSTEMS & INNOVATIVE USE OF IMF’S SPECIAL DRAWING RIGHTS (SDRs)
SDRs can help address impacts of global financial & economic crisis
ActionAid International and Third World Network are pleased to announce the release of a joint study on the potential use of the IMF’s Special Drawing Rights (SDRs) as a tool for both innovative financing and systemic monetary reforms. SDR-derived funds can be applied to critical financing needs for developing and low-income countries, including development, climate finance, and effective measures to counter the impacts of the global economic and financial crisis. Creative use of SDRs could complement measures such as the proposed financial transaction tax and levies on bunker fuels and aviation to raise the sums urgently needed. With international co-operation, SDRs could potentially mobilize more resources than other proposals for new forms of financing.
For the first time last week, the IMF suggested
that SDRs be used as a finance instrument; its head, Dominique Strauss-Kahn,
offered a vague proposal to use them in generating climate finance.
The IMF promises more details in the coming weeks. Our report includes
analysis of a similar proposal made by George Soros at the
SDRs could also be a key part of reform measures that would address the distortions and contradictions that set the stage for the global financial and economic crisis. Many experts across the ideological spectrum are now acknowledging that a genuine “fix” of the world’s financial system will require a revamping of the global monetary system, among other initiatives. With the increasing volatility in both the U.S. dollar’s value and level of trust, SDRs may be an effective vehicle to serve as an international reserve currency.
In his keynote address at the World Economic Forum last week, French President Nicolas Sarkozy made headlines when he called for significant monetary reform, including the replacement of the U.S. dollar as the global reserve currency. He did not mention SDRs, but this report describes how they can be used to make Sarkozy’s call a reality.
The report includes recommendations to build on the G20’s innovative use of SDRs to address the global crisis. It calls for mobilizing the resources represented by the idle SDRs allocated to rich governments, and for easing the conversion of and use of SDR proceeds by developing countries. The role of the IMF in facilitating the issuance and use of SDRs is examined, with attention to the ways in which the IMF could channel SDRs more effectively.
The paper, Fruits of the Crisis: Leveraging the Financial & Economic Crisis of 2008-2009 to Secure New Resources for Development and Reform the Global Reserve System, by Soren Ambrose of ActionAid International and Bhumika Muchhala of Third World Network, is available at http://www.actionaid.org/docs/sdr_reserve_final.pdf and http://www.twnside.org.sg/fnd_n.papers.htm