- Kenya’s SDR quota at the IMF as of September stood at 542.8 million, or Sh91.8 billion.
- Analysts early this year expected that the country’s SDR quota would rise above 1 billion (Sh169.4 billion), as its share has over the years been lower than that of smaller economies.
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Leaders from developing countries want all IMF Special Drawing Rights funds channeled through development banks, for affordability and widened impact scale.
Speaking on the sidelines of the COP28 in Dubai, African Development Bank Group president Akinwumi Adesina said the funds sent to African countries for instance, should be routed through AfDB.
“The benefits range from the multilateral development bank’s unique value proposition as they can multiply the re-channeled Special Drawing Rights (SDR) by at least three to four times their original values,” Adesina said.
This, he said will transform the SDRs from foreign reserve assets into dynamic lending instruments at an affordable cost, to support critical development challenges in African countries.
SDR is an international reserve asset created by the IMF to supplement the official reserves of its member countries such as Kenya.
It is majorly intended to provide a country with liquidity in case of an economic shock, allowing them to reduce their reliance on more expensive domestic or external debt for building reserves.
Early this year, Kenya was lined up as among the top beneficiaries of the planned increase on quota SDR allocation, following the decision by IMF's Executive Board to increase its member country allocations.
This was intended to cushion the country’s dwindling forex reserves, amidst the tough economic times and the weakening shilling against the greenback.
Kenya’s SDR quota at the IMF as of September stood at $542.8 million, or Sh91.8 billion, offering the country a critical buffer in case of external shocks.
Earlier during the increment review, analysts expected that the country’s SDR quota would rise above 1 billion (Sh169.4 billion), as its share has over the years been lower than that of smaller economies.
Such ambitions could be propelled with the full implementation of the re-channeling proposal, according to Adesina.
He further noted that full realisation of the proposal will be essential in boosting the capital resources of the development bank in fulfilling its mandate in terms of development in the region.
“This is while cushioning the countries of the high interest rates and IMF charges as the development bank will pay the charges directly to the countries lending their SDRs to the African countries through the IMF,” he said.
Discussions to re-channel the support funding began in June this year in Paris during Financial Pact summit, where global leaders met to review and revise the current global financial architecture to create a more just and beneficial system, especially for the developing nations.
Spearheaded by AfDB and the Inter-American Development Bank (IDB), the proposal was backed to help unlock significant funds to address pressing global challenges, and catalyse sustainable development in low-income countries, particularly in Africa.
At the height of the COVID-19 pandemic in 2021, the IMF shored up the global economy by allocating $650 billion (Sh99.7 trillion) in SDRs.
This action demonstrated the global community’s capacity to respond adequately to unprecedented crises, AfDB said in a statement.
However, of the newly issued SDRs, Africa received only about five per cent of the total allocation, the smallest portion among the different regions of the world.
Currently, IMF members channel some SDR resources to developing countries through the IMF’s existing Poverty Reduction and Growth Trust (PRGT) and the newly established Resilience and Sustainability Trust (RST).
“While these measures are commendable, we believe there is a need for a more targeted and complementary third option;re-channeling SDRs through multilateral development banks (MDBs),” he said.