Nearly 60 congressional lawmakers in the U.S. signed a letter this week calling on the Biden administration to help developing countries recover from debt, food insecurity, and the climate crisis by backing the International Monetary Fund in issuing a new allocation of a financial tool known as Special Drawing Rights.
Special Drawing Rights (SDRs)
are an international reserve asset that the IMF created and can allocate to member countries. It isn't a currency itself, but rather allows recipients to lay claim to the use of the currencies of member countries, thereby increasing cash flow.
"As developing countries around the world continue to feel the combined effects of simultaneous crises, it is powerfully important that the Biden administration support a new allocation of IMF SDRs to provide much-needed relief at no cost to the federal government," Sen. Elizabeth Warren (D-Mass.)
said in a statement on Thursday.
Warren led the letter along with Reps. Jesús "Chuy" GarcÃa (D-Ill.), Donald Norcross (D-N.J.), Joyce Beatty (D-Ohio), and Pramila Jayapal (D-Wash.). In the letter, sent on Wednesday to President Joe Biden and Treasury Secretary Janet Yellen, the lawmakers pointed to the success of the last major allocation of SDRs—$650 billion worth in 2021 to help countries respond to and recover from the Covid-19 pandemic.
"This measure was by far the single most important action taken to support the economies of developing countries in the face of combined global health, debt, economic, and climate crises," the legislators wrote.
The aid represented by the SDRs was more than wealthy countries typically send to poorer ones during a year and did not add to the recipients' debt. Developing countries used the SDRs to, among other things, stabilize their own currencies; pay down debts to the IMF; and buy essentials like food, vaccines, and personal protective equipment. The allocation likely saved the lives of hundreds of thousands of people, the Bank for International Settlements found.
"SDRs are a readily available and effective tool in your economic policy toolbox—we urge you to use it."
The lawmakers who signed this week's letter are calling for another allocation as developing countries continue to contend with climate disasters, war, and the threat of new pandemics. The request comes as the IMF recently issued its worst five-year economic forecast in 30 years. The 59 signatories asked for at least another $650 billion—a strategic number because that is the most the IMF can sign off on without a vote from Congress, according to Axios.
"Leading your administration now to support a new issuance of at least $650 billion in SDRs is a simple, cost-free, and effective way of saving many export-related jobs—including manufacturing and union jobs—in the U.S., while saving many lives in developing countries and mitigating the effects of a global slowdown," the lawmakers said. "SDRs are a readily available and effective tool in your economic policy toolbox—we urge you to use it."
The legislators emphasized that the SDR allocation would benefit the U.S. because it would increase the market for national exports. The global downturn triggered by the emergence of Covid-19 between January 2020 and May 2021 cost the U.S. around 2.2. million export-related jobs, they noted.
"A new SDR issuance would create more than $200 billion worth of international reserves for developing countries not including China, helping to stabilize global economies and U.S. export markets and therefore preserve and create U.S. jobs that would otherwise be lost to a global recession," the letter states.
The lawmakers are adding their voices to a global call for more SDRs. The idea gained support at the
Summit for a New Global Financing Pact in Paris in June, as Axiosreported at the time. Globally, the Africa Union, a coalition of Caribbean nations, and Colombian President Gustavo Petro have all stated their support. Several labor, nonprofit, and religious groups also endorsed Wednesday's letter, including the AFL-CIO, the Center for Economic and Policy Research, and the NETWORK Lobby for Catholic Social Justice.
"The labor movement strongly supports the call for a new allocation of SDRs which represent a transformative measure needed to avoid future shocks and job loss related to climate; health; debt; and digitalization; among other challenges," AFL-CIO international director Catherine Feingold said in a statement.
The ball is now in Yellen's court, Axios observed, as she is the one who would tell the U.S. to vote to issue more SDRs at the IMF, and such a vote would likely be decisive. However, in October of 2022 she said that she did not think issuing more SDRs was appropriate because wealthy nations still had existing reserves they needed to channel to developing nations, as Reutersreported at the time. Since then, she has made no other statements on the matter, according to Axios.
"The world wants the IMF to do this again," Mark Weisbrot of the Center for Economic and Policy Research told Axios in June. "It's only the U.S. Treasury Department that is holding it up."
