Ghana is among the largest recipients of the International Monetary Fund (IMF)’s Special Drawing Rights (SDRs) in Sub-Saharan Africa to aid its economic recovery processes from the COVID-19 pandemic, the 2021 Annual World Bank Report has revealed.
According to the World Bank, Ghana, together with South Africa, Nigeria, the Democratic Republic of Congo, Zambia and Angola were the biggest recipients of the International Monetary Fund’s Special Drawing Rights within sub-Saharan Africa.
The six countries, together, claimed about half the amount of SDRs allocated to the region by the IMF, the World Bank stated.
Ghana received an SDR equivalent of US$1.007 billion to support its economy which is still battling the impacts of the COVID-19 pandemic.
SDR to support ongoing recovery
Finance Minister, Ken Ofori-Atta stated that government will spend part of the Fund to aid the ongoing economic recovery, instead of the normal practice of using it to shore up the country’s balance of payment or the Central Bank’s reserves.
According to data from the World Bank, South Africa received the largest SDR equivalent of $4.2 billion, followed by Nigeria with $3.3 billion. The DR Congo, Zambia and Angola also received SDR equivalents of $1.4 billion, $1.35 billion and $1.02 billion respectively. This means that Ghana is the 6th largest recipient of the SDR allocation from the IMF in Sub-Saharan Africa.
The World Bank warned in its report that “although this is a large amount for some countries, the SDR allocation is not a panacea. It is a good start, but it will not be sufficient. As the pandemic lingers, it cannot remain as a permanent solution and, thus, it cannot substitute other financing channels”.
Need to explore other financing needs
As such, the Bretton Woods Institution urged the international community to continue exploring different options that would enable rich countries to share their surplus SDRs voluntarily with the poor countries in regions with the greatest financing needs.
Earlier, the Governor of the Bank of Ghana, Dr. Ernest Addison clarified that the SDR allocation will not be treated as a central bank’s financing. Ghana’s share of the allocation has cushioned the country’s fiscal position at least for 2021, as the government has decided not to borrow from the international capital markets this year after receiving the funds. But just as the World Bank has warned, the country will need to explore other financing needs whilst keeping an eye on reducing its debt burden.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.
To date, a total of SDR 660.7 billion (equivalent to about $943 billion) have been allocated to countries globally. This includes the largest-ever allocation of Special Drawing Rights (SDRs) equivalent to about US$650 billion, effective August 23, 2021.
The most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic.