Development Banks propose using Special Drawing Rights to finance Alliance launched by the G20 following IMF approval to expand access to resources to solve the challenges of food insecurity and the effects of climate change in the world.
After the opening for countries to join the G20 Global Alliance against Hunger and Poverty, the alliance now faces the challenge of securing funding to address global food and nutritional insecurity. The IDB (Inter-American Development Bank) and the AfDB (African Development Bank) see the use of Special Drawing Rights (SDRs) as a key to this issue.
In May this year, the IMF (International Monetary Fund) approved expanded access to the instrument, which can generate up to US$140 billion for multilateral development banks to finance climate action and the fight against hunger and poverty. The decision was prompted by IDB and the AfDB's pioneering initiative, which is linked to the ongoing debates in the forum of the world's largest economies.
During the G20 meeting in Rio de Janeiro, President Luíz Inácio Lula da Silva welcomed the proposal and stressed its importance. "We welcome the announcements made today by the Inter-American Development Bank and the African Development Bank. Both institutions are establishing an innovative financial mechanism for the use of hybrid Special Drawing Rights capital in support of the Global Alliance Against Hunger and Poverty," highlighted the president.
Possible measures
On the occasion, Brazilian Finance Minister Fernando Haddad pointed to the need for new investments in the form of subsidized credit from development banks and indicated both the taxation of billionaires and SDRs as possible ways to boost the global initiative.
"We need to look for innovations in financing instruments for development and public-private partnerships and support the multilateral development banks reform. The pioneering initiative by the Inter-American Development Bank and the African Development Bank to operationalize this channeling also offers a promising path for the Global Alliance, which we would like to explore," he argued.
Renata Amaral, Secretary for International Affairs and Development at Brasil's Ministry of Planning and Budget, also pointed out that SDRs reallocation can generate a 'win-win' situation for the countries. "It has the potential to leverage seven to eight times every dollar invested," explained Amaral. For her, "the initiative will be transformed into funding for good projects to combat hunger and extreme poverty in the poorest countries, including those in Latin America," she emphasized.
