No ‘free pot of painless money’: UK rejects call to donate more SDRs

The United Kingdom is resisting pressure to donate more of its Special Drawing Rights to low-income nations ahead of the Paris financing summit scheduled for June 22-23, despite being less generous than other advanced economies. Questioned by members of Parliament, Foreign Secretary James Cleverly dismissed the idea that releasing SDRs — a reserve asset that can be traded for hard currency — is a way for the U.K. to increase its aid spending following massive cuts. “The idea that somehow there is this free pot of painless money that we could apply but choose not to, which is implicit in your question, is just not accurate. All money has to come from somewhere,” Cleverly insisted. Just 20% of the £19 billion ($24.4 billion) SDRs the U.K. was allocated by the International Monetary Fund in 2021 is being passed on — a far smaller share than Japan (40%), Australia (39%), China (34%) or France (30%). French President Emmanuel Macron will make the use of SDRs a key issue at the two-day summit he is hosting to agree on “a new financial pact with the South,” viewing them as a mechanism to redirect scarce finance. But Cleverly rejected Labour MP Liam Byrne’s call to “match Japan’s commitment,” while giving evidence to the Commons Foreign Affairs Committee last Monday, insisting the U.K.’s stance “balances our international commitments.” “It is deeply disappointing the Foreign Secretary isn't prepared to step up to lead the global debate about on-lending of special drawing rights,” Byrne, who is also chair of the Parliamentary Network on the World Bank and International Monetary Fund, told Devex. “The world is still well short of the $100 billion target agreed by the G20. A clear commitment from the UK to match Japan's pledge would surge in £3.8 billion in extra aid spending immediately.” Frederique Dahan, ODI’s director of development and public finance, said the rechannelling of SDRs is “important in times where new financial resources are scarce,” adding: “Clearly the UK has some catch up to do.” But she added: “Who the UK pledges any new SDR to is arguably even more important. To date, the IMF has been the main beneficiary of new SDR pledges but has been shockingly slow in actually disbursing funds. “The UK could demonstrate real leadership by pledging additional SDR to the African Development Bank. There is a great proposal on the table that would leverage these amounts 4 times and could move them to vulnerable countries more quickly and at greater scale.” The ONE Campaign is keeping a running tally of SDR donations, calculating the average from high-income nations to be 25% — while calling for each country to release “at least 30%.” It lists Belgium, Norway and Sweden (all 4%) as the least generous, below Denmark (5%), Oman (7%) and Estonia (11%). The U.S. figure is 19%, but this excludes a further $21 billion pledge not yet authorized by Congress. The U.K. provoked further criticism by — as Devex revealed two years ago — counting the redistribution of some of its SDRs toward its reduced target of spending 0.5% of gross national income on aid. The IMF approved SDRs worth $650 billion, the largest ever, to help countries cope with the COVID-19 pandemic — but allocations are based on member countries’ share quotas, so they went mainly to wealthier nations. At last November’s United Nations Climate Change Conference, Macron urged fellow world leaders to act, saying: “We’ve got to do battle if we’re to do what’s necessary on the Special Drawing Rights and on the $100 billion to support the poorest countries, a large part of which will go towards the climate.”