The 2021 Special Drawing Rights allocation has helped bring some of the most deeply entrenched injustices embedded in the global economic system to light.
This image series, developed in partnership with AFRODAD and Tax Justice Network Africa, connects the dots between the SDR system and IMF voting rights and calls for a fundamental rethink of our global financial architecture that is embedded in reparative justice, rather than a system in which ‘might makes right’.
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SDRs were especially created to reduce European dependence on the US dollar under the Bretton Woods System.
When that system collapsed in the 1970s, negotiations took place on the function of SDRs. It was ultimately agreed that SDRs should be used with the objective of becoming the principal reserve asset in the international monetary system, a channel to de-dollarisation.
Yet, the global North has not kept this promise and SDRs still only serve as a supplementary reserve asset today, leaving the US dollar as the de-facto primary global reserve currency, which disadvantages developing economies in a number of ways.
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SDRs are created through ‘allocations’, which are decided by the IMF Board. Since 1969, four general allocations have been made.
When SDRs are allocated, they are immediately disbursed among almost all countries without any policy conditionality being attached, so they can be used in whatever way countries need.
Lessons from Christian Aid in Sierra Leone, Kenya and Malawi.
What happened to the SDRs created in 2021?
In 2021, in response to the global Covid-19 crisis, the IMF created, or ‘allocated’, SDRs worth $650 billion USD to support countries manage the severe economic impacts of the pandemic.
Civil society organisations like AFRODAD, Latindadd and Christian Aid worked with national partners at the time to understand how governments used SDRs. We found that SDRs performed a crucial positive role in supporting developing countries with differing needs, but that, in many cases, this emergency financing was ultimately not enough to prevent long-term economic crises from taking hold.
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In the instances where G20 countries did channel their unused SDRs to developing countries, they overwhelmingly chose to do so through IMF loan programmes, where they are unnecessarily tied to austerity-based policy conditions, controlled by a small handful of countries.
Some of these IMF programmes are designed to support countries respond to climate change, raising concerns about ‘green conditionality’ and SDRs being effectively used as yet another tool of economic control over the global South by the global North.
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How are SDRs distributed among countries?
General allocations of Special Drawing Rights are distributed to IMF member states in a way that is proportional to their IMF quota.
IMF quotas largely determine how much financing countries put into the IMF, how much they can borrow from the IMF, and how much their vote counts in IMF decision-making. While IMF quotas are supposed to be determined by a formula based especially on economic size, in reality, the US and European countries have effectively dominated IMF decision-making since the end of WWII, when most of Africa was under colonial control.
This archaic system means that only one country, the US, who has such a big vote share that it effectively holds the veto power in IMF decision-making, was able to single-handedly block an SDR allocation from being made for an entire year when the Covid-19 pandemic first broke out. It also means that when SDRs are created in times of crisis, the majority of them paradoxically go to those who need them the least, while deepening neocolonial power structures in today’s global economy.
In 2021 when a new SDR allocation was made, just the 8 former major European colonial powers (i.e. France, Germany, the UK, Netherlands, Belgium, Italy, Portugal and Spain) received about three times the amount of SDRs compared to all African countries.
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The unfair distribution of SDRs is echoed in today’s unfair distribution of voting rights in IMF decision-making, whereby the entire African continent has less voting power than just a few European countries and former colonial powers.
Decision-making at the IMF is not just shaped by voting power. Some countries, like the United Kingdom and France, are represented by their own executive directors on the IMF board, while all of sub-Saharan Africa’s 1.2 billion people are represented by just 2 directors.
In 2024, after years of advocating for greater African representation, the IMF added a third African chair to its board, but without added voting powers.
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Even as recently as 2023, when IMF quotas were doubled, the Fund’s most powerful members blocked voting rights being redistributed more fairly by insisting on a fully ‘equiproportional’ quota increase.
By doing so they chose to break with decades of precedent to maintain their unfairly gained power in IMF decision-making, further damaging the credibility and legitimacy of the institution.
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In summary, while African countries facing immense crises during the pandemic made the most out of their tiny proportion of SDRs, some of the world’s richest countries held up the allocation being made, received an enormous chunk of the SDR pie that they had no use for, and are now dragging their feet to redistribute SDRs and inventing new ways to attach policy conditionality to them. All while resisting redistributing IMF quotas that would make future SDR allocations more fair.
It's no wonder African governments are asking: SDR are you kidding me?!
Enough is enough. It is high time to transform our global financial architecture to ensure Africa is at the decision-making table and systemic SDR and IMF quota reforms are enacted.
There's no time to wait.
Proposals for SDR Reform.
