The Center for Global Development (CGD), a leading international development think-tank, published a new report criticizing the UK’s proposal to count some of its recycled International Monetary Fund (IMF) Special Drawing Rights (SDRs) as official development assistance (ODA).
CGD calculated that for every £1.0 billion (US$1.3 billion) of SDRs that the UK recycles, low- and middle-income countries (LMICs) will experience a £310 million (US$416 million) net loss in development assistance. The UK will count 31% of its recycled SDRs as part of its commitment to reach 0.5% of gross national income (GNI) as ODA, reducing resources from the UK ODA budget that are available to LMICs. CGD has described the UK’s decision to count its recycled SDRs as ODA as "giving with one hand while taking with the other."
Other donor countries that have also decided to recycle their SDRs to LMICs have chosen not to count them as ODA; this decision will ensure that the full amount of SDRs is available to target countries in addition to planned ODA budgets.
The report is heavily critical of the Organisation for Economic Co-operation and Development's (OECD) rules which enable the UK to count IMF lending, via its Poverty, Growth and Reduction Trust, as ODA, arguing that rules do not appropriately reflect the low-level risk of the loans.
The report recommends that:
- In the short term, the new UK Foreign Secretary, Liz Truss, push the UK Treasury to ensure all of its recycled SDRs are additional to the UK’s 0.5% of GNI ODA budget. If this is not possible, the report recommends that the IMF actively draw on other countries' flows that are not counted as ODA; the funding only counts as ODA when it is drawn down by the IMF and released to countries. It is not counted as ODA when it is merely committed.
- In the long-term, if a new fund at the IMF is used to channel the additional SDRs to LMICs, it should ensure that any funding that is counted as reserves and subsides by other donors should not be counted as ODA.