A February 2023 Update on SDR Recycling: Getting Closer But Still Not There!

As the development community's attention turns increasingly to climate mitigation, adaptation, and loss and damage, special drawing rights (SDRs) are once again being bandied about as a potential financing source.

Let's check in once again on where we stand on the use of SDRs and recycling. (See our work on this mini-website if you want to know more about SDRs—from the basics to the nitty gritty details.)

The last time we looked (November 2022), the bottom line was: No vulnerable country has received a single recycled SDR, yet—almost a year after the pledge of the G20 to recycle $100 billion. Alas, this is still the bottom line—but there is some good news.

We're getting closer! Here’s a recap of where we stand:

The allocation

• The IMF issued $650 billion worth of SDRs on August 23, 2021. Each country received an allocation proportional to its IMF quota.
• Countries have used those SDRs in a variety of ways. The IMF has summarized what they have found from their conversations with country officials about the use of the new allocation, information which you can find here.

Recycling SDRs: Where the recycled SDRs will come from

• In October 2021, the G20 promised to recycle $100 billion of SDRs from members to vulnerable countries. The G20 announced last November that countries had committed $82 billion to recycling. But this included $21 billion from the United States, which has repeatedly failed to get congressional approval.
• So the ONE Campaign puts the total of publicly announced pledges at $60 billion, excluding the United States.  

Recycling SDRs: The institutions and instruments to be used for recycling

• Two channels for SDR recycling have been confirmed through the IMF: the Poverty Reduction and Growth Facility (PRGT) and the Resilience and Sustainability Trust (RST).
• Across the two facilities, the IMF is aiming to absorb about SDR 50 billion (US$ 65 billion) of recycled SDRs. Progress has been made on mobilizing those commitments, but much remains to be done.
• For the PRGT, not much has changed since November. At that time, donors had indicated their intention to recycle SDR 9.4 billion (about $12 billion). The IMF is seeking at least another SDR 3.2 billion (about US$4 billion) in recycled SDRs for the PRGT. More details will be available in a report in April 2023.
• For the RST, there has been a lot of progress since November.
  • The IMF is publishing the current state of RST financing.
  • The IMF has received SDR 30.4 billion (USD 40.4 billion) of pledges, of which SDR 19.5 billion (USD 26.0 billion) have been finalized with contribution agreements. The US indicated its intention to contribute to the RST, but it appears unlikely to happen. So there is still a large financing hole to bring the RST up to initial funding goals.
  • China is by far the most significant contributor, with a pledge of SDR 6 billion (USD 8.0 billion).
  • The IMF has committed to lend SDR 2.5 billion from the RST to five countries: Costa Rica (SDR 554 million), Barbados (SDR 142 million), Rwanda (SDR 240 million), Bangladesh (SDR 1,000 million) and Jamaica (SDR 574 million). The IMF Board approved the first four loans, with the Jamaica approval pending.
  • The IMF has yet to disburse any money from the RST. Disbursement is dependent on the countries taking agreed reform measures. If all goes well, the first disbursement will be made to Costa Rica as early as March 15, 2023. Other disbursements from the RST will be spread out as much as three years: Bangladesh, for example, is slated to receive six semi-annual disbursements of SDR 166.67 million, beginning in November 2023.

• The African Development Bank (AfDB) has opened another channel for recycling with the establishment of its hybrid capital model see here.
  • The AfDB is seeking SDR 2.5 billion for its initial financing round—SDR 500 million from five donors. No lending countries have yet made firm commitments, although several have expressed interest.
• If the G20 wants to live up to its recycling commitment of USD 100 billion, other recycling options must be developed.
  • Other MDBs may explore the AfDB hybrid capital scheme as a model to use SDRs to increase their lending power. 
  • The IMF has approved five new institutions as prescribed holders of SDRs, which widens the field. These include the Inter-American Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Caribbean Development Bank, and the Latin American Development Bank (CAF).

Recycling SDRs: How much has been received by low- and middle-income countries?

• None, but we're close on the RST!