Hard to imagine, but Canada has just enriched itself, almost in secret, by 19 billion dollars.
In fact, last August, due to the COVID-19 crisis, Canada received this sum from the International Monetary Fund (IMF) in the form of a special asset called Special Drawing Rights (SDRs), which been placed in our international reserves. This is part of a record SDR 650 billion USD allocation injected into the global economy to address the damage caused by the pandemic.
Last week, Minister Chrystia Freeland was in Washington to discuss with fellow G20 finance ministers how best to use this windfall to jumpstart the global economy, among other things.
SDRs can be used to bolster a country’s international reserves or be exchanged for real currency to purchase goods like vaccines or personal protective equipment. Developing countries are already using this new financial room for maneuver that they were sorely lacking. In Madagascar, the new SDRs will be used to respond to the health crisis and economic recovery; in Senegal, they will be used to strengthen the health system and increase social protection.
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Canada, on the other hand, does not risk using these new resources, because our international reserves, like those of other rich countries, were already over-supplied before this “manna” fell from the sky. And this is the absurdity of the situation: while all IMF member countries received this unprecedented financial support, only a very small part went to very poor countries, because the allocation was made according to the size of economies. In fact, the very poor countries together will receive barely $ 26 billion, which is slightly more than a small country like Canada.
With widespread immunization, Canada is already getting back on its feet. But in low-income countries, investments have plummeted, and an estimated 65 to 75 million more people worldwide have fallen into extreme poverty.
This is why the G7 leaders concluded that of the 650 billion SDR, 100 billion should be recycled from the richest countries to the poorest countries. It should be a minimum. If Canada recycled 25% of the new SDRs received to begin with, that would unlock up to C $ 4.7 billion, which is roughly equivalent to two-thirds of Canada’s aid budget, without the aid budget. get poorer. The effect on developing countries would be enormous, and indeed cost us very little, in proportion. For example, if Canada were to lend its SDRs to other countries without interest, the only direct cost to us would be a small amount of interest paid to the IMF, which would amount to about $ 24 million at current rates.
As we just celebrated the International Day for the Eradication of Poverty on October 17, it is good to remember that we have the opportunity to act rather than stick to platitudes. President Macron set the tone by pledging that a fifth of France’s new SDR allocation will be recycled, and it was followed this week by the UK, which also made a pledge of 20 %. It is Canada’s turn to take action.
After all, Special Drawing Rights were invented to fund a Marshall Plan in the event of dark days for the global economy. With the pandemic, the world has not seen such dark days for almost a century. It’s time to put the plan into action.