Special Drawing Rights: Are they sufficient for Africa’s economic recovery?

African nations are facing a significant challenge in their economic recovery as they expect to receive $33.6 billion from a new issuance of Special Drawing Rights (SDRs), representing only 6.4% of the proposed $650 billion allocation. To discuss the implications of this allocation for Africa's economic recovery, CNBC Africa interviewed Carlos Lopes, Professor of Economics at the University of Cape Town. Lopes highlighted the importance of SDRs as an international reserve that the IMF can utilize during crises. However, he emphasized that Africa's current allocation falls short of addressing the continent's liquidity issues, exacerbated by the pandemic and systemic challenges. Lopes pointed out that developed countries have had more flexibility in implementing macroeconomic measures to support their economies, unlike African nations constrained by limited fiscal space and high interest rates. The interview delved into key themes such as the inadequacy of Africa's SDR allocation, the need for greater liquidity to address the continent's economic challenges, and the call for more equitable distribution of SDRs. Despite calls for rich countries to allocate more funds to Africa, challenges remain in achieving a fair distribution. Lopes urged African nations to focus on enhancing domestic policies to utilize savings effectively, uniting for systemic changes, and addressing the bias of rating agencies towards the continent. The interview shed light on the disparity in SDR allocations and underscored the importance of African nations advocating for a fairer distribution to support their economic recovery.