This briefing was commissioned and originally published by the European Parliament.
On March 19, 2024, the European Parliament's Committee on Development hosted a workshop titled “Confronting Debt, Climate Change, and Poverty: Global Financial Architecture Reform and the Fiscal Space of Developing Countries.” CGD experts contributed briefings on key elements of the discussion: the concept of fiscal space of developing countries and the debate over IMF Special Drawing Rights.
From Fiscal Space in Developing Countries: A Primer, by Sanjeev Gupta and Hannah Brown:
Discourse surrounding fiscal space in developing countries has assumed significance on both international and European fronts, notably reflected in the United Nations Statement to the International Monetary Fund (IMF) and Board of Governors’ Financial Committee during the IMF-World Bank Annual Meetings in Marrakech. This briefing starts by discussing the concept of fiscal space in developing nations, delineating influencing factors, before exploring its relationship with demography, pandemics and climate change. The impact of policy levers available to policymakers is also considered, including expanding domestic resource mobilisation; enhancing expenditure efficiency; and refining debt management. The briefing concludes with a set of recommendations that hold potential relevance for policymakers in the European Union.
From IMF Special Drawing Rights: A Primer, by Mark Plant and Bernat Camps Adrogue:
Special Drawing Rights (SDRs) came to the fore in international discussions on development finance after the International Monetary Fund (IMF) issued USD 650 billion SDRs in response to the COVID-19 pandemic. Since then, many policy-makers and advocates have seized on SDRs as a possible source of development finance, but often such discussions betray a misunderstanding of such assets’ nature and purpose. Hence, this briefing provides key information needed for a more informed discussion of SDRs’ use as an international finance tool. Through historical analysis, different ways are considered in which such assets could be used to foster global development. This results in three proposals being presented for the European Parliament’s Committee on Development to consider. Firstly, a resolution should be promoted calling for EU Member States to fulfil their Group of 20 SDR recycling pledge. Secondly, unlocking the untapped potential of SDR recycling to multilateral development banks should be considered, an innovative approach to channelling resources for development financing. Finally, a resolution should be issued encouraging EU Members States to advocate regular periodic SDR allocations, consistent with the role envisaged in the IMF Articles of Agreement.
Read the full briefings here.
