Press Releases

U.S. Rep. French Hill (AR-02) joined Member of Parliament for Gillingham & Rainham, Rehman Chishti in an opinion piece featured in The Times Redbox urging the International Monetary Fund (IMF) to review its rules regarding allocations of Special Drawing Rights (SDRs). Last year, the IMF issued $650 billion worth of SDRs, with Russia receiving a staggering $17.5 billion. Some have pushed for an additional SDR allocation of up to $2 trillion, which would send around $60 billion to the Kremlin.

The full op-ed is transcribed below and can be viewed HERE.  

The IMF must review its rules or we risk giving Russia $17.5 billion

By U.S. Congressman French Hill & UK Member of Parliament Rehman Chishti

A policy issue that might be flying under the radar is the International Monetary Fund’s issuing of Special Drawing Rights (SDRs) to its global membership. But make no mistake: SDRs should not be flying under the radar as they are as significant as they are arcane, since governments can trade them in for hard currency without ever having to repay them.

Last year, the IMF issued $650 billion worth of SDRs, with Russia receiving a staggering $17.5 billion. As the international community comes together to challenge the clear and flagrant violation of the sovereign and democratic Ukraine, we must look at all options available. While we both welcome the steps taken so far by our respective governments, we must make sure that Russia’s actions have severe consequences.

Some have pushed for an additional SDR allocation of up to $2 trillion, which would send around $60 billion to the Kremlin. If this happens, Russia cannot be allowed to receive any funding as this would completely undermine sanctions already levied against the country.

While the IMF hopes the world will use these funds to recover from Covid-19, SDRs come with no strings attached, so vigilance is essential. Unless the IMF’s top shareholders in the Group of Seven (“G7”) capitals insist on conditions for SDRs, the IMF will aid the richest nations and fuel rogue regimes and terror states rather than helping the neediest.

Further SDRs would represent a strategic coup for Russia. Following the Skripal poisoning in the UK in 2018, the US prohibited dealings in the primary market for Russia’s non-ruble sovereign bonds. The UK and the US also acted swiftly and firmly together to challenge Russia’s unacceptable behaviour around the world, including expelling Russian diplomats after the poisoning.

In April 2021, President Biden went further by targeting ruble-denominated debt in light of Russia’s international aggression, cyber attacks, and targeting of regime critics. It would be lunacy for the IMF to now hand over billions of dollars in SDRs to Moscow while the US, UK, and other G7 countries are exerting pressure on Russia through financial sanctions, especially following the invasion of Ukraine.

Like Russia, China is a case in point. Now the largest official creditor in the world, China has saddled dozens of countries in the developing world with unsustainable debts that don’t conform to international lending standards, threatening to drag down weak economies as they emerge from the pandemic.

While G7 countries have done important work to force Beijing into suspending debt service and ensuring its lending terms are more transparent, SDRs from the IMF could well set back those efforts.

In sub-Saharan Africa, for instance, forcing China to restructure its obligations will only become harder now that the continent has acquired its billions in shares of new SDRs. Beijing itself will see little need to comply with G7 calls for credit reform after the IMF has sent China’s borrowers an infusion of no-strings-attached liquidity.

At least some in the G7 recognise these dangers, with the US Treasury secretary Janet Yellen testifying to Congress in March 2021 that SDRs shouldn’t go to repay loans from China’s Belt and Road Initiative. Taro Aso, the Japanese finance minister has understandably said that there’s “no point” in SDRs if they go to pay off Beijing.

This is why the G7 should secure a concrete commitment from China on debt restructuring and Chinese adherence to international standards — including those of the Paris Club and the OECD’s export subsidy rules — before they sign off on additional SDRs.

Of course, the UK and the US have previously worked together to challenge Chinese human rights abuses in Xinjiang by imposing Magnitsky-style sanctions on Chinese officials.

The same goes for international outcasts like Iran and Syria, which benefited from around $5 billion in the SDR allocations.

As with Russia, the G7 democracies can’t afford to reward autocrats in the name of responding to Covid-19. This is especially true as the EU seeks to broker talks between the US and Iran on Tehran’s nuclear ambitions, all while the Iranians have kicked their enrichment of uranium into high gear.

Yet again, the international community has witnessed Iran’s unacceptable behaviour with the continued detention of the UK citizen Nazanin Zaghari-Ratcliffe, despite her having already served an unjustified and deplorable period of detention. Now is the time for negotiations, not premature giveaways.

While the Biden administration has hinted it would refuse to provide dollars to unfriendly governments bearing SDRs, including Iran, it can’t control other major currencies. Although it’s unlikely that the US or UK will exchange Iran’s SDRs into dollars or pounds, there’s nothing stopping Iran from turning to Beijing to exchange their $4.9 billion worth of SDRs into renminbi.

Alternatively, the G7 could simply push for the IMF to selectively issue SDRs, thus bypassing countries of concern. This tool, dubbed a “special allocation,” would focus the IMF’s resources on countries with the weakest public health systems, including those in Africa. The IMF carried out a special allocation as recently as 2009.

The IMF seems to believe that SDRs are the easiest option to reassert its relevance as the world overcomes the effects of Covid-19, but failing to target those resources could end up benefiting precisely those countries that are least interested in international values.

The IMF takes its cues from its members, and none more so than large developed economies of the Group of Seven. With the invasion of Ukraine by Russian forces, they need to speak out now.