Africas Chronic Liquidity Challenges and the Role of SDR Allocations

Abebe Abebe and Kevin Gallagher

Working Papers from African Economic Research Consortium

Abstract: The triple and overlapping global shocks faced by African countries have caused severe liquidity challenges in recent years. Many countries are currently experiencing low real GDP growth, higher inflation, exchange rate instability, balance of payments crisis, and a high risk of debt distress. The most critical is the increasing disruption that climate change risks pose to the macroeconomy, including worsening conditions of conflict and instability. In this regard, Africa is at a significant historic moment to resolve its development finance challenges to ensure a transition to a low-carbon economy while achieving the targets set in the Sustainable Development Goals. This paper outlines potential areas of reform in both the domestic and global arenas. It argues that the existing debt resolution mechanisms are obsolete, requiring novel and bold approaches, such as revising the role of Special Drawing Rights in relieving liquidity challenges in developing countries, mainly in Africa. In addition, the paper also notes that African governments need to seize opportunities created by the shocks to implement long-overdue structural and governance reforms to realize the continents enormous development potential.

Date: 2024-05-14
New Economics Papers: this item is included in nep-afr
Note: African Economic Research Consortium
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publication.aercafricalibrary.org/handle/123456789/3819 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aer:wpaper:b0185468-6704-4746-9909-5c512e4b2e88

Access Statistics for this paper

More papers in Working Papers from African Economic Research Consortium Contact information at EDIRC.
Bibliographic data for series maintained by Daniel Njiru ().