Special Drawing Rights (SDRs): Country Experiences and Impact on Selected African Countries

Michael Takudzwa Pasara
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Michael Takudzwa Pasara: London School of Economics and Political Science

Chapter Chapter 12 in Public Finance Management in the Development Matrix of the Global South, 2025, pp 239-266 from Springer

Abstract: Abstract This chapter analyses the impact of Special Drawing Rights on the Zimbabwean economy from a policy perspective. Zimbabwe received SDR 677.4 million (approximately USD 965 million) from the International Monetary Fund under the General Allocation Fund. At the global level, SDRs were meant to supplement international reserves and stabilise exchange rates in order to absorb economic shocks caused by the COVID-19 pandemic. SDRs in Zimbabwe have been marred by a lack of transparency in both disbursements and utilisation, leading to less than optimal perceived gains and loss of social contract between the government and citizens. This chapter provides a closer analysis of some historical as well as current experiences on the utilisation of SDRs. The chapter also analyses the relationship between SDRs and the National Development Strategy 1 (Zimbabwe’s key policy) as well as other country experiences in Southern Africa. The study concludes that the pandemic exposed the health and financial sector inefficiencies in Zimbabwe and revealed that stronger health systems, which incorporate universal health coverage such as the Abuja Declaration, are vital; SDRs only play a complementary role. The majority of cases have been that of mismatches between allocations of contingency funds and utilisation, which continue to expose vulnerable groups. The study recommends the following: (1) need to significantly boost foreign reserves and the Balance of Payment (BOP) position in Zimbabwe; (2) need to establish specific legal instruments on transitory or windfall revenue like SDRs within the Public Finance Management Act; (3) need to propose a liquidity ratio and framework to monitor their use; and (4) also need to prioritise sustainable projects as opposed to recurring expenditures, which take up approximately 70% of the national purse. Moreover, SDRs should be complemented by functional Development Banks to sustainably increase long-term financing of infrastructure to ensure economic shocks such as COVID-19 and the Russia–Ukraine conflict do not derail SDGs and other national objectives such as the National Development Strategy 1 (NDS 1).

Keywords: Special drawing rights; Public finance management; National budget; Zimbabwe; Economy (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:aaechp:978-3-032-00525-0_12

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DOI: 10.1007/978-3-032-00525-0_12

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