Using the United Kingdom’s SDRs to tackle Covid-19 and climate change
CAFOD discussion paper - May 2021
In August 2021 we call on the UK government to deploy £9.5 billion worth of its SDR allocation.
The UK should use the boost to its reserves from the SDRs to make contributions to mechanisms such as COVAX, the Green Climate Fund and the Adaptation Fund.
The UK will receive circa US$27 billion worth of Special Drawing Rights (SDRs) in August 2021 (equivalent to around £19 billion). This discussion paper argues that the UK should use an increase to overall reserves to rapidly scale up access to Covid vaccines for the poorest countries and to tackle the global climate and biodiversity crisis.
Tackling the Covid-19 pandemic, climate change and biodiversity loss are areas the UK has consistently identified as priorities through its leadership role in COVAX and in the recent Integrated Review. They are also priorities for key allies. This is evidenced by the on-going commitments by G7 ministers and bold action by the Biden administration to eliminate trade barriers on vaccines, increase climate finance and to agree a huge domestic economic recovery package with a strong green dimension to it
Special Drawing Rights (SDRs) are a unit created by the IMF which are added to the reserves of member countries so that they have more finance available (referred to as liquidity). They are an international reserve asset which can be used by countries to shore up national reserves or exchanged for hard currency, often US dollars.
The last time SDRs were created was in 2009 following the financial crisis. They are about to be created again to respond to the damaging economic impacts of the Covid-19 pandemic.