I think there’s a human tendency to focus on what’s wrong – we see this in the news (especially in American news), and frequently also in the analysis of global financial institutions like the International Monetary Fund (IMF) and the World Bank. Now certainly, both these institutions have problems – when distributing loans to countries in need, both institutions require that a variety of economic changes be implemented (e.g., privatization of water, privatization of health care / health insurance). Besides infringing on the sovereignty of the nations in question, these demands often have deleterious effects on the population of the country, in the cases listed above, by making the cost of essential goods prohibitively high for the poorest members of the population. However, to paint the IMF and World Bank as purely ineffectual or perhaps even corrupt or malevolent is, at best, an incomplete picture, as argued by Mark Weisbrot of the Center for Economic and Policy Research. Mr. Weisbrot discussed one of the lesser-known tools of the World Bank, special drafting rights (SDRs).
SDRs are fairly complicated to explain, which partially explains why they’re not frequently talked about in popular discussions about the World Bank. These assets can be incredibly useful for developing countries – buffering potentially weak or sluggish economies (e.g., by keeping borrowing costs down) and can be exchanged for liquid currency. However, and this is a crucial point – they don’t actively cost the US or any other nation capital. Unfortunately, during the onset of the COVID-19 pandemic, the US Congress blocked the World Bank from issuing SDRs using the dollar as currency, effectively blocking the World Bank’s efforts to blunt the economic devastation wrought by COVID.
While the World Bank and IMF both need to change their policy approach moving forward, Weisbrot saw reasons for optimism. First, the emergency SDRs that the World Bank sought to distribute were not according to the IMF’s quota system, a complex computation that dictates how, in general, these must be distributed (frequently disproportionately benefiting already wealthy countries). And while these changes might not be happening as rapidly as one might like, there is also evidence that popular opinion has, and will continue, to guide the IMF’s actions and steer them toward a more equitable and beneficial policy stance in the future.