World Bank President Open to Using IMF Special Drawing Rights for Climate Lending

"I would love it if the IMF and the world changed the rules and said Special Drawing Rights (SDRs) can be used by the MDBs."

World Bank President Ajay Banga has signaled his willingness to consider the use of International Monetary Fund Special Drawing Rights to support climate-related lending and tackle global crises. 

In an interview, Banga acknowledged the difficulty of overcoming hurdles associated with harnessing the IMF's reserve assets, emphasizing the need for alternative strategies to enhance the bank's lending capacity.

He emphasized the importance of collaboration with other multilateral development banks (MDBs) and governments to address this issue.

Banga expressed, "I would love it if the IMF and the world changed the rules and said Special Drawing Rights (SDRs) can be used by the MDBs."

SDRs are backed by major currencies such as the dollar, euro, yen, sterling, and yuan. In 2021, the IMF allocated $650 billion in new SDRs to assist member countries in dealing with the COVID-19 pandemic. While some SDRs from wealthier nations are currently being directed to poorer countries through IMF trust fund loans, the idea of transferring them to MDBs is untested.

In his latest stance, Banga expressed his hopes for a rule change by the IMF, allowing MDBs to utilize SDRs. He acknowledged mounting pressure from the global development community and the U.S., the World Bank's largest shareholder, to ramp up lending for climate action alongside its traditional anti-poverty mission.

While pledging to maximize lending from the bank's balance sheet in the coming year and a half, Banga revealed plans to increase lending by an additional $106 billion over a decade, in addition to a $50 billion boost approved earlier in the year.

Despite the complexity of these processes, the World Bank President remains hopeful, stating that if progress is made by spring, it would be a cause for delight.