Reforms for Special Drawing Rights (SDRs) Financing in Ghana's Economic Recovery
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Date
2024-04-30
Authors
Quartey, Peter
Atta-Ankomah, Richmond
Afful-Mensah, Gloria A
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
On 2 August 2021, the International Monetary Fund announced the largest (in its history) allocation of Special Drawing Rights(SDRs) worth US$650 billion (€550 billion),which was approved with effect from 23 August 2021. A large proportion of the total allocation went to developed economies because they hold much higher quotas, although the levels of SDR utilisation by these countries have been historically very low, compared to developing countries like Ghana. The important question is: in what ways could Ghana benefit from SDRs beyond its allocation? How can the unused SDRs allocations be rechannelled to support developing countries' public finances and help their recovery from recurrent global multiple shocks? To help address these questions, this case study on Ghana sought to: (1) Comprehensively explore the state of Ghana's public sector finance and how it has been affected by the triple crisis (COVID-19 pandemic, rising external debts, and Russia-Ukraine war); (2) Explore the evolution of Ghana's external balance position and its vulnerabilities in the context of local constraints and external shocks; and (3) Explore the opportunities for using SDR facilities to support public financial management, improve external balance position, and as a vehicle to promote stable economic growth and development in Ghana. The study points to several structural constraints, both local and external, to prudent fiscal management, and underscores the need for reforming SDR regime to provide an alternative and sustainable financing framework for Ghana and similar developing countries. Several recommendations are also provided to address the challenges of public financial management, including low domestic revenue mobilisation and inefficiencies in public spending.