Martin Wolf provided a valuable analysis of the three different options considered by the IMF for the use of the future allocation of $650bn of special drawing rights to help low-income countries recover from the pandemic (Opinion, June 2).
He argued that high income countries that do not need the free money could allocate their SDRs to the IMF’s Poverty Reduction and Growth Trust, lend those SDRs directly to affected countries and allocate part of those SDRs to multilateral development banks to support their lending.
Considering the pandemic has also significantly worsened food insecurity in poor countries, we propose a fourth option as part of the preparatory work for the UN food systems summit. We propose a small portion of the future SDRs be allocated to create a trust fund to guarantee the issuing of special bonds (“zero hunger bonds”) by developing countries with credible national plans to end hunger, which has been exacerbated by the pandemic. These will be perpetual bonds, paying a floating, but capped, interest rate.
Instead of using the additional SDRs for debt reduction or for lending, this plan would vastly multiply the impact of those instruments. For instance, with a trust fund of $13bn, the value of guaranteed “zero hunger bonds” may be at least 10 times that amount, under conversative assumptions about how the guarantees would operate.
This option provides for a sizeable multiplier effect and, if applied to similarly structured “pandemic recovery bonds”, will greatly expand the amount of resources that can be mobilised in support of urgently needed pandemic relief and recovery.
Joachim von Braun
Chair, UN Food Systems Summit Scientific Group
Professor at Bonn University, Germany
Eugenio Diaz Bonilla
Head, Latin American and Caribbean Programme, International Food Policy Research, Washington, DC, US