To avoid global economic collapse and the death of millions of people worldwide, Congress must act swiftly and decisively to help low-income nations cope with the COVID-19 pandemic. The Support for Global Financial Institution Pandemic Response Act would direct the International Monetary Fund to issue $700 billion worth of assets, supporting the economic stability of 155 low- and middle-income countries at no cost to U.S. taxpayers.
Only Congress can authorize the IMF to release a financial resource called Special Drawing Rights at the scale and speed needed. These resources are not loans to the governments, but assets created by the IMF. In times of economic and financial distress, countries can use these SDRs to meet critical financing needs.
SDRs were issued on a smaller scale in 2009 to help manage the global recession and have the support of a wide range of conservative and liberal economists, Christian denominations and humanitarian organizations.
SDRs are not a cure-all. The U.S. should also release targeted aid dollars for hunger and health programs. Nevertheless, by helping low-income nations cope with the economic and health care costs of the pandemic, the proposed legislation is estimated to save between 1.8 million and 5.3 million lives in Africa alone.
We are part of a network of farmers, humanitarians and faith leaders working to raise awareness about this legislative proposal, which is anticipated to increase demand for agricultural exports and is consistent with Iowa values — saving millions of lives at no cost to American taxpayers.
World economy needs stimulus
The IMF SDRs are critical to containing the coronavirus pandemic and boosting the global economy. SDRs are not well-known to the general public, but economists and development experts believe they could provide crucial support to countries facing economic and public health crises caused by COVID-19.
Why are SDRs important for developing countries? IMF projections indicate that the economic disruptions caused by the pandemic will lead to the worst global economic turndown since the Great Depression and will be far worse than the 2008-09 global financial crisis and world recession. Developing countries — which are disproportionately harmed by disruptions to global supply chains and by the sharp fall in commodity prices triggered by the pandemic — will be hit particularly hard.
Many developing economies are losing foreign exchange to cover financing gaps and essential imports — such as food, medical supplies and personal protective equipment — at the time they need it most. The potential human consequences of this dire economic situation are staggering. According to the World Food Program, the number of people facing acute hunger worldwide could roughly double from 135 million to 265 million.
How do SDRs benefit U.S.?
Unlike other forms of multilateral financial support, such as IMF or World Bank loans and grants, SDRs do not cost U.S. taxpayers anything. They are assets the IMF creates — just as central banks like the U.S. Federal Reserve creates bank reserves — and that countries can use at a reasonable interest charge. But an SDR issuance would benefit the U.S. in other, far more significant ways.
First, a new issuance of SDRs would stimulate our economy by enabling low-income countries to continue purchasing U.S. exports, including Iowa farm products. U.S. businesses, many of which are global leaders in the production of agricultural goods and medical equipment, can expect to see higher production levels and greater profits. Without a major SDR issuance, global demand for U.S. exports is likely to fall, putting the estimated 10 million U.S. jobs that rely on foreign trade in jeopardy.
Second, a new issuance of SDRs would advance our security by avoiding the widespread hunger and economic disruption that breeds terrorism and can lead to failed states. It costs much less to avoid a disaster than to respond after-the-fact, and SDRs are an especially good deal because they don’t cost American taxpayers anything. Why put U.S. security interests — and potentially American lives — at risk when we can act now without any cost to us?
Finally, a new issuance of SDRs is consistent with our history and values. On May 5, Sen. Chuck Grassley remarked on the Senate floor that “despite the hardship and heartache so many families are experiencing right now, there are countless acts of kindness that show humanitarian goodness taking place in communities across my state.” Prompt congressional action on the Support for Global Financial Institution Pandemic Response Act would be a continuation of this goodness. What could be more Iowan than that?