Australia will re-route 20% of its allocated support from the International Monetary Fund (IMF) to low-income countries.
The assigned financial aid, in the form of Special Drawing Rights (SDRs), will be returned to the IMF and devoted to the funds’ poverty alleviation, growth, resilience and sustainability support mechanisms.
"Huge thanks to Australia for agreeing to channel 20% of its SDR allocation to vulnerable countries,” IMF Managing Director Kristalina Georgieva tweeted Friday. “SDR 1.26 billion [will go to] loans for the Poverty Reduction and Growth Trust and Resilience and Sustainability Trust.”
A separate, additional 19% will support the long-term sustainability of the trusts themselves.
Australia’s total allocation equates to around AU$4.6 billion.
SDRs — a type of “coupon” that acts just like money — are distributed by the IMF during periods of global instability.
The financial assistance scheme has long been criticised for the way countries receive their allocation, with wealthy IMF member nations — which hold the most significant share component — prioritised over the world's poorest countries, which lack the means to invest in the first place.
Last year, 44 of the lowest-income countries received just 7% of the total yearly allocation.
Proud to make a significant contribution to supporting the world's poorest countries through this critically important vehicle. Credit to @JEChalmers for this move which will be a force multiplier as the Albanese Govt rebuilds Australia's international development program. https://t.co/84uPGBbEMe— Pat Conroy MP (@PatConroy1) August 4, 2022
Minister for International Development and the Pacific Pat Conroy hopes the move will inspire other wealthy countries to follow suit while providing Australia’s Pacific neighbours with the economic support required to adapt to climate change and future pandemics.
Pacific nations at high risk of debt distress — like Samoa, Tonga and Tuvalu — are most likely to benefit.
"[I’m] proud to make a significant contribution to supporting the world's poorest countries through this critically important vehicle,” Conroy wrote. “Credit to[Australian] Treasurer Jim Chalmers for this move which will be a force multiplier as the Albanese Government rebuilds Australia's international development program.”
Alongside receiving praise from Georgieva, Australia has been applauded by economists and activists, many of whom had been pushing for the relocation for some time. Still, most now say that more must be done if Australia is to adequately play its part in reversing the setbacks to poverty alleviation seen over the past two years.
Aid analysis platform Devpolicy explained that any support provided through SDR reallocation must be in addition to official increases to the nation's aid budget. The budget currently sits at just 0.19% of Australia’s gross national income — way below the United Nations' recommendation of 0.7%.
"At a time when global development assistance is increasing, Australia is an outlier in that its development assistance is now at its lowest percentage of federal budget since the 1970s,” the organisation said. “At its height, the aid budget was equivalent to $266 per Australian. In 2022-23, we are spending $168 per Australian on aid.”
Australia’s newly-elected Labor Government has long promised to make incremental increases to the budget each year.