Rishi Sunak is to save billions of pounds counting as financial aid to poor countries provided following a windfall Britain received from the International Monetary Fund (IMF).
In a move that was condemned by former Tory international development secretaries, the Chancellor chose not to use Britain’s share of a new IMF’s $ 650 billion global fight fund to increase the share of domestic production devoted to help.
Britain received $ 27.4 billion (Â£ 20 billion) as part of an IMF Special Drawing Rights (SDR) allocation – financial assets designed to help struggling poor countries during the pandemic – months after the government decided to cut aid spending from 0.7% to 0.5% of national income.
Other rich countries are making SDR aid add to existing budgets, but the UK will stick to internationally agreed rules that allow 30% of any concessional lending through the IMF. to count as help.
Romilly Greenhill, UK director of global anti-poverty campaign group ONE, said she expected the Treasury to recycle around 75% of its SDR allocation and would likely save between $ 4 billion and $ 5 billion of pounds sterling over a number of years. .
SDRs are an international reserve asset issued by the IMF that can be exchanged for one of five currencies: the US dollar, the euro, the Chinese yuan, the Japanese yen and the pound sterling.
They are given to member states based on their IMF participation, but the Chancellor said because poor countries need them more, the government will recycle its SDRs. In a February tweet, he said he would provide “additional funding to low-income countries to help them respond and recover.”
The group of G7 finance ministers, which Sunak currently chairs, will discuss how to recycle SDRs at the IMF’s annual meeting in Washington later this week.
Two former Conservative international development secretaries condemned the decision. Justine Greening said: âBritain has already cut aid spending from 0.7% to 0.5% of gross national income. If we are to be a truly global Britain, we must now focus on making the most of what is left.
âIt would be counterproductive to reduce even more effectively the investment in aid that saves lives and maintains the stability of fragile states. “
Andrew Mitchell, the former international development secretary who led the Commons rebellion against the government’s decision to cut the aid budget from 0.7% to 0.5% of domestic production, said Sunak should think again.
âThe Treasury is absolutely correct that the classification of these SDRs falls within the aid budget, but the question is whether, in the midst of a pandemic, Britain should accept in these exceptional circumstances that ‘they are added. “
Mitchell said the money recycled by the UK to poor countries was a contingent liability for the UK rather than actual expenditure. “This underlines the interest of adding it to the aid budget,” he added.
Greenhill said Sunak is expected to reverse his decision when reviewing spending at the end of the month.
âIt is shocking that the Treasury is considering classifying part of our SDR allocation as overseas development assistance,â she said. “This is further proof that they are planning further cuts in the aid budget and are not transparent about how they are going about it, which will mean the loss of even more vital programs for them. poorest in the world.
âIt is even more scandalous that we are the only wealthy donor to consider this money as aid. Because of the way SDRs work, this money costs the UK taxpayer virtually nothing. It is literally taking charity away from those who need it most.
A UK government spokesperson said: ‘The UK is a major donor of international aid and this year we have provided over Â£ 10 billion for poverty reduction, climate change and global health security. We will return to the 0.7% target when the budgetary situation allows.