Abstract

Redistribution of Special Drawing Richts as an Instrument for Financing Development Aid (“Link”)

The developing countries are demanding that the industrial countries make over 25 -75% of their special drawing rights (SDR) for the purpose of financing development aid. The debate on this “Link” has been concentrated up to the present on the question of possible adverse consequences; on the other hand there is hardly any mention of special advantages over conventional development aid. Many of the arguments for or against the “Link” are not specific, but depict economic effects which may emanate from development aid in general. Probably the most important argument against the “Link” is the inherent danger of inflation. However, considering ahe current volume in which SDRs are created, the possible inflationary effects of their redistribution for financing development aid are quantitatively insignificant. But in such case there can also be no notable quantitative advantage for the developing countries; at most the increase in development aid would amount to about 3 %/u of the annual aid provided by the DAC alone. Very probably there would not even be this slight increase, since a compensatory - or even more than compensatory - reduction in the development aid given hitherto can be reckoned with. Since so far there is also no proof of the alleged advantageousness of multilaterazion of development aid (hand in hand with “Link” aid), even from the angle of developing countries’ interest there is no aparent reason for introducing a link between SDRs and development aid. For the industrial countries such a link might even afford an opportunity to reduce the burden imposed on them hitherto by development aid payments. This is possibly one of the reasons why various industrial countries have already given up their original opposition to the link.