Sen. John Kennedy (R-La.) this week introduced an amendment to the National Defense Authorization Act that would require an act of Congress before the Taliban could receive any current or future allocation of special drawing rights through the International Monetary Fund (IMF). These special drawing rights (SDR) burden U.S. taxpayers because the Taliban could exchange the drawing rights for U.S. dollars at any time.
“If the IMF recognizes the Taliban as Afghanistan’s government, those terrorists will automatically have access to hundreds of millions of American tax dollars through the most recent allocation of special drawing rights. It’s Congress’s job to make sure America doesn’t end up bankrolling the Taliban’s violence against women, children and ethnic minorities. I can’t imagine any person who understands the Taliban’s human rights abuses and wouldn’t support this amendment,” said Kennedy.
The IMF created the SDR as an international reserve asset to supplement IMF member countries’ official reserves. The IMF distributes these assets to member countries, including Afghanistan, based on each country’s IMF quota, which depends on its size relative to the global economy.
Member countries receive SDRs and can exchange them for U.S. dollars. The IMF approved $650 billion in SDRs in August, $450 million of which was allocated for Afghanistan.
That distribution to Afghanistan has been blocked since the Taliban took control. That move, however, can be reversed should the majority of the IMF voting shares move to recognize the Taliban as a legitimate government. The U.S. cannot veto that recognition.
This summer, President Biden agreed to a general allocation of IMF SDRs totaling $650 billion without consent from Congress. Large portions of that allocation flowed to dictators and countries that actively oppose American interests and violate human rights.
China, Russia, Venezuela and state sponsors of terrorism like Syria and Iran received a huge portion of this allocation.
While some have claimed that SDRs offer the U.S. a no-cost way to assist poor countries, this is demonstrably false. Large IMF allocations require the U.S. to issue debt in order to cover the loans issued through SDRs. The U.S. has to pay interest on that debt, and that interest would exceed any interest that the U.S. might receive on the loans it issues.
There is no requirement that countries that receive loans from the U.S. through SDRs ever repay the principal. As a result, the financial burden of these loans falls on the U.S. taxpayer.
Kennedy previously introduced the No Dollars for Dictators Act to prohibit allocations of SDRs at the IMF from going to perpetrators of genocide and state sponsors of terrorism unless Congress authorizes the allocation.