Intergovernmental Group of Twenty Four on International Monetary Affairs and Development
IMF News, October 11, 2018
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- Published: October 11, 2018
Meeting summary and leadership
- We held our 100th meeting in Bali, Indonesia on October 11, 2018.
- Chair: Mangala Samaraweera, Minister of Finance and Mass Media of Sri Lanka.
- 1st Vice‑Chair: Julio Velarde, Governor/President of the Central Reserve Bank of Peru.
- 2nd Vice‑Chair: Yaw Osafo‑Maafo, Senior Minister of the Republic of Ghana.
- Deputies meeting: one hundred and twelfth meeting on October 10, 2018, chaired by P. Nandalal Weerasinghe, Senior Deputy Governor, Central Bank of Sri Lanka.
Global growth outlook and risks
- Finding: Recovery of global growth continues but risks have shifted to the downside.
- Finding: Growth is becoming increasingly uneven, including among emerging market and developing economies (EMDEs).
- Risks identified:
- Tightening financial conditions from ongoing monetary policy normalization in advanced countries.
- Rapid shifts in financial market sentiment could set back the growth recovery.
- Uncertainty from trade tensions and protectionist sentiments that cloud the growth outlook.
- Recommendation: Urgent domestic policy actions to strengthen resilience, and multilateral actions to ensure financial stability and global growth.
Trade, multilateralism, and WTO
- Call: Strong international cooperation to foster a rules‑based, open, transparent, non‑discriminatory and equitable multilateral trading system, with the World Trade Organization at its center.
- Offer: G‑24 stands ready to participate in global efforts to improve the global trading system to facilitate sustainable development, ensure fair distribution of benefits and keep pace with technological change.
- Request: Increased engagement from international organizations on regional integration and more effective global governance of trade to enhance benefits for EMDEs.
International policy spillovers and IMF surveillance
- Call: International policy coordination to reduce adverse spillovers from domestic policies in advanced economies to limit recurring instability disrupting EMDE growth.
- Surveillance: Importance of continued evenhanded and context‑based assessment of macro‑prudential and capital flow management measures within IMF surveillance to support appropriate measures for financial stability.
Global Financial Safety Net and IMF capacity
- Finding: Current challenging financial conditions underscore the importance of a strong Global Financial Safety Net with an adequately resourced, quota‑based IMF at its center.
- Calls and recommendations:
- Maintain the IMF’s current lending capacity by increasing quotas and reducing dependence on borrowed resources.
- Note: Bilateral borrowing agreements will expire at year end 2019.
- Encourage strengthened cooperation between the Fund and Regional Financial Arrangements.
- Call for continued adaptation of the Fund’s toolkit, including program design and conditionality, to members’ evolving circumstances and needs.
- Encourage the IMF to revive discussion on a short‑term liquidity swap instrument.
- Call for even‑handed surveillance and lending decisions by the IMF.
- Support further work to explore a possible enhanced role for Special Drawing Rights as an instrument for international cooperation and as an international reserve currency.
Facilities for low‑income countries (LICs)
- Calls and recommendations:
- Increase access limits for the Poverty Reduction and Growth Trust (PRGT).
- Establish credible mechanisms to boost PRGT resources, effectiveness and impact.
- Keep the Policy Support Instrument alongside the newly established Policy Coordination Instrument.
- Enhance precautionary financing and increase scope for blending with non‑concessional financing.
- Enhance Fund engagement with fragile states in line with recommendations of the IMF’s Independent Evaluation Office.
Refugee crises and involuntary displacement
- Concern: Developing countries disproportionately affected by refugee crises and involuntary displacement, creating severe economic and social pressures in some countries in the Middle East and Africa and more recently in Asia and Latin America and the Caribbean.
- Call: Stronger support from international financial institutions (IFIs) and the international community; urgent collective action to deal with consequences and causes.
- Note: Look forward to outcomes of the UN Global Compact for Safe, Orderly and Regular Migration.
Debt vulnerabilities and debt transparency
- Finding: Rising debt vulnerabilities across developing countries.
- Calls and recommendations:
- Strengthen international financial community support for developing countries addressing interrelated challenges of debt and growth.
- Flexible implementation of the LIC Debt Sustainability Framework and Debt Limits Policy to accommodate infrastructure and social spending while preserving debt sustainability.
- Stronger and faster action from the IMF, World Bank Group (WBG), multilateral partners and donors on capacity building for fiscal and debt management, improving debt transparency and developing domestic capital markets.
- Encourage countries to maintain institutional capacity in fiscal and debt management.
- Emphasize joint responsibilities of debtors and creditors in fostering debt transparency and sustainability; encourage effective creditor coordination.
Concessional financing, ODA, and disaster/climate vulnerabilities
- Finding: Success of adjustment and reform efforts depends on supportive external trade and financial environment, timely contingency financing and adequate concessional financing for LICs.
- Statistic: Concern with the almost 20 percent decline of Official Development Assistance to LICs between 2013 and 2016; urge donor countries to take steps to reverse this trend.
- Note: Debt sustainability risks are acute for countries vulnerable to natural disasters and climate change.
- Recommendation: Stress importance of IMF and WBG support, including utilizing innovative approaches to help countries build resilience and unlock climate change financing.
Domestic resource mobilization, tax cooperation, and illicit flows
- Calls and actions:
- Strengthen IMF and WBG support for domestic resource mobilization and combating illicit financial flows.
- Mitigate adverse social and distributional impact of fiscal adjustment.
- International tax cooperation essential to develop fair rules and avert harmful tax practices and competition, and should be cognizant of EMDEs’ challenges, circumstances and priorities.
- Welcome interim report of the G‑24 Working Group on tax policies and international tax cooperation outlining approaches to peer learning, capacity building, implementation of exchange of information, and perspectives on taxation of the digital economy, extractive industries and indirect transfer of assets.
Private financing for infrastructure and role of MDBs
- Finding: Private financing for infrastructure and development is unlikely to reach the scale envisioned in the Addis Ababa Action Agenda to support the 2030 Sustainable Development Goals (SDGs).
- Call: Multilateral Development Banks (MDBs) should step up to support an enabling investment environment and de‑risk investments in developing countries.
- Recommendations for MDBs:
- Work together to pool and diversify risks across the MDB system and create new asset classes for private investors.
- Draw on respective strengths to maximize development impact supporting country‑led programs.
- Urgent scaling up of financing ambition and development effectiveness to support all client countries in meeting the SDGs while recognizing countries’ priorities and national circumstances.
Technological change and human capital
- Observations:
- Technological change creates opportunities for inclusive growth but also risks from a wider technological divide and economic and social exclusion.
- Welcome the IMF/WBG Bali Fintech Agenda as guidance on policy approaches to capture benefits and safeguard against risks to financial stability, integrity and consumer protection.
- Note WBG’s enhanced emphasis on developing human capital and strongly suggest linking this to jobs and economic transformation agenda.
- Note ongoing WBG work on the Human Capital Index (HCI); look forward to further methodology improvements and new data through capacity building and investment in data collection.
- Caution against inappropriate use of the HCI to rank countries’ performance.
Anti‑money laundering, correspondent banking relationships (CBRs)
- Support: Global efforts against money laundering and financing of terrorism.
- Concern: Unintended consequences, such as decline in correspondent banking relationships (CBRs).
- Recommendation: Encourage IMF and WBG to catalyze solutions to address decline of CBRs, including consultative processes involving source and destination countries, national regulators and global standard‑setters.
Voice, governance, and IMF quota reform
- Emphasis: Importance of voice and governance reforms in the Bretton Woods Institutions to reflect changed global economic landscape.
- Expectation: Completion of the IMF 15th General Review of Quotas, including agreement on a new quota formula, by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019.
- Concern: Slow progress to date; call on the IMFC to seek consensus for timely completion.
- Specific calls:
- Revised quota formula that increases the weight of GDP PPP within the GDP blend and further shifts quota shares from advanced economies to dynamic EMDEs.
- Realignment must not come at the expense of other EMDEs and should protect the quota shares and voice of all PRGT‑eligible countries and small developing states.
- Complete implementation of the 2010 IMF Governance Reform on Board representation.
- Call for a third Chair for Sub‑Saharan Africa to enhance voice and representation of the region without this being at the expense of another EMDE Chair.
World Bank Group, IBRD, IFC and IDA issues
- Welcome: Approval of the International Bank for Reconstruction and Development (IBRD) capital increase resolutions.
- Encouragement: All countries to approve the International Finance Corporation (IFC) capital increase resolutions in a timely manner.
- Note: New IBRD shareholding structure will not lead to a notable change in the voice of EMDEs in IBRD governance.
- Recommendation for 2020 IBRD shareholding review: Outcomes should uphold the Istanbul Principle to achieve equitable voting power over time between developed countries and developing and transition countries.
- IDA and IBRD graduate issues:
- Look forward to effective implementation of IDA18 to substantially increase assistance to LICs and deliver on its five themes, including jobs and economic transformation.
- Welcome intention to scale up IBRD financing to IDA graduates and strongly urge elimination of the accelerated payments clause for IDA graduates.
- Rationale: Upon graduating from IDA, countries often have large financing gaps that cannot be filled by borrowing from IBRD and other creditors; eliminating the clause will alleviate financial burden during transition to non‑concessional borrowing.
Staff diversity and representation
- Call: Strengthen IMF and WBG efforts to address under‑representation of some regions and countries in recruitment and career progression, including at managerial levels.
- Reiterate: Importance of staff diversity and gender balance at all levels, including diversity of educational institutions and backgrounds.
Participants and observers (high level)
- Ministers and Deputies from African, Asian and Latin American groups participated; delegates from Algeria, Democratic Republic of Congo, Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Kenya, Morocco, Nigeria, South Africa, India, Islamic Republic of Iran, Lebanon, Pakistan, Philippines, Sri Lanka, Syria Arab Republic, Argentina, Brazil, Colombia, Guatemala, Haiti, Mexico, Peru, Trinidad and Tobago, Venezuela and others sat at the discussion table.
- Observers and special guests included representatives from the Arab Monetary Fund, China, ILO, Islamic Development Bank, OFID, Saudi Arabia, South Centre, United Arab Emirates, UNCTAD, UNDESA, and special guests David Lipton (International Monetary Fund), Joaquim Levy (World Bank), Joseph Stiglitz (Columbia University).
IMF Communications Department — Communiqué, Bali, Indonesia, October 11, 2018.