Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
IMF News, October 13, 2020
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- Published: October 13, 2020
Overview of the COVID-19 economic impact
- Chaired by Kenneth Ofori-Atta, Minister of Finance of Ghana; dated October 13, 2020.
- COVID-19 spread rapidly in the past six months; many EMDCs remain at high levels of infection and deaths.
- The global economy remains in recession, though the outlook has improved slightly as the economic decline in some major economies has been less severe than projected earlier.
- For the first time in decades, GDP growth in EMDCs, as a group, is expected to be negative in 2020.
- The pandemic is exacerbating inequality, with millions losing livelihoods and falling into poverty.
- Recovery is expected to be protracted with likely scarring damage to productive capacity and risks from recurring infection surges and financial stability headwinds.
Calls for global cooperation and vaccine access
- Encourages deeper global cooperation by the G20, WHO, WTO, and IFIs to support all countries confronting the health, social and economic crises.
- Notes G20 support for development, manufacture and equitable distribution of affordable vaccines and treatments as critical global public goods.
- States that "All countries, without exception, should have timely and affordable access to these public goods on the basis of need."
- Welcomes:
- The WBG’s proposed $12 billion initiative to help developing countries procure COVID-19 vaccines to treat up to 1 billion people.
- The COVID-19 Vaccine Global Access (COVAX) Initiative and urges major economies to provide necessary financial support.
Policy recommendations and financial support measures
- Calls on major economies to:
- Work together and use all policy tools to help countries contain the pandemic and restore inclusive growth.
- Facilitate international trade and investment and build resilience of supply chains.
- Notes sharp declines in revenue and capital outflows have depleted fiscal resources and reserve buffers.
- Urges the international community and IFIs to step up liquidity and fiscal support to assist EMDCs in limiting loss of lives, provide social protection and support economic recovery.
- Reiterates importance of a strong Global Financial Safety Net with a quota-based and adequately resourced IMF at its center.
- Calls for completion of the 16th General Review of Quotas within the agreed timeframe.
- Supports continued discussions on a meaningful new SDR allocation and mechanisms to channel unused SDRs to vulnerable countries.
- Seeks expansion of major central banks’ swaps and repo lines to more EMDCs and initiatives to scale up affordable market financing.
- Urges increased concessional financing as a higher priority to avoid prolonged damage to low-income developing countries’ development prospects.
- Calls for multilateral cooperation to contain illicit financial flows and reform international tax rules, including a multilateral solution to tax digital activities that considers EMDCs’ concerns.
- Calls on MDBs to find effective means to stretch balance sheets to boost lending capacity and to monitor and address potential constraints to medium-term lending capacity.
Debt treatment, DSSI, and debt transparency
- Emphasizes need to manage worsening debt vulnerabilities to avoid a debt crisis.
- Welcomes the G20’s Debt Service Suspension Initiative (DSSI) and encourages extension of DSSI support beyond 2020 by advanced economies and emerging markets with fiscal space.
- Encourages MDBs to support developing countries that need a debt standstill, including through net transfer of resources.
- Calls on private creditors to assume responsibility for sharing the burden of alleviating debt distress.
- Notes that risks of downgrades by Credit Rating Agencies affect market access and sovereign decisions to seek debt relief.
- Supports greater debt transparency and assistance from the IMF and WBG in strengthening debt management and fiscal management capacities.
- Welcomes G20 discussions on a structured framework for debt treatments beyond the DSSI, including mechanisms for debt restructuring and reduction when necessary.
- Urges IMF, WBG and development partners to consider ways to support countries undergoing debt restructuring with exceptional financing and to work urgently on mechanisms for fair, meaningful and timely sovereign debt resolution.
- Cites challenges in private creditor coordination illustrated by recent experiences of the Governments of Argentina and Ecuador.
IMF and WBG actions and requests
- For the IMF:
- Commends timely emergency lending to more than 80 countries.
- Urges the IMF to facilitate support to all member countries seeking urgent financial assistance.
- Welcomes the temporary increase in annual limits on overall access to the Fund’s resources by member countries.
- Welcomes the six-month extension of the higher access limits under the Fund’s emergency facilities.
- Appreciates ongoing efforts to boost resources of the Poverty Reduction and Growth Trust (PRGT) and calls for additional contributions to the PRGT and the Catastrophe Containment and Relief Trust.
- Urges the IMF to work expeditiously to explore options to reform its lending toolkit and advisory support and adapt them to evolving needs during the crisis and recovery.
- For the WBG:
- Welcomes its lending program of US$160 billion over a period of 15 months and commends frontloading part of this lending and a substantial increase in the fourth quarter of FY20.
- Encourages the WBG to respond flexibly to requests for new financing.
- Notes the need for exceptional financing by EMDCs will persist beyond FY21 and that the WBG needs to be prepared to respond with continued exceptional support beyond FY21.
Longer-term development priorities
- Warns that a decade of progress in reducing poverty could be lost and scars from the recession weigh on development prospects.
- Calls to build more resilient economies, harness digitalization, and address job creation, high inequality, climate change, environmental concerns, and access to affordable and reliable energy and infrastructure services—particularly the health sector.
- States that sufficient, timely and effective external assistance will be needed to complement diminished domestic resources.
- Reaffirms that international cooperation is essential to boost development financing and ensure the international financial architecture makes financing work for all.
IMF Communications Department — Communiqué dated October 13, 2020.