International Cooperation: Strengthening Economic Institutions for Sustainable Development
January 26, 2021
Thank you so much for the kind introduction, Eirik and my appreciation to NORAD for inviting me to join your important conference. A very good morning to everyone.
I thought to speak today to a question that may be on the minds of some of you: Why is the IMF speaking front and center at a conference focused on development and humanitarian issues? So, let me share with you in this message why economic and social development are top priorities for us and how international cooperation lies at its heart. But I should first touch on the current and biggest crisis of our lifetimes. Covid-19 has called for exceptional actions from us all.
Over the last year, the IMF has moved with unprecedented speed and magnitude to help countries protect the lives and livelihoods of people. We have approved over $100 billion in total financing to more than 80 countries since the start of the pandemic last year.
Given their needs, we have focused on our low-income member countries by expanding our concessional financing and by providing immediate debt relief to 29 of the poorest, most vulnerable countries. We have also worked closely with the G20 on bilateral debt service relief and on a common framework to address unsustainable sovereign debt.
This financing has been critical to support short-term economic stabilization. But for a truly sustainable long-run recovery, countries must also strengthen their economic institutions such as central banks and tax administrations. Strong economic institutions are the critical foundation countries need to enable effective policies—and to make progress toward the Sustainable Development Goals.
And that is why, for more than 50 years, the IMF has provided technical assistance and training—capacity development as we call it—to help governments strengthen public finances, safeguard financial stability, modernize exchange rate policies, and improve economic governance and transparency. Most people may not know this, but capacity development accounts for nearly a third of the IMF’s budget.
Since the start of the pandemic, we have provided real-time policy advice and capacity development support to over 175 countries to address urgent issues such as cash management, financial supervision, and debt management. Much of this support has helped countries address challenges that had not been encountered in the past—for example how to collect inflation data during a lockdown.
This is, therefore, an important service we provide, especially in low-income and fragile states that need such support badly. We deliver it in conjunction with our global network of 16 capacity development centers; and—in the spirit of international cooperation—it is supported by our incredible partners such as Norad, which has partnered with us in three of these centers across Africa and Central America. Much of this work is also provided in close collaboration with partners on the ground, including the World Bank and the UN.
So, what are the Fund’s capacity development priorities in the period ahead? A big challenge that policymakers now confront is rising public debt, resulting from worsened fiscal positions due to the pandemic. IMF experts have been working closely with them to strengthen their debt management and reduce debt vulnerabilities.
And related to that, another crucial effort we are focused on is revenue mobilization—a critical endeavor to tackle debt vulnerabilities and create space for development spending. This includes helping many countries manage revenues from natural resources. In fact, we have a dedicated fund to finance support in this area, and—drawing on its considerable experience in this field—Norad has been one of the most engaged partners in this effort, providing substantive funding and guidance to our work. We thank you for that, for chairing this fund currently and for broadly supporting our revenue mobilization efforts.
Another priority I’d like to highlight is carbon pricing which is, of course, relevant from a climate change perspective. The Fund estimates that a combination of green investments and appropriate carbon pricing can put us on a path towards net zero emissions by mid-century. But carbon pricing is also important in supporting policymakers’ revenue mobilization efforts, all the more important as countries rebuild their revenue base post-pandemic to support the recovery.
As we look to exiting this crisis, we expect unusually high demand for our capacity development service. So, we have set up a COVID-19 capacity development fund and reached out to our membership for support, and I am pleased to say that we are getting positive responses from several countries.
Let me conclude by acknowledging the critical role you all play in the global development effort. Both as a former policymaker and in my roles at the IMF, I have witnessed first-hand the commitment and tenacity of our development partners in the pursuit of reforms. These efforts are often behind-the-scenes, but they help shape effective and impactful policy. And that can have the greatest, long-term impact on the economic and social wellbeing of people around the world.
So, thank you very much for your efforts and thank you for inviting me.