Financing for Development in the Era of COVID-19 and Beyond Initiative
IMF News, March 29, 2021
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- Published: March 29, 2021
Overview and key message
- Remarks by IMF Managing Director Kristalina Georgieva at the Meeting of Heads of State and Government on the International Debt Architecture and Liquidity, March 29, 2021.
- Quote: "Helping vulnerable countries calls for a comprehensive approach. This includes actions on concessional finance, global reserves & debt, so countries can support their people."
- Central assertion: The global economy is on a path to recovery, but many developing countries are dangerously falling behind, requiring both domestic reforms and substantial international assistance.
Global economic outlook and distributional risks
- The global economic outlook is improving—credited to vaccine efforts and unprecedented government and international action.
- Divergence in recovery: Emerging and developing countries are at risk of languishing with weaker growth.
- Relative to pre-crisis projections and excluding China, this group is projected by 2022 to have cumulative per capita income losses as high as 20 percent versus 11 percent in advanced economies.
Comprehensive approach to support vulnerable countries
- Domestic policy measures recommended:
- Improve revenue collection.
- Improve spending efficiency.
- Improve the business environment.
- International support recommended:
- Grants.
- Concessional lending.
- IMF commitment: "We will do our part through concessional lending."
Special Drawing Rights (SDRs)
- Advanced consideration of a new SDR allocation of US$650 billion to address the long-term global need for reserve assets.
- Next steps: A formal SDR proposal will be presented in June, including measures to enhance transparency and accountability.
- Expected effects of a new SDR allocation:
- Provide a substantial direct liquidity boost for all IMF members without adding to debt burdens.
- Free up resources for countries under pressure to support people and businesses.
- Parallel efforts: Exploring options for members with strong financial positions to reallocate SDRs to support vulnerable countries.
Debt actions, DSSI, and the Common Framework
- Debt Service Suspension Initiative (DSSI):
- Provided around US$5.7 billion in relief to eligible countries in 2020.
- Was extended to June 2021.
- IMF strongly supports a further extension until the end of 2021, which is currently under consideration by G20 members.
- Limitations: The DSSI is not a solution to unsustainable debt.
- Priority actions on debt:
- Strengthen the international framework for sovereign debt resolution.
- Improve debt transparency.
- Develop new ideas to secure broad creditor participation.
- Common Framework implementation:
- Making the Common Framework for debt treatments work is paramount.
- Current requests: three requests—Chad, Ethiopia and Zambia.
- Emphasis on delivering on these requests and ensuring participation by all creditors—official and private—to build confidence and prevent delays.
IMF support and closing
- Throughout the crisis, the IMF scaled up support for its members to ease the recession and intends to continue supporting the recovery.
- Closing line: "Thank you"
Source: Financing for Development in the Era of COVID-19 and Beyond Initiative — Remarks by IMF Managing Director Kristalina Georgieva, March 29, 2021.