Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development — Communiqué (April 5, 2021)
IMF News, April 5, 2021
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- Published: April 5, 2021
Context and leadership
- Chaired by Abdolnaser Hemmati, Governor of the Central Bank of the Islamic Republic of Iran.
- Date: April 5, 2021.
- Media contact: IMF Communications Department.
Global recovery, COVID-19, and vaccines
- Findings:
- The global economy is showing signs of recovering from the COVID-19 crisis, but the path to broad-based and inclusive recovery is fraught with uncertainty about vaccine availability and access and the strength of external financial support to developing countries.
- The pandemic has strained health systems, severely hit developing-country economies, pushed millions into extreme poverty, and sharply increased food insecurity in the poorest and fragile/conflict-affected countries.
- Policy priorities:
- Urgent priorities are to contain the pandemic through scaling up vaccinations and to rebuild economies to avoid a lost decade of development and a major decline in people’s well-being.
- Call on advanced countries to boost financing for the COVAX Facility and move toward patent liberalization for COVID-19 vaccines to boost global production.
- Welcome the African Union’s vaccine program as a supplement to COVAX.
- MDBs must finance and deliver vaccines and support efforts to enable vaccine manufacturing in developing countries; MDBs should adopt COVAX vaccine criteria or the World Health Organization (WHO) Emergency Use List.
- Call on the World Trade Organization and MDBs to seek solutions to scale up vaccine production, including addressing intellectual property rules.
International cooperation and financing needs
- Findings:
- Large stimulus in advanced countries cushioned global impact; however, international assistance for developing countries has fallen short of an estimated $2.5 trillion in additional financing needs.
- Policy recommendations:
- Call on IFIs, especially the IMF and the World Bank, in coordination with the international community, to ensure availability of necessary liquidity and fiscal support for all developing countries.
- Concessional financing and ensuring positive net transfers should be central to avoid prolonged damage to LICs and small vulnerable states.
- Major economies should use all policy tools to foster trade and investor confidence to boost investment growth globally.
IMF role, SDRs, quotas, and governance
- Findings and recommendations:
- Reiterate importance of a strong global financial safety net with an adequately resourced, quota-based IMF at its center.
- Welcome stronger support in the IMF’s Executive Board for a meaningful new allocation of Special Drawing Rights (SDRs) to address long-term global liquidity needs.
- Call for members with strong external positions to voluntarily channel their SDRs, including from the new allocation, to benefit countries in need.
- Recycling mechanisms that boost IMF lending capacity would enable increased access limits and additional support to low- and middle-income countries.
- Request the IMF to modernize and enhance the impact of SDRs, including considering a more equitable and just way to allocate SDRs across countries to take account of demand, and to ensure utilization of SDRs in a transparent and accountable manner.
- Urge the IMF to ensure timely completion of the 16th General Review of Quotas by end-2023, and to increase quota resources, reduce reliance on borrowed resources, and implement governance reforms to increase the quota share of emerging markets and developing countries while protecting the shares of the poorest countries.
IMF lending toolkit, surcharges, and resource mobilization
- Findings and recommendations:
- Commendation for IMF’s swift pandemic response; the IMF should flexibly adapt its lending toolkit to evolving needs of low- and middle-income countries.
- Emphasize precautionary financing instruments for eligible countries to manage tail external risks.
- Since 2021 is the year for the IMF to review its Access Limits and its Surcharge Policy, urge the Fund to correct the regressive and pro-cyclical character of the Surcharge Policy and consider specific measures, such as suspending surcharges at this time to help economic recovery.
- Encourage the IMF to consider a significant permanent reduction in surcharges or their elimination.
- Encourage exploration of non-traditional and predictable funding options to boost the Poverty Reduction and Growth Trust’s resources and to increase IMF resources devoted to capacity development.
- Urge the IMF to increase its internal budget resources to ensure necessary financial and human resources to fulfill its mandate.
- Look forward to the upcoming review of the IMF’s Institutional View on Capital Flows to help countries reap benefits of capital flows while managing risks.
Debt vulnerabilities, DSSI, Common Framework, and sovereign debt treatment
- Findings:
- Worsening debt vulnerabilities in developing countries risk a debt crisis that would retard development progress.
- The G20’s Debt Service Suspension Initiative (DSSI) has provided short-term breathing space for many LICs, more than half of which are under high risk of debt distress or in distress.
- Policy recommendations:
- Welcome the G20’s Common Framework for Debt Treatments (CF) beyond the DSSI and call for fair, meaningful, and expeditious sovereign debt treatments with participation of private creditors within the CF.
- Encourage IMF and World Bank Group to support CF implementation in line with mandates, provide exceptional financial support to strengthen capacity for debt treatments, and enhance debt management frameworks, including transparency and reporting standards.
- Call for realistic debt sustainability assessments to determine financing needs.
- Encourage MDBs to support low- and middle-income countries in need of debt relief through innovative instruments and ensuring significant positive net transfers.
- Call for increased multilateral efforts to improve the architecture for sovereign debt resolution to facilitate expeditious debt treatments.
Multilateral Development Banks, World Bank Group, and IDA
- Findings and recommendations:
- Severe fiscal constraints and heightened debt vulnerabilities imperil containment of the pandemic and inclusive, resilient, and sustainable rebuilding.
- WBG and other MDBs should use their balance sheets to scale up financial support to low- and middle-income countries.
- Commend the WBG’s frontloaded International Development Association (IDA) lending program and look forward to successful completion of IDA20 replenishment in end-2021.
- WBG should strengthen financial support for middle-income countries and consider waiving front-end and commitment fees.
- Urge WBG to explore options to stretch balance sheets, including greater flexibility in implementing individual country lending limits; shareholders should monitor and address constraints to MDBs’ lending capacity in a timely way.
Domestic resource mobilization, taxation, and illicit financial flows
- Findings and recommendations:
- Developing countries should explore all financing sources to rebuild fiscal buffers and ensure effective use of resources.
- Countries should explore avenues for taxes to raise revenues, address inequality, improve health outcomes, and promote sustainable recovery.
- Urge IMF and WBG to strengthen capacity building for domestic resource mobilization and public debt and expenditure management.
- Call on IMF and WBG to enhance support for small states, fragile and conflict-affected states, and countries hosting refugees and experiencing significant migration influx.
- Urge WBG and other MDBs to explore innovative solutions, including de-risking instruments, to leverage private financing in sustainable energy and infrastructure and initiatives to support small and medium enterprises.
- Call for multilateral cooperation to reform international tax rules and prevent further erosion of tax bases.
- On taxation of the digital economy, seek a fair and equitable multilateral solution that addresses concerns of developing countries and yields meaningful and sustainable revenues by enabling them to tax their fair share of multinationals’ profits; the solution should be simple to implement and comply with.
- Urge IMF and WBG to deepen work to measure, monitor, and contain illicit financial flows.
Climate finance and MDB support for sustainable recovery
- Findings and recommendations:
- Welcome stronger international support for an inclusive and sustainable recovery; delivering on climate finance is critical and fair to assist developing countries in implementing their Nationally Determined Contributions.
- Advanced countries should fulfill their commitment, under the 2009 Climate Accord, to provide $100 billion annually by 2020 at the earliest possible time.
- Critical to scale up concessional resources and finance for adaptation.
- Adequate financing and technical assistance from MDBs and climate-related funds will be crucial to support sustainable investments, especially infrastructure and energy, and to leverage more private financing.
- Bretton Woods Institutions should tailor climate assistance to diverse developing-country circumstances, integrate climate objectives with sustainable development goals, and strengthen work on productivity, diversification, and job-creating inclusive growth.
- Urge MDBs and IMF to better articulate assistance strategies aligned with comparative advantages and mandates to support transitions to more inclusive and sustainable economies.
Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development — Communiqué (April 5, 2021).