Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
IMF News, October 11, 2021
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- Published: October 11, 2021
Global recovery and macroeconomic risks
- The global economy is recovering from the pandemic amidst an uncertain path.
- Growth in per capita incomes of advanced countries and many emerging and developing economies (EMDEs) continue to diverge, driven by uneven vaccine access, fiscal space and financial capacity to respond to the crisis.
- After severe output losses due to the pandemic, near-term growth in many EMDEs is improving largely due to increasing domestic demand and higher commodity prices.
- Multiple social and economic challenges weigh on medium-term prospects of most EMDEs: food insecurity, increasing inequality, persistent unemployment and informality, setbacks in education and human capital development, heightened debt vulnerabilities, conflict, fragility and migration, climate change and increasing inflation risks.
- Sudden tightening of financial markets poses additional downside risks.
- Securing inclusive and sustainable growth will require international cooperation to provide widespread access to and distribution of affordable vaccines, ensure adequate external financial support to meet sustainable development goals and maintain financial market stability.
Vaccines and pandemic response
- Call for stronger multilateral cooperation to scale up vaccine supply and ensure equitable access to affordable vaccines, described as the most critical global public good at this juncture.
- Support mobilization of the IMF’s proposed US$50 billion global financing, preferably through grants or on concessional terms, to end the pandemic.
- Welcome efforts by the Multilateral Leaders Task Force on Scaling COVID-19 Tools to tackle obstacles to reaching:
- 40 percent vaccine coverage in all countries by end-2021,
- 60 percent by mid-2022, and
- 70 percent by end-2022.
- Advanced countries should ensure adequate upfront funding of Access to COVID-19 Tools Accelerator (ACT-A) and the COVAX Facility, fulfill dose-sharing pledges and agree on a patent waiver for COVID-19 vaccines and treatments.
- Commend increased lending envelope of the WBG’s Pandemic Facility.
- Call on MDBs to urgently support boosting vaccine manufacturing in EMDEs and welcome the IFC’s efforts.
- All countries should ease trade restrictions and tackle logistical, financial and supply-chain bottlenecks that impede production and distribution of vaccines, treatments and critical medical supplies.
SDR allocation, PRGT and the Resilience and Sustainability Trust (RST)
- Welcome the new $650 billion Special Drawing Rights (SDR) allocation to boost global liquidity.
- Call for meaningful voluntary channeling of SDRs from countries with strong external positions to low- and middle-income countries that need support.
- Welcome channeling SDRs through the Poverty Reduction and Growth Trust (PRGT).
- Welcome the proposed Resilience and Sustainability Trust (RST) to support low-and-middle-income countries vulnerable to transformational challenges, including pandemic prevention and preparedness and challenges to sustainable development.
- RST should complement and add to the Fund’s regular lending toolkit by providing affordable and long-term financing to IMF-supported arrangements.
- Welcome wider consultations with key stakeholders on the objectives and structure of the Trust.
- Encourage the IMF to explore further options, where feasible, for members to voluntarily channel SDRs through the WBG, other MDBs, regional development banks and other prescribed holders of SDRs, without delaying the RST, and while preserving the reserve asset characteristics of the SDR.
IMF lending toolkit, surcharges, and governance
- Commend the IMF’s continued efforts to adapt its lending toolkit, technical assistance and advice to evolving needs of EMDEs, including fragile and conflict affected states (FCS).
- Ask the IMF to consider the review of Access Limits and Surcharge Policy.
- Urge the Fund to correct the regressive and procyclical character of the Surcharge Policy and suspend, or at least substantially reduce, existing surcharges to support pandemic responses.
- Call on the IMF to review and expedite some Rapid Financing Instrument cases that have not been concluded yet.
- Highlight the role of precautionary financing instruments in helping eligible countries deal with tail external risks and complement liquidity buffers.
- Encourage review of IMF financial governance and address equity considerations in its revenue structure, including the role of surcharges.
- Suggest the IMF explore predictable sources of funding to enhance the PRGT and increase own resources devoted to capacity building that will particularly benefit low-income countries.
- Look forward to further discussions on the review of the IMF’s Institutional View on Capital Flows, incorporating recommendations of the Independent Evaluation Office (IEO) and the Integrated Policy Framework.
Global Financial Safety Net and quotas
- Reiterate importance of a strong Global Financial Safety Net, with an adequately resourced and quota-based IMF at its center.
- Encourage timely completion of the 16th General Review of Quotas (GRQ).
- Under the 16th GRQ, support a substantial quota increase and reduction in reliance on borrowed resources.
- Call for an early consensus on a new quota formula and a meaningful shift in quota shares from advanced economies to EMDEs, while protecting the shares of the poorest countries.
- Note that if previous quota reviews had been successful, EMDEs could have received a higher share of the new SDR allocation.
World Bank Group (WBG) and MDB financing
- WBG and other MDBs should use the strength of their balance sheets to the fullest extent possible while maintaining financial sustainability and credit ratings, to scale up lending over the medium- and long-term to meet exceptional financing needs in low- and middle-income countries, including FCS and small states.
- Welcome the WBG’s scaled-up COVID-19 response and proposed financing for the Green, Resilient and Inclusive Development (GRID) approach.
- Call for an ambitious IDA20 Replenishment to support a strong recovery in low-income countries and to strengthen assistance to fragile and conflict-affected states, small states and countries experiencing unprecedented migration flows, forced displacement and refugee challenges.
- Urge the WBG to increasingly adopt innovative solutions—such as de-risking instruments and blended finance—to leverage more private financing, especially for sustainable infrastructure investments.
- Note that the 2018 IBRD-IFC Capital Package did not anticipate the enormous financing needs of middle-income countries hit hard by the pandemic.
- Ask the WBG to develop a medium-term strategy of engagement with middle-income countries, considering their evolving landscape and circumstances.
International taxation and illicit financial flows
- Welcome introduction of a global minimum corporate tax to address harmful tax competition and new rules to allocate a portion of taxable profits of multinationals to market countries.
- Expect the multilateral solution under the proposed two-pillar approach will yield meaningful revenues for EMDEs.
- Emphasize dispute prevention rather than arbitration; existing arbitration systems need redesign to reflect the interests of all parties.
- Call for stronger international cooperation to tackle illicit financial flows.
Sovereign debt treatment and debt resolution
- Look forward to further progress in implementing sovereign debt treatments with participation of private and official creditors in a coordinated manner, within the G20’s Common Framework for Debt Treatments (CF).
- Call for further work on improving the sovereign debt resolution framework to facilitate debt treatments, increase private creditor participation and address the pro-cyclical impact of sovereign credit ratings.
- Encourage the IMF and WBG to strengthen technical and financial support in implementation of the CF, in line with their mandates.
- Ask the IMF and WBG to develop innovative financial instruments to reduce debt burdens, and support capacity building for domestic resource mobilization and debt management.
- Encourage the IMF to continue engaging with potential contributors/donors while exploring other innovative mechanisms to replenish the Catastrophe Containment and Relief Trust (CCRT).
- Urge the WBG to ensure that the LIBOR transition will not add to the financial burdens of EMDEs.
Inequalities, social protection, and human capital
- COVID-19 has exacerbated social and economic inequalities between and within countries.
- Addressing these inequalities is essential to avoid long-lasting scars and build a more inclusive future; should be a key area for stronger responses from the IMF, WBG and other MDBs.
- Call on the IMF to strengthen attention to the social and distributional consequences of the growth and adjustment programs the Fund supports, as recommended in the recent IEO evaluation, to help build country ownership of adjustment reforms.
- Call on the WBG and other MDBs to strengthen assistance to protect the vulnerable, promote gender equity, invest in public health, address the education crisis that has set back gains in human capital development, close the digital divide and address food insecurity.
- Urge the IMF and WBG to strengthen analytical work on the macroeconomic and developmental impacts of migration and refugee flows in source and destination countries and provide advice to design cooperative approaches and national policies.
Climate change, biodiversity loss, and finance for transition
- Welcome stronger global attention to address climate change and tackle biodiversity losses; look forward to the success of COP26 and COP15.
- Note the IPCC report highlights immense impacts of climate change, which will disproportionately fall on developing countries.
- International commitment to accelerate transition to a low-carbon world should reflect the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) as enshrined in the Paris Agreement.
- Low carbon pathways should offer opportunities to boost, not impede, poverty reduction, job-creating growth, technological advances, trade openness and inclusive development in EMDEs.
- Call for a concrete plan to reverse biodiversity loss and put nature on the path to recovery.
- Call on the WBG to collaborate with other organizations and institutions and contribute based on its comparative advantage.
- Massive increases in investment and access to affordable low-carbon technology for developing countries are required, including financial access on concessional terms and drawing on benefits of a circular economy.
- Developed countries should deliver ambitious climate financing, fulfill the commitment to provide US$100 billion annually to developing countries at the earliest possible time, and increase the share of concessional resources and adaptation finance.
- Significant scaling up of financial and technical assistance from MDBs and climate related funds, such as the Climate Investment Fund, Green Climate Fund and Global Infrastructure Facility, will be important.
WBG and IMF strategies on climate and development
- Welcome the WBG’s Climate Action Plan and the IMF’s Strategy to assist countries in addressing adaptation and mitigation goals and achieve the 2030 sustainable development goals, within their respective mandates.
- Call on the WBG and IMF to tailor support to countries’ unique and diverse economic structures and circumstances.
- All discussions on climate related programs should remain within the ambit of the Paris Agreement, and the principles of CBDR-RC need to be prioritized.
- The WBG can scale up operational and lending capacity to support developing countries’ Nationally Determined Contributions under the Paris Agreement, and enhance sustainable, resilient, and inclusive development.
- Support the IMF’s update of its bilateral and multilateral surveillance frameworks to recognize the macro-critical implications of climate risks and actions.
- Strongly encourage effective collaboration between the WBG and the IMF.
Communiqué — Chaired by Ali Salehabadi, Governor of the Central Bank of the Islamic Republic of Iran; October 11, 2021 — IMF Communications Department, MEDIA RELATIONS