Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
IMF News, April 11, 2023
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- Published: April 11, 2023
Condolences and humanitarian concerns
- G-24 members express condolences over human suffering from various crises globally and support international efforts to restore peace, stability and livelihoods.
- Note that crises are stretching the capability of governments and humanitarian agencies to cope.
Global economic outlook, human development, and risks
- Multiple crises and shocks are narrowing scope for smooth macroeconomic adjustment; human development is suffering major setbacks.
- Specific impacts cited:
- Extreme and severe poverty are increasing.
- Food insecurity is worsening.
- Learning losses are immense.
- Migration and forced displacement are at record highs.
- Inequality has risen worldwide, particularly in LICs and MICs.
- COVID-19 continues to constrain economic activity and keep many countries on a low growth path; global growth remains below pre-pandemic levels with risks heavily skewed to the downside.
- Many EMDEs are projected to grow below their potential in 2023.
- The World Food Programme estimates that the number of food insecure persons will rise to 345 million in 2023, more than double the number in 2020.
- Geopolitical conflicts and extreme weather contribute to food and energy insecurity and fuel price inflation; recent financial market turmoil creates volatility in fuel futures with the possibility for near-term inflation.
- Geopolitical tensions may upend prior global commitments, including on trade and climate change.
External financing pressures, capital flows, and financial stability
- External risks are rising as interest rate spreads increase and risk premia rise, compounded by high levels of debt, fiscal and current account imbalances, and high inflation.
- Scope for financing is narrowing as domestic exchange rates weaken.
- Capital flow dynamics in EMDEs are highly uncertain due to a faster-than-expected pace of global monetary tightening.
- Recent developments in some AEs’ banking sectors raise concerns about systemic financial instability and contagion.
- Systemically important economies should remain vigilant about inflation and guard against adverse spillovers; EMDEs affected by tighter conditions should implement policies to preserve and increase resilience.
Global liquidity and IMF initiatives
- Call for more support to expand global liquidity.
- Commendation of IMF initiatives: Food Shock Window (FSW) and Resilience and Sustainability Trust (RST) to provide liquidity to adjust to shocks.
- Calls for:
- Expanding the RST beyond climate change and pandemic preparedness to include other BOP vulnerabilities.
- An early review of the FSW.
- Additional member countries to join pledges to recycle SDRs to the RST to increase RST lending capacity.
- Welcomed IMF’s decision to raise the annual cumulative limits of access under the General Resources Account (GRA).
- Regret at lack of increase in access limits for the Poverty Reduction and Growth Trust (PRGT) due in part to a large subsidy resource gap; call on donors to help narrow this gap to maintain the low cost of using SDRs for developing countries.
- Reiteration of call for additional pledges to re-channel SDRs to meet the global ambition of USD 100 billion of voluntary contributions; note that this would not be sufficient alone to meet urgent needs.
- Encourage exploring other voluntary SDR channelling mechanisms including through RDBs, MDBs and regional financing arrangements.
SDR allocations and IMF precautionary instruments
- Allocations of new SDRs together with reforms of IMF precautionary financing instruments could further expand global liquidity and contain systemic risks.
- An additional SDR allocation would mitigate BOP and debt crises by lowering countries’ borrowing costs.
- Any new SDR allocation should be accompanied by a commitment from countries with large quota shares to increase re-channeling of new SDRs to countries most in need.
- Precautionary financing instruments mentioned: Flexible Credit Line (FCL), Precautionary and Liquidity Line (PLL), Short-Term Liquidity Line (SLL).
- Recommendation to strengthen precautionary facilities toolkit, including increasing the access limit of the SLL.
- Awaiting IMF review of these instruments.
Surcharge policy and IMF income model
- Welcome IMF Board discussion of the surcharge policy and note the failure to launch a formal review.
- Due to the regressive and pro-cyclical character of surcharges, calls for a comprehensive review to partially compensate increased financing burdens while allowing accumulation of precautionary reserves.
- Review should consider:
- Suspension of surcharges to support countries with severe BOP constraints.
- Significant permanent reduction in surcharges or their elimination.
- In the medium term, IMF should review its income model to reduce reliance on income from lending.
IMF quotas, governance, and representation
- Call for a well-resourced, quota-based IMF as the center of the global financial safety net and international lender of last resort.
- Call for timely completion of the 16th General Review of Quotas and urge reaching a meaningful quota increase and quota share realignment agreement this year.
- Fundamental goals of quota and governance reform:
- Enhance the voice and representation of EMDEs.
- Protect the share of least developed countries (LDCs).
- Shore up IMF finances.
- The review should recognize growing weight of EMDEs without disadvantaging other EMDEs and should provide resources to allow IMF to comply with its mandate with quotas as main financing source, while leveraging borrowed resources for tail risks.
- Reiteration of calls for creation of a third chair for Sub-Saharan Africa on the IMF Executive Board to improve regional representation; this should not come at expense of other EMDE and LDC chairs.
- Call for strengthening staffing resources available to Executive Directors elected by many members with heavy workloads.
World Bank Group (WBG) Evolution Roadmap and operational model
- Welcome ongoing discussions on the WBG Evolution Roadmap and reaffirm centrality of twin goals: end extreme poverty and promote shared prosperity and support for SDGs.
- Expectation of a more efficient and inclusive WBG capable of meeting needs of all client countries.
- Urge WBG to provide clear definition of global development challenges and selectivity criteria consistent with WBG mandate and comparative advantage, and in line with the SDGs.
- Priority areas urged for scaled-up support: access to affordable water, food and energy, human capital development, digital development and debt sustainability, in addition to climate change, conflict and fragility, and pandemic preparedness and prevention.
- Emphasize that tradeoffs from a new vision and mission should not come at the cost of development finance.
- Recommendations on operational model:
- Integration of global and regional dimensions must maintain country-based model and country ownership.
- Recommend close cooperation with UN Green Climate Fund, other MDBs and RDBs, guided by complementarity and synergies.
WBG financing capacity, balance sheet optimization, and ratings
- New ambition and high costs highlight need to substantially scale-up WBG financing capacity while preserving financial sustainability, AAA ratings and preferred creditor status.
- Current loan prices should be maintained to avoid increasing burden on borrowing costs.
- Recommendations for maximizing financing capacity:
- Optimize balance sheets and better leverage existing capital, including financial intermediary funds.
- Increase efficiency and lower transaction costs on trust funds.
- Leveraging existing resources should not foreclose medium-term capital increase, which remains the most powerful mechanism to increase financing capacity with lowest risk.
- Urge MDBs to implement recommendations from G20-convened Independent Expert Panel on Capital Adequacy Frameworks and strengthen communications with credit rating agencies to factor in MDB particularities.
Private finance mobilization and concerns for IDA/IBRD sustainability
- Call to double efforts in private capital mobilization.
- Enhancement of IBRD financing for MICs should not be at expense of IDA’s long-term financial sustainability, future IDA replenishments and country allocations.
- Expanded concessionality and lending volumes for MICs should not come at expense of current portfolios and financial conditions of IBRD and IDA countries; cross-subsidies must be avoided.
- Warning that additional financial capacity is required to avoid an unfunded enhanced mandate.
Sovereign debt vulnerabilities and multilateral debt coordination
- Urgent globally coordinated actions needed to support EMDEs manage worsening debt vulnerabilities to avoid debt crises that retard sustainable and inclusive growth.
- Calls to strengthen implementation of the G20 Common Framework (CF) to deliver timely, orderly and coordinated debt restructuring through fair burden sharing, increased private creditor participation and comparability of treatment among private and official bilateral creditors.
- Need for strengthened multilateral coordination by official, bilateral and private creditors to address deteriorating debt situations and facilitate coordinated debt treatment for debt distressed LICs and MICs.
- Encourage engagement through the Global Sovereign Debt Roundtable and stepping up implementation of the CF.
- Note that many debt-vulnerable countries have substantial domestic creditors; poorly designed debt resolution mechanisms could create domestic financial market instability.
- Call on IMF and WB to stand ready to support countries’ financial sectors during restructurings, especially to ensure adequate liquidity for banks.
Climate finance, energy access, and just transitions
- Combating climate change needs acceleration; climate financing and actions should reflect common but differentiated responsibilities and respective capabilities.
- Call for AEs to fulfil UNFCCC commitments including the 2009 goal of mobilizing USD100 billion annually and provide new and additional financial resources to support developing countries.
- Delivering on climate finance is critical to support developing countries’ Nationally Determined Contributions in line with the Paris Agreement.
- Welcome COP27 outcomes, especially historic funding arrangements on loss and damage in the Sharm el‑Sheikh Implementation Plan, and look forward to strong commitments in COP28.
- Urge IMF, WBG and other MDBs to intensify support for mitigation, adaptation and resilience in coordination with UNFCCC institutions through finance, technology transfer and capacity building.
- Note access to affordable energy remains a lynchpin of economic growth and development and requires stronger focus and stepped-up climate finance for loss and damage, adaptation and just transitions.
- WBG and IMF have catalytic roles to crowd-in private finance for efficient green public investments.
International tax reform and capacity building
- International tax reform is important to finance economic recovery, climate action and the SDGs.
- Call for a more effective, inclusive, sustainable and equitable international tax architecture, scaling-up international tax cooperation, fighting illicit financial flows and combating aggressive tax avoidance and evasion with focus on capacity building.
- Support principles of the global tax deal under the G20/OECD BEPS Inclusive Framework: introduction of a global minimum tax and taxation of the digital economy.
- Reiterate calls to address remaining issues and for solutions that are simple to administer and generate substantial new fiscal revenues for EMDEs.
- Welcome UN General Assembly resolution on Inclusive and Efficient Tax Reform Initiative and hope it opens door for inclusive intergovernmental negotiations at the UN.
- Support continued efforts of the G-24 Tax Working Group for peer dialogue, cooperation and international advocacy.
Trade policy, protectionism, and supply-chain resilience
- Concern over rising trade protectionism amid economic uncertainties and slow progress in global trading system reforms.
- Global trade is important for sustainable inclusive growth and poverty reduction; many EMDEs face unequal distribution of trade benefits, limited market access and unfair practices, especially in agriculture.
- Some policies aimed at domestic production or net-zero targets may raise relative costs of tradable commodities, distort trade and investment decisions, and affect developing countries.
- Call on IMF and WBG to analyze costs and benefits of free trade and globalization, including threats to economic security during crises like the pandemic.
- Urge WTO support to design a robust multilateral trade system and welcome IMF review of the Role of Trade to guide policy advice on supply-chain resilience while avoiding distortive protectionist measures.
- Emphasize measures to combat climate change should not be arbitrary or unjustifiable discrimination or disguised restrictions on international trade.
Institutional coordination, meetings, and acknowledgements
- Call for enhanced and sustained collaboration between WBG and IMF and greater regional partnerships at country and institutional levels.
- Ministers held their one hundred and ninth meeting in Washington D.C. on April 11, 2023 with Adama Coulibaly, Minister of Economy and Finance, Côte d’Ivoire, in the Chair; Benjamin Diokno, Secretary of Finance, Philippines, served as First Vice-Chair; and Candelaria Alvarez Moroni, Undersecretary for International Coordination and Management of the Secretariat of International Economic and Financial Affairs of the Ministry of Economy, Argentina, served as Second Vice‑Chair.
- Deputies held their one hundred and twenty-first meeting on April 10, 2023 with Chalouho Coulibaly, BCEAO National Director for Côte d'Ivoire, as Chair.
- List of participants includes named representatives across African, Asian and Latin American groups, observers and special guests; special guests included Kristalina Georgieva, Managing Director, International Monetary Fund, and David Malpass, President, World Bank.
- Expression of thanks to WBG President David Malpass for stewarding the WBG and wishes for a smooth transition.
Communiqué, April 11, 2023 — Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development.