IMF Managing Director Remarks at the Summit for a New Global Financing Pact
IMF News, June 22, 2023
Source details
- Canonical URL
- IMF Managing Director Remarks at the Summit for a New Global Financing Pact
Other formats
Bibliographic details
- Published: June 22, 2023
A rapidly changing and unbalanced world
- Historical and membership context:
- In 1944 there were 99 countries.
- The IMF now has 190 members.
- Aggregate changes since 1944:
- Global population has more than tripled.
- The world economy – as measured by GDP -- increased more than 10 times.
- Average income per capita has more than tripled.
- Key global imbalances identified:
- Geographic mismatch between youth and capital: need to build a bridge for capital to flow where young people are to create jobs and prosperity.
- Climate imbalance: sources of emissions are primarily in advanced economies and large emerging market economies, while the worst impacts fall on countries that have not caused the problem.
- Financial capacity imbalance: financial resources are much larger in some places than in others, reducing some countries’ ability to cope with a more shock-prone world.
Adapting institutions: mandate and implementation
- Core IMF mission restated:
- Macroeconomic and financial stability, growth, and employment.
- Imperative to take a more comprehensive view in implementing the mandate:
- Resilience of people: ensure they are educated, healthy and have good social protection.
- Resilience of society: extend focus beyond the banking sector to address unfairness and injustice that undermine economic outcomes.
- Resilience of the planet: incorporate climate considerations into the Fund’s work.
- Institutional implications:
- Examine how the IMF and World Bank work, their priorities, and the instruments they deploy to address the multi-dimensional challenges described.
Well-resourced reinvigorated multilateralism — financing priorities and initiatives
- Poverty Reduction and Growth Trust (PRGT):
- The IMF has almost reached the resources needed to meet demand for the PRGT.
- Higher demand and higher interest rates create a subsidy gap of US$1.2 billion that must be closed to preserve concessional lending terms for the most vulnerable borrowers.
- Appeal to Summit participants: close the US$1.2 billion subsidy gap.
- Special Drawing Rights (SDRs) rechanneling:
- Original target for rechanneling SDRs was set at US$100 billion.
- The target of US$100 billion has been reached.
- Channeling requests escalated over time: 20 percent of 2021 allocation → 30 percent → now an ask of 40 percent.
- Current status: close to US$60 billion in pledges to be channeled through the Resilience and Sustainability Trust (RST) and through the PRGT.
- Resilience and Sustainability Trust (RST):
- The RST has raised more than US$40 billion — close to the original target.
- IMF request at the Summit: lift ambition by an additional US$20 billion for the RST.
- RST features:
- Long-term financing with a 20-year repayment period and a 10-year grace period.
- Concessional financing to vulnerable middle-income countries.
- Implementation and partnerships:
- RST programs are underpinned by World Bank analytics, such as Country Climate and Development Reports, which support two thirds of RST programs.
- RST is working with other institutions, including the European Investment Bank, the African Development Bank, and the Inter-American Development Bank.
- Current beneficiaries and near-term expectations:
- Seven countries are already benefiting from the RST.
- Hope for another 10 countries to benefit next year.
- Upcoming engagement:
- President Banga and the Managing Director will go to Morocco for the IMF and World Bank Annual Meetings in October — the first time in half a century that the meetings will take place on the African continent.
- A strong International Development Association (IDA) and a strong PRGT are highlighted as necessary to deliver for Africa.
Closing argument and policy orientation
- The Managing Director’s framing:
- Global average income increases do not guarantee income convergence for those lower down the income spectrum.
- Without restarting the engine of income convergence, rising average global income will not improve the lives of those whose incomes are lagging.
- Institutional commitment:
- The IMF and World Bank are committed to ensuring income convergence and addressing the imbalances that hinder shared prosperity.
IMF Managing Director Remarks at the Summit for a New Global Financing Pact — As Prepared for Delivery, June 22, 2023.