{ "title": "Three Policy Priorities for a Robust Recovery", "publication": "IMF Blog, February 16, 2022", "sourceUrl": "https://www.imf.org/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery", "canonical": "https://www.imf.org/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery", "overlayPath": "/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/index.md", "summary": "We must work together to end the pandemic, navigate monetary tightening and shift focus to fiscal sustainability.", "sections": [ { "heading": "Overview", "content": "- Author: Kristalina Georgieva\n- Date: February 16, 2022\n- Central message: Countries must \"work together to end the pandemic, navigate monetary tightening and shift focus to fiscal sustainability\"—drawing on the Indonesian concepts gotong royong (\"working together to achieve a common goal\") and Bhinneka Tunggal Ika (\"Unity in Diversity\")." }, { "heading": "Global outlook and key risks", "content": "- IMF global forecast for 2022: 4.4 percent.\n- Recent drivers of downside risk: Omicron variant, persistent supply chain disruptions, higher-than-expected inflation readings, financial market volatility, and increased geopolitical tensions.\n- Cumulative global output losses from the pandemic projected through 2024: nearly $13.8 trillion." }, { "heading": "Priority 1 — Broader efforts to fight \"economic long-Covid\"", "content": "Findings\n- Durable and inclusive recovery is impossible while the pandemic continues.\n- Uncertainty about virus path post-Omicron, durability of vaccine or infection protection, and risk of new variants.\n- Learning losses cost to students worldwide estimated at up to $17 trillion over their lives (lower productivity and employment disruptions).\n- School closures especially acute in emerging economies, risking increased divergence among countries.\n\nPolicy recommendations\n- Move from a singular focus on vaccines to equitable access to a comprehensive COVID-19 toolkit: vaccines, tests, and treatments.\n- Ongoing investments in medical research, disease surveillance, and health systems that reach the \"last mile\".\n- Upfront financing of $23.4 billion to close the ACT-Accelerator funding gap as an important down payment.\n- Enhanced coordination between G20 finance and health ministries.\n- Scale up social spending, reskilling programs, remedial training for teachers, and tutoring for students." }, { "heading": "Priority 2 — Navigate the monetary tightening cycle", "content": "Findings\n- Inflation pressures building in many countries; differentiation across economies and high uncertainty remain.\n- Labor markets tight and inflation expectations rising in some countries (examples cited: United States and the United Kingdom).\n- Other countries (including the euro area) can afford a slower withdrawal of accommodation if inflation rise is largely energy-driven.\n- So far, global financial conditions have remained relatively favorable, partly due to negative real interest rates in most G20 countries.\n\nPolicy recommendations and preparedness\n- Calibrate monetary withdrawal to country circumstances; be ready to act faster if data warrants.\n- Clear communication of policy shifts to safeguard financial stability domestically and internationally.\n- Borrowers should extend debt maturities where feasible now and contain further buildup of foreign currency debts.\n- Flexible exchange rates are important for absorbing shocks in most cases, but not the only tool.\n- In high volatility events, consider foreign exchange interventions (example: Indonesia in 2020) and capital flow management measures (examples: Iceland in 2008 and Cyprus in 2013).\n- Use macroprudential measures to guard against risks in the non-bank financial sector or surging property markets.\n- Combine these tools with macroeconomic adjustments when needed." }, { "heading": "Priority 3 — Shift focus to fiscal sustainability", "content": "Findings\n- Extraordinary fiscal measures prevented a deeper depression but pushed up debt levels.\n- 2020 saw the largest one-year debt surge since the second world war; global debt—both public and private—rose to $226 trillion.\n- Many developing countries have limited fiscal firepower, weaker recoveries, and deeper scars from economic long-Covid.\n- IMF estimate: green supply policies, including a 10-year public investment program, could raise annual global output by about 2 percent compared to the baseline on average over 2021-30.\n- About 60 percent of low-income countries are in or at high risk of debt distress—double 2015 levels.\n\nPolicy recommendations\n- Carefully calibrate fiscal policies as countries emerge from the pandemic: continue support for health systems and the most vulnerable while reducing deficits and debt levels as appropriate.\n- Faster fiscal scaling back warranted where recovery is further ahead to facilitate monetary policy shifts and contain inflationary pressures.\n- For highly indebted and low-income countries: more domestic revenue mobilization, more grants and concessional financing, and immediate help to deal with debt.\n- Reinvigorate the G-20 Common Framework for debt treatment:\n - Start with offering a standstill on debt service payments during negotiation under the framework.\n - Implement quicker and more efficient processes with clarity on steps—from formation of creditor committees to agreement on debt resolution.\n - Make the framework available to a wider range of highly indebted countries." }, { "heading": "The IMF’s role and financing tools", "content": "Findings and actions\n- IMF provides macroeconomic frameworks and debt sustainability analyses; encourages greater debt transparency (greater disclosure of what a member owes and to whom when seeking IMF financing).\n- Works with members through the IMF-World Bank Multi-Pronged Approach to debt vulnerability.\n- Historic allocation of Special Drawing Rights: $650 billion.\n\nExamples of SDR use (as cited)\n- Nepal: vaccine imports.\n- North Macedonia: health spending and pandemic lifelines.\n- Senegal: boost vaccine production capacity.\n\nRecommendations for maximizing SDR impact\n- Channel new SDRs through the Poverty Reduction and Growth Trust for concessional financing to low-income countries.\n- Channel SDRs through the new Resilience and Sustainability Trust (RST).\n- RST offers cheaper rates and longer maturities and could fund climate, pandemic preparedness, and digitalization policies that improve macroeconomic stability for decades.\n- The G20 has given strong backing to the RST; aim to have it fully operational this year.\n\nFinal IMF policy stance\n- The IMF will support countries with calibrated policy advice, capacity development, and financial assistance where needed.\n- Emphasizes agility in policymaking and international cooperation to achieve a durable, inclusive recovery that \"works for all.\"\n\nSource: IMF blog post \"Three Policy Priorities for a Robust Recovery\" by Kristalina Georgieva, February 16, 2022.\n\n---\n\n Content in this bundle\n\n- Policy Paper\n - Policy Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Policy Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n- G20: Reaching Net Zero Emissions\n - G20: Reaching Net Zero Emissions (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - G20: Reaching Net Zero Emissions (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- we cut our global forecast\n- new report to the G20\n- comprehensive COVID-19 toolkit\n- School closures have been especially acute\n- https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-Chart-1.png\n- potential capital flow reversals\n- https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-chart-2-.png\n- rising to $226 trillion\n- G-20 Common Framework for debt treatment\n- Poverty Reduction and Growth Trust\n- Resilience and Sustainability Trust\n\nSource: https://www.imf.org/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/index.md)", "[Structured JSON version](/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/index.json)", "[Bundle manifest](/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/bundle-manifest.json)", "Authors: Kristalina Georgieva", "Published: February 16, 2022", "Author: Kristalina Georgieva", "Date: February 16, 2022", "Central message: Countries must \"work together to end the pandemic, navigate monetary tightening and shift focus to fiscal sustainability\"—drawing on the Indonesian concepts gotong royong (\"working together to achieve a common goal\") and Bhinneka Tunggal Ika (\"Unity in Diversity\").", "IMF global forecast for 2022: 4.4 percent.", "Recent drivers of downside risk: Omicron variant, persistent supply chain disruptions, higher-than-expected inflation readings, financial market volatility, and increased geopolitical tensions.", "Cumulative global output losses from the pandemic projected through 2024: nearly $13.8 trillion.", "Durable and inclusive recovery is impossible while the pandemic continues.", "Uncertainty about virus path post-Omicron, durability of vaccine or infection protection, and risk of new variants.", "Learning losses cost to students worldwide estimated at up to $17 trillion over their lives (lower productivity and employment disruptions).", "School closures especially acute in emerging economies, risking increased divergence among countries.", "Move from a singular focus on vaccines to equitable access to a comprehensive COVID-19 toolkit: vaccines, tests, and treatments.", "Ongoing investments in medical research, disease surveillance, and health systems that reach the \"last mile\".", "Upfront financing of $23.4 billion to close the ACT-Accelerator funding gap as an important down payment.", "Enhanced coordination between G20 finance and health ministries.", "Scale up social spending, reskilling programs, remedial training for teachers, and tutoring for students.", "Inflation pressures building in many countries; differentiation across economies and high uncertainty remain.", "Labor markets tight and inflation expectations rising in some countries (examples cited: United States and the United Kingdom).", "Other countries (including the euro area) can afford a slower withdrawal of accommodation if inflation rise is largely energy-driven.", "So far, global financial conditions have remained relatively favorable, partly due to negative real interest rates in most G20 countries.", "Calibrate monetary withdrawal to country circumstances; be ready to act faster if data warrants.", "Clear communication of policy shifts to safeguard financial stability domestically and internationally.", "Borrowers should extend debt maturities where feasible now and contain further buildup of foreign currency debts.", "Flexible exchange rates are important for absorbing shocks in most cases, but not the only tool.", "In high volatility events, consider foreign exchange interventions (example: Indonesia in 2020) and capital flow management measures (examples: Iceland in 2008 and Cyprus in 2013).", "Use macroprudential measures to guard against risks in the non-bank financial sector or surging property markets.", "Combine these tools with macroeconomic adjustments when needed.", "Extraordinary fiscal measures prevented a deeper depression but pushed up debt levels.", "2020 saw the largest one-year debt surge since the second world war; global debt—both public and private—rose to $226 trillion.", "Many developing countries have limited fiscal firepower, weaker recoveries, and deeper scars from economic long-Covid.", "IMF estimate: green supply policies, including a 10-year public investment program, could raise annual global output by about 2 percent compared to the baseline on average over 2021-30.", "About 60 percent of low-income countries are in or at high risk of debt distress—double 2015 levels.", "Carefully calibrate fiscal policies as countries emerge from the pandemic: continue support for health systems and the most vulnerable while reducing deficits and debt levels as appropriate.", "Faster fiscal scaling back warranted where recovery is further ahead to facilitate monetary policy shifts and contain inflationary pressures.", "For highly indebted and low-income countries: more domestic revenue mobilization, more grants and concessional financing, and immediate help to deal with debt.", "Reinvigorate the G-20 Common Framework for debt treatment:", "IMF provides macroeconomic frameworks and debt sustainability analyses; encourages greater debt transparency (greater disclosure of what a member owes and to whom when seeking IMF financing).", "Works with members through the IMF-World Bank Multi-Pronged Approach to debt vulnerability.", "Historic allocation of Special Drawing Rights: $650 billion.", "Nepal: vaccine imports.", "North Macedonia: health spending and pandemic lifelines.", "Senegal: boost vaccine production capacity.", "Channel new SDRs through the Poverty Reduction and Growth Trust for concessional financing to low-income countries.", "Channel SDRs through the new Resilience and Sustainability Trust (RST).", "RST offers cheaper rates and longer maturities and could fund climate, pandemic preparedness, and digitalization policies that improve macroeconomic stability for decades.", "The G20 has given strong backing to the RST; aim to have it fully operational this year.", "The IMF will support countries with calibrated policy advice, capacity development, and financial assistance where needed.", "Emphasizes agility in policymaking and international cooperation to achieve a durable, inclusive recovery that \"works for all.\"", "**Policy Paper**", "**G20: Reaching Net Zero Emissions**", "[we cut our global forecast](https://blogs.imf.org/2022/01/25/a-disrupted-global-recovery)", "[new report to the G20](https://www.imf.org/external/np/g20/021622.htm)", "[comprehensive COVID-19 toolkit](https://www.imf.org/en/Topics/imf-and-covid19/imf-staff-pandemic-proposal)", "[School closures have been especially acute](https://blogs.imf.org/2022/02/03/pandemic-scars-may-be-twice-as-deep-for-students-in-developing-countries/)", "[https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-Chart-1.png](https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-Chart-1.png)", "[potential capital flow reversals](https://blogs.imf.org/2022/01/10/emerging-economies-must-prepare-for-fed-policy-tightening)", "[https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-chart-2-.png](https://www.imf.org/wp-content/uploads/2022/02/G20-Blog-chart-2-.png)", "[rising to $226 trillion](https://blogs.imf.org/2021/12/15/global-debt-reaches-a-record-226-trillion)", "[G-20 Common Framework for debt treatment](https://blogs.imf.org/2021/12/02/the-g20-common-framework-for-debt-treatments-must-be-stepped-up)", "[Poverty Reduction and Growth Trust](https://www.imf.org/en/About/Factsheets/IMF-Support-for-Low-Income-Countries)", "[Resilience and Sustainability Trust](https://blogs.imf.org/2022/01/20/a-new-trust-to-help-countries-build-resilience-and-sustainability/)" ], "related": [ { "title": "Policy Paper", "role": "paper", "sourceUrl": "https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020066.pdf", "summary": { "path": "/-/media/files/publications/pp/2020/english/ppea2020066.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/pp/2020/english/ppea2020066.pdf", "mime": "application/pdf" } }, { "title": "G20: Reaching Net Zero Emissions", "role": "document", "sourceUrl": "https://www.imf.org/external/np/g20/pdf/2021/062221.pdf", "summary": { "path": "/external/np/g20/pdf/2021/062221.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/external/np/g20/pdf/2021/062221.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/index.md", "json": "/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/index.json", "bundleManifest": "/en/blogs/articles/2022/02/16/three-policy-priorities-for-a-robust-recovery/bundle-manifest.json" }, "generatedAtUtc": "2026-08-27T02:10:02.166Z" }