A New Agenda for Macro Stability
IMF News, September 21, 2021
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- Authors: Deputy Managing Director Antoinette M. Sayeh September
- Published: September 21, 2021
Global outlook and divergence
- Global economy is on a path to recovery and "on sounder footing" than a year ago, but the recovery is creating a growing divergence between advanced economies and many emerging and developing economies.
- Main drivers of divergence:
- Unequal access to vaccines:
- "Close to 40 percent of the population in advanced economies is fully vaccinated."
- "In emerging markets, that number is 11 percent – and in low-income countries, a tiny fraction."
- Unequal resources to support the recovery:
- "Sizable fiscal support in advanced economies – with $4.6 trillion of pandemic related measures available in 2021 and beyond."
- "In other economies, most support measures expired in 2020 due to limited fiscal space."
- Risks highlighted:
- "Extreme poverty is set to rise for the first time in 20 years."
- "The emergence of even more infectious virus variants could further wipe out trillions from global GDP by 2025."
- A "double blow" to many emerging and developing economies if the pandemic worsens while advanced economies normalize monetary policy faster than expected and financial conditions tighten.
IMF response to the pandemic
- Scale and reach of IMF support since the start of the pandemic:
- "The IMF has provided over $118 billion in financing to 87 countries, including 54 low-income countries."
- "Our support to Sub-Saharan Africa, in particular, has increased dramatically – reaching 13 times that of our annual average last year."
- "We provided policy advice and capacity development support to over 175 countries during the crisis."
- Debt relief and liquidity measures:
- "The IMF extended direct debt service relief to 29 of our poorest, most vulnerable member countries."
- Supported the G20’s DSSI and Common Framework initiatives.
- "Last month, the IMF made the largest allocation of Special Drawing Rights in its history—about US$650 billion—injecting additional liquidity to the global economic system."
- Encouragement of voluntary channeling of some SDRs from countries with strong external positions to those most in need.
- Characterization: "Never in our history have we done so much, so fast – reached out to so many countries in such a short period of time."
Vaccine policy as first priority
- Urgent collective action to close vaccine access gaps is the top priority for durable and equitable recovery.
- IMF staff proposal and targets:
- "IMF staff recently outlined a $50 billion plan that sets a goal of vaccinating at least 40 percent of the population in every country by the end of this year and at least 60 percent by mid-next year."
- "Faster access to vaccinations for high‑risk populations could potentially save more than half a million lives in the next six months alone."
- Economic rationale:
- Vaccination investment could "lead to trillions of dollars in economic growth driven by accelerated recovery."
- "Vaccine policy today is the most urgent and important economic policy."
Building a resilient and sustainable global economy
- Long-term imperatives for macro stability:
- Strengthen public finances via better revenue mobilization and expenditure management.
- Modernize financial systems, advance macroeconomic frameworks, and improve governance.
- Expand access to basic public services—healthcare, education, and infrastructure—and protect vulnerable populations from income shocks.
- Advance digital economy policies (e-commerce, e-learning, e-government) and invest in human capital and high-quality education to spread benefits of technology more widely.
- Gender-inclusive policies:
- "IMF studies show that closing the gender gap in countries with very low female labor force participation could increase GDP by an average of 35 percent in level terms."
- Conclusion: "Policies that are good for women are also good for economic growth."
- Climate and green transition:
- Carbon pricing targets and proposal:
- "Today, carbon is priced at $3 a ton—globally—we have to reach $75 a ton by 2030."
- IMF staff proposal of a carbon price floor for big emitters to make this action possible.
- Green investment and growth:
- "Decarbonizing our economies will also require a substantial scaling-up of green investment over the next two decades."
- "Research by IMF staff shows how deficit-financed green supply policies could raise global GDP by about 2 percent this decade and create millions of new jobs."
- Just transition principles:
- Support workers moving from shrinking to expanding sectors.
- Support countries balancing increasing energy access and reducing carbon footprints, and those facing high adaptation costs with limited resources.
Policy priorities and recommendations (summary)
- Immediate:
- Close vaccine access gap globally (vaccinate at least 40 percent of every country by end of this year; 60 percent by mid-next year).
- Encourage voluntary SDR channeling to countries most in need.
- Medium and long term:
- Strengthen public finances: revenue mobilization and expenditure management.
- Modernize financial systems and macro frameworks; improve governance.
- Expand access to healthcare, education, infrastructure; protect vulnerable groups.
- Promote digitalization, invest in human capital, and advance gender-inclusive policies to boost growth (noting a potential 35 percent GDP uplift in affected countries).
- Implement robust carbon pricing (from $3 a ton globally to $75 a ton by 2030) and scale up green investment; design policies to ensure a just transition.
Key statistics and figures (verbatim)
- "190 countries"
- "over the last 18 months"
- "close to 40 percent" (advanced economies fully vaccinated)
- "11 percent" (emerging markets fully vaccinated)
- "Extreme poverty is set to rise for the first time in 20 years."
- "$4.6 trillion of pandemic related measures available in 2021 and beyond"
- "most support measures expired in 2020"
- "over $118 billion in financing to 87 countries, including 54 low-income countries"
- "13 times that of our annual average last year" (support to Sub-Saharan Africa)
- "policy advice and capacity development support to over 175 countries"
- "direct debt service relief to 29" countries
- "about US$650 billion" (SDR allocation)
- "$50 billion plan"
- "vaccinating at least 40 percent of the population in every country by the end of this year and at least 60 percent by mid-next year"
- "save more than half a million lives in the next six months alone"
- "closing the gender gap ... could increase GDP by an average of 35 percent in level terms"
- "carbon is priced at $3 a ton—globally—we have to reach $75 a ton by 2030"
- "raise global GDP by about 2 percent this decade" (deficit-financed green supply policies)
Source: Opening Remarks at the Harvard Growth Lab’s Development Talk by Deputy Managing Director Antoinette M. Sayeh, "A New Agenda for Macro Stability", September 21, 2021.