Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
IMF News, October 11, 2022
Source details
- Canonical URL
- Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
Other formats
Bibliographic details
- Published: October 11, 2022
Global outlook and immediate risks
- Multiple compounding crises have severely darkened the global economic outlook and development prospects.
- Global growth is slowing; poverty, hunger, water scarcity, cost of living pressures and food and energy insecurity have increased alarmingly.
- Persistently high inflation and spikes in food and energy prices, exacerbated by the conflict in Ukraine, have disproportionately harmed vulnerable households and the poor.
- Downside risks to prospective growth have risen, leading to fears of a global recession.
- Financial conditions are worsening:
- Advanced-economy policymakers have tightened monetary policy with sharp and repeated increases in interest rates.
- Currency depreciations and large capital outflows have occurred in emerging markets and developing economies (EMDEs).
- EMDEs face much tighter fiscal spaces and increased debt burdens, complicating trade-offs between social spending and investment for recovery.
Immediate multilateral responses and food/energy issues
- Strong and coordinated multilateral support to tackle the food and energy crises is urgently required.
- Welcomes and actions:
- Decision of the WTO Ministers on the exemption from export prohibitions or restrictions of World Food Programme’s food purchases to meet needs of least developed countries and net food importing developing countries.
- Creation of the Food Shock Window in the IMF’s emergency lending instruments and expectation of its urgent assistance to countries in need.
- World Bank Group’s (WBG) Global Crisis Response Package to address drivers and impact of food insecurity, recover learning and other losses to human capital, and build resilience in times of health crises and future pandemics.
- Establishment of the Financial Intermediary Fund for Pandemic Prevention, Preparedness and Response.
- Calls for:
- Enhancing and diversifying food production and addressing longstanding subsidies and import restrictions by advanced countries that have constrained agricultural production and exports from many developing countries.
- Exploring regional solutions to alleviate food and energy shortages.
- Flexibility in providing IMF emergency assistance to countries with debt sustainability concerns.
Monetary policy spillovers, IMF surveillance, and digital payments
- Policy coordination is needed among large, advanced economies to calibrate simultaneous and rapid monetary tightening to mitigate adverse spillovers to EMDEs.
- Risks of uncoordinated tightening: further capital outflows, currency depreciations, jeopardized financial stability and debt sustainability.
- EMDE policymakers should be vigilant and implement macroprudential and capital flow management measures.
- Calls for IMF actions:
- Strengthen engagement with member countries to deliver on global surveillance mandate and provide tailored policy advice.
- Continue work on the Integrated Policy Framework and adapt the Institutional View to diverse country circumstances.
- Support local currency market development.
- Continue support for managing implications of digitalization of payments systems and adoption of Central Bank Digital Currencies (CBDCs), especially on financial stability and monetary policy effectiveness.
Global Financial Safety Net and IMF governance (Quotas, GRQ, RST, PRGT)
- Reiterates need for a strong Global Financial Safety Net (GFSN) with an adequately resourced and quota-based IMF at its center.
- Calls and timelines:
- Calls on the IMF to ensure the timely completion of the 16th General Review of Quotas (GRQ) by December 2023.
- The 16th GRQ should include the long-delayed realignment of IMF members’ quota shares (last undertaken in 2008).
- Calls for a revised quota formula that shifts quota resources from advanced countries to EMDEs, consider increasing the weight of the GDP blend and correct biases within the formula.
- Realignment must protect the shares of PRGT-eligible members and small developing states and should not be at the expense of other EMDEs.
- Deepen governance reforms to improve voice and representation of EMDEs on the IMF’s Executive Board, including adding a third Chair for Sub-Saharan Africa without this being at the expense of another EMDE chair.
- Resilience and Sustainability Trust (RST) and PRGT:
- Welcomes timely implementation of the IMF’s RST to channel SDRs to support low-income and vulnerable middle-income countries.
- Looks forward to expanding the RST to cover other structural challenges affecting EMDCs beyond pandemic and climate responses.
- Calls for timely adjustments to the RST where warranted and for additional member countries to contribute to increase the Trust’s lending capacity.
- Calls for strengthening lending capacity of the Poverty Reduction and Growth Trust (PRGT), including from channeled SDRs and contributions to its subsidy resources.
- Pledges should at least meet the global ambition to voluntarily on-lend US$100 billion of unused SDRs to developing countries in need of liquidity support.
- Encourages exploring other viable mechanisms to voluntarily channel SDRs, including through Multilateral Development Banks (MDBs).
- IMF surcharge policy:
- Calls on the IMF to correct the regressive and procyclical character of its surcharge policy.
- Short-term: due consideration should be given to suspend surcharges temporarily to support countries with severe balance of payments constraints.
- Going forward: encourages the IMF to review its revenue sources and assess appropriate burden sharing among members in providing a GFSN.
Sovereign debt treatment and transparency
- Addressing worsening sovereign debt distress requires urgent globally coordinated actions.
- G20 Common Framework:
- Implementation should be timely, orderly, and coordinated for eligible low-income countries (LICs).
- Comprehensive debt treatment will remain limited without comparable treatments from private creditors within the Common Framework.
- Stress on importance of private creditors’ commitment to provide debt treatments for fair burden sharing and comparability of treatment.
- Middle-income countries (MICs):
- Rising debt distress in several MICs highlights importance of supporting their necessary debt treatments when sought.
- Calls for IMF and WBG engagement:
- Welcome IMF revisions of policies on sovereign arrears to reflect changes in the sovereign creditor landscape, strengthen debt transparency, and facilitate creditor coordination.
- Urge strong engagement of the IMF and WBG in providing technical and financial support to countries that seek to restore debt sustainability.
- Look forward to continued IMF and WBG support to improve debt transparency and build capacity in public expenditure and debt management.
International tax reform and digital taxation
- Welcomes introduction of a global minimum tax and taxation of the digital economy under the G20/OECD Inclusive Framework.
- Calls for:
- Early finalization of the subject to tax rule as an essential component of Pillar Two, with a broad scope covering services and capital gains.
- A Two-Pillar solution that is simpler to administer and provides sufficient taxing rights for EMDEs.
- Developing countries to develop and implement tax measures (including withholding taxes) on digital and remote transactions involving their residents, or to configure a significant taxable economic presence in their jurisdictions.
- Stronger and more inclusive multilateral cooperation to reach a fairer and more stable international corporate tax system that can yield meaningful revenues for EMDEs.
Role of MDBs and World Bank Group in scaling development financing
- MDBs should play a much greater role in scaling up development financing to meet investments needed for an inclusive recovery and climate action.
- Recommendations for MDBs and WBG:
- Enhance lending capacity by using the strength of their balance sheets while preserving financial prudence.
- Consider recommendations by the Independent Expert Panel convened by the G20 to review Capital Adequacy Frameworks to manage risks and leverage capital more effectively.
- Strengthen support to developing countries in mobilizing private finance through scaling up risk mitigation instruments and blended finance.
- Note that WBG’s frontloaded crises response will reduce its medium-term lending capacity; urge shareholders to initiate discussions to consider timely increases in capital to ensure medium-term lending firepower.
- Welcome last replenishment of IDA20 and look forward to its successful implementation.
- Calls on WBG to design a two-fold strategy of engagement with the full range of MICs to address short- and medium-term challenges, including significant public investments in human development, sustainable infrastructure, climate mitigation and adaptation, and social protection.
Climate, biodiversity, and finance
- Climate action principles:
- International commitment should reflect equity and common but differentiated responsibilities and respective capabilities as enshrined in the UNFCCC and the Paris Agreement.
- Support for low GHG and climate resilient development pathways should create opportunities for inclusive and sustainable growth and ensure affordable energy access.
- Financing and support needs:
- Scale up affordable, long-term sustainable and climate finance and finance for nature under the Rio Conventions; ensure access to technology and capacity building.
- Developed countries should contribute financing matching their largest share of historical and current global GHG emissions.
- Calls on COP27 to aim for an ambitious and accelerated climate agenda and an implementation plan to bridge financing gaps.
- Developed countries urged to urgently deliver the annual US$100 billion climate financing commitment and significantly increase this target under a new collective quantified goal for climate finance.
- Agenda should increase and broaden sources of grant and concessional finance, step up MDB financing, catalyze private finance, provide adequate financing for adaptation, and mainstream financing for loss and damage.
- WBG and other MDBs must articulate medium-term strategy to support climate and development agendas in partnership with developing countries and in line with Nationally Determined Contributions and sustainable development strategies.
- Encourage effective collaboration between the WBG and the IMF.
- Notes that climate change and biodiversity loss are interlinked global challenges and looks forward to outcomes of COP27 and COP15.
Meeting and participation details
- Ministers of the Intergovernmental Group of Twenty-Four held their one hundred and eighth meeting in Washington D.C. on October 11, 2022.
- Chair: Alvaro Gonzalez Ricci, Governor of the Bank of Guatemala.
- First Vice-Chair: Adama Coulibaly, Minister of Finance, Côte d’Ivoire.
- Second Vice‑Chair: Benjamin Diokno, Secretary of Finance, Philippines.
- Deputies met on October 10, 2022 for the one hundred and twentieth meeting of the Deputies of the Group of Twenty-Four, chaired by Johny Gramajo Marroquin, Economic Manager at the Central Bank of Guatemala.
- Lists of participants included representatives from African Group, Asian Group, Latin American Group, Observers, Special Guests (including Kristalina Georgieva, Managing Director, International Monetary Fund; David Malpass, President, World Bank), G-24 Secretariat, and IMF Secretariat for the G-24.
Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development — Communiqué, October 11, 2022.