Group of Twenty IMF Note — Finance Ministers and Central Bank Governors' Meetings

G-20 Surveillance Note

February 16, 2022

The following executive summary is from a note by the Staff of the IMF prepared for the February 17-18, 2022 G-20 Finance Ministers and Central Bank Governors' Meetings, Jakarta, Indonesia.
Read the Full Text  

Executive Summary

The pace of the recovery has slowed. Since the January 2022 WEO Update projected growth of 4.4 this year, economic indicators point to continued weak growth momentum amid the spread of the virus. Supply-demand mismatches, increases in energy and food prices, and bottlenecks in transportation of goods have put upward pressure on inflation—which in some economies has broadened across consumption categories, prompting a shift toward a less accommodative monetary policy stance. Longer-term inflation expectations generally remain well-anchored in economies with strong policy frameworks. While economic activity is projected to return to pre-pandemic trends in many advanced economies, many emerging market and low-income economies continue to face significant headwinds. The most vulnerable people continue to struggle, with employment yet to fully recover and the danger of persistent learning losses from school closures.

Immediate action by the G-20 is needed to arrest the rising human and economic toll of the pandemic. A US$50 billion IMF staff proposal, endorsed by the WHO, WTO, World Bank, and the IMF, provides clear targets, pragmatic actions, and at a feasible cost to bring about an end to the pandemic. Vaccine donations and grant pledges have been provided but much more is needed. With the pandemic still raging, it will be vital to ensure that shared doses are available for use as soon as possible and that additional upfront grant financing is provided for the funding of tests, treatments, and investments in vaccines. More than half a million lives could potentially be saved if high-risk populations globally were to gain earlier access to vaccinations. Ensuring free trade in medical inputs and supplies is also key. The G-20 should also help ensure weaker economies have access to financial liquidity, including through the operationalization of the Common Framework for Debt Treatments and support for the general allocation of Special Drawing Rights (SDR) of US$650 billion. Reforming the international trade system would help support the global recovery.

Downside risks dominate. There remains high uncertainty around the evolution of the pandemic, and inflation continues to be a significant risk. High public and private sector debt levels add to vulnerabilities and expose emerging market economies to risks from a sudden tightening of global financial conditions. Climate change continues to pose a threat to livelihoods and economic activity. 

Implementing the first best policy mix will be particularly challenging amid difficult trade-offs between containing inflation and supporting the recovery. Monetary policy will need to continue to flexibly adjust to incoming data. Where there are tangible risks that inflation pressures will become longer lasting, a tighter, well-communicated policy stance may be warranted. Where longer-term inflation expectations remain well anchored and wage pressures remain moderate, continued accommodation remains appropriate. In the event of sudden shifts in monetary policy in major advanced economies, exchange rates represent important shock absorbers against adverse spillovers, but foreign exchange interventions may be needed in some economies in the event of high volatility. Fiscal policy should prioritize healthcare and support for the most vulnerable and carefully manage tradeoffs between lifting growth and containing debt. Infrastructure investment should include green and digital projects to strengthen resilience and long-term growth. Anchoring measures in medium-term frameworks can help ease the adjustment. It will be important to facilitate the reallocation of resources to expanding sectors and target financial sector policies to address pockets of vulnerability. 

The G-20 must swiftly address the vaccine divide among countries and support a strong, resilient future for all. Action is needed to end the pandemic. This requires up-front financing for vaccines, testing, and treatments—along with the resources to deliver them to all people. In addition, greater ambition is needed on mitigating climate change, including through the implementation of an international carbon price floor, or equivalent regulations, and by supporting climate-vulnerable economies. At the same time, multilateral action is essential for helping weaker economies address scarring from the pandemic, including by resolving remaining implementation challenges regarding the G-20 Common Framework for Debt Treatments. Trade reform is essential to ensure that the benefits from trade are broadly shared. 

Prepared under the guidance of Shekhar Aiyar by a team led by Lone Christiansen, comprising Eric Bang, Tryggvi Gudmundsson, Augustus Panton, and Chao Wang. Ilse Peirtsegaele provided administrative support. G-20 Surveillance Notes are available on

Read the Full Text