IMF Managing Director Kristalina Georgieva has said that the IMF project economic losses from Covid-19 “pandemic to be nearly $13.8 trillion by end-2024 – and Omicron is a reminder that a durable and inclusive recovery is impossible while the pandemic continues. There remains great uncertainty about how effective the health protections that have been built will be in the face of other possible variants. In this environment, our best course of action is to move from a singular focus on vaccines to ensuring that each country has equal access to a comprehensive COVID-19 toolkit that also includes tests and treatments. Keeping these tools updated as the virus evolves will require continuous investment in medical research, disease surveillance, and health systems that help countries reach ‘the last mile’ in every community. The World Bank’s announcement on mobilising further toward reaching that goal is welcome.
According to her “second, many countries will need to navigate a tightening monetary cycle. In the context of a high degree of uncertainty and significant differences across countries, macroeconomic policies need to be carefully calibrated to individual country circumstances. The risk of potential spillovers, especially for emerging markets and developing countries, also needs to be managed. We must fight inflation without impairing the recovery. To support our members in harnessing the benefits of capital flows while managing the risks to financial and economic stability, we aim to finalise the review of the IMF’s Institutional View on capital flows by the Spring Meetings. We are also on track to operationalise the findings of the Integrated Policy Framework. Third, countries need to give greater priority to fiscal sustainability. Extraordinary fiscal measures deployed during the crisis helped prevent another Great Depression.
“But they also pushed up debt levels to historical highs. In 2020, we observed the largest one-year debt surge since the Second World War, with global debt—both public and private—rising to $226 trillion. And while many countries are facing higher debt, we should prioritise help to those countries who need a debt restructuring. The share of low-income countries at high risk or already in debt distress has doubled since 2015 – from 30 percent to 60 percent today, and several face the immediate need to restructure their debt. Here the G-20 Common Framework can play an important role, and I am calling for efforts to make it even more impactful. In addition to transparency and early action, that means: offering a debt service standstill during negotiations to avoid squeezing a country precisely when it is under financial pressure; providing clear and time bound processes that foster confidence and facilitate implementation, including participation of private creditors; and finding ways to bring in countries that are not currently covered by Common Framework by expanding is perimeter. More broadly, the G20 is crucial to sustain the momentum on collective efforts to deliver on global ambitions for the common good. This includes focusing on amplifying the effect of the historic US$650 billion SDR allocation by channeling as much of it as possible to where the need is greatest.
“In this context, we welcome the G20 endorsement of our proposed new Resilience and Sustainability Trust (RST). The aim is to establish the Trust by the Spring Meetings and make it operational by the Annual Meetings – so we can support our vulnerable members address longer-term structural challenges, especially those related to climate change and pandemics. We count on G20 members’ contributions to make the RST operational and also to support the augmentation of the Poverty Reduction and Growth Trust, which is equally critical for our vulnerable low-income members. I am encouraged by the progress toward the $100 billion global ambition for reallocating SDRs to benefit countries most in need—with about $60 billion pledged so far. We must sustain momentum on global efforts to implement the Paris Agreement, which requires a large increase in investment toward low-carbon and climate resilient development. Critical here are clear policy signals from governments to decarbonise the economy, including through carbon pricing mechanisms to create incentives for the private sector to invest in mitigation. The IMF will support the G20 on these and other priorities. I look forward to our next meeting in April.”
