With economic indicators pointing to weaker growth momentum in 2022, the International Monetary Fund (IMF) has called for strong international cooperation and extraordinary policy agility to navigate a complex ‘obstacle course’.
Noting that inflation readings remained high in many countries, financial markets more volatile and geopolitical tensions sharply increased, IMF Managing Director Kristalina Georgiev said Strong international cooperation and extraordinary policy agility will be crucial to navigate a complex ‘obstacle course’ through 2022.
In a statement, she focusssed on three points that need prior importance to get out of the crisis.
ECONOMIC LONG COVID
“First, we need to broaden efforts to combat what might be described as ‘economic long COVID. “We project economic losses from the pandemic to be nearly US$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,” she said.
The IMF Chief stressed that the 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 mobilizing further toward reaching that goal is welcome.” she noted.
TIGHTENING MONETARY CYCLE
The second point that Kristalina Georgie points out is that the countries 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 spill over, especially for emerging markets and developing countries, also needs to be managed. We must fight inflation without impairing the recovery,” she said.
“To support our members in harnessing the benefits of capital flows while managing the risks to financial and economic stability, we aim to finalize 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 ,” the IMF chief said..
“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,” the Chief said.
Noting that several countries faced higher debt, she said that the prioroty is to help 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, she noted.
G-20 COMMON FRAMEWORK
Stressing that G-20 Common Framework can play an important role, she called for efforts to make it even more impactful. “‘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$650 billion SDR allocation by channeling as much of it as possible to where the need is greatest. In this context, we welcome the G20 endorsement of our proposed new Resilience and Sustainability Trust (RST). The aim is to establish the Trust by the Spring Meetings and make it operational by the Annual Meetings – so we can support our vulnerable members address longer-term structural challenges, especially those related to climate change and pandemics.,” the Chief said.
She further said; “We count on G20 members’ contributions to make the RST operational and also to support the augmentation of the Poverty Reduction and Growth Trust, which is equally critical for our vulnerable low-income members. I am encouraged by the progress toward the US$ 100 billion global ambition for reallocating SDRs to benefit countries most in need—with about US$60 billion pledged so far.” Stating that sustained momentum on global efforts was needed to implement the Paris Agreement, Kristalina Georgiev said ” Critical here are clear policy signals from governments to decarbonize the economy, including through carbon pricing mechanisms to create incentives for the private sector to invest in mitigation.”