The Managing Director of the International Monetary Fund has called on the G20 leaders to take “strong and determined action” to fight the economic impacts of the COVID and climate change.
Kristalina Georgieva (above) attended the virtual meeting of the G20 Finance Ministers and Central Bank Governors at which she said while the global economy was ion the road to recovery there were serious threats remaining.
“Those of us who were in Riyadh just about a year ago hold vivid memories of the first warning shots of what was to come — countless human tragedies and a deep recession,” she said. “Today, powered by advancements in vaccinations and your strong monetary policy and fiscal actions, the world economy is on the path of recovery. Growth prospects for this year, enhanced by sizable additional stimulus in some large economies, are possibly even above our January 5.5 percent projection. Yet, uncertainties remain very high, as vaccinations still have a long way to go against new waves and variants of the virus.”
Ms Georgieva warned that recovery as it occurred needed to be global and that developed economies needed to ensure that they brought the developing economies with them.
“We see dangerous divergence between and within economies,” she explained. “In emerging and developing countries, excluding China, we project by 2022 cumulative per capita income losses as high as 22 percent, versus 13 percent in advanced economies. And we forecast that only half of the countries that were narrowing their income gaps relative to advanced economies will continue to do so over 2020-22. Within countries, the young, the low-skilled, and women have been disproportionately affected by job losses.
“And we cannot forget the major threat from climate change.”
The response was clear. “We need strong and determined action,” explained Mr Georgieva. “First, speed up vaccinations across the world — it is the most impactful support for the recovery. We need international collaboration to accelerate production and make vaccines available everywhere as fast as possible.
“Second, resolve to provide lifelines to business and households, tailored to countries’ circumstances, until there is a durable exit from the health crisis. And prepare for risks and unintended consequences once policy support is gradually withdrawn. We are likely to see rises in bankruptcies and financial stresses, including excessive volatility in financial markets.
“Third, step up support to vulnerable countries. Together with the World Bank we are working with countries to implement strong reforms, address debt transparency and sustainability, and expand concessional financing. We support the prompt and effective implementation of the Common Framework, with Chad, Ethiopia, and Zambia being the first candidates. We are also reviewing the case for extending the Debt Service Suspension Initiative.
“We must deploy all tools at our disposal. I am very encouraged by the growing support for a new Special Drawing Right (SDR) allocation, to boost reserves of all members in a transparent and accountable manner. And by the calls for an additional mechanism to enable our wealthier members to support low-income countries through on-lending part of their SDRs. We stand ready to present to our membership a robust assessment of long-term reserve needs and implementation modalities.”
She added there was now a clear need to align the use of public resources with the goal to shape a climate-resilient, digital, and inclusive future.
“We strongly support the Presidency’s proposal on global climate risks and environmental taxation,” added Ms Georgieva. “We will play our part in the areas of our comparative strength, such as integrating climate in public revenues and spending policies, climate-related financial stability risks and data.”