IMF’s Georgieva Urges Continued Action To Address Two-Track Recovery – OpEd
By Kristalina Georgieva, IMF Managing Director
I am very encouraged by the substantial progress made by the G20 at this meeting on a number of crucial issues. In particular, I want to recognize the G20’s support for the historic agreement on a minimum corporate tax rate. This will help countries preserve their corporate tax base and mobilize revenue by ensuring that highly profitable companies pay their fair share everywhere.
I want to commend the G20 for the focus on climate risks and role of carbon pricing mechanisms. At the G20 Conference on Climate on Sunday, I intend to follow up on a proposed international carbon price floor which could significantly accelerate the global economy’s transition to low-carbon growth.
The G20 recognized the urgent need to be better prepared for future health threats and welcomed the Report of the High Level Independent Panel on Financing Global Commons for Pandemic Preparedness and Response, committing to work with international financial institutions and relevant partners to develop proposals for sustainable financing to strengthen future pandemic preparedness and response.
I also wish to express my profound appreciation for the G20’s and our membership’s support for a new SDR (Special Drawing Right) allocation of $650 billion—the largest in IMF history and a shot in the arm for the world.
Turning to the global economy, the recovery continues, broadly in line with our April projection of 6 percent global growth this year. Yet the divergence across economies is intensifying. Essentially, the world is facing a two-track recovery.
In major advanced economies and some emerging market countries, growth is accelerating– propelled by a combination of strong fiscal and monetary policy support, and rapid vaccinations; but in many other countries—particularly the poorest without access to vaccines and with surging infection rates—growth is suppressed.
With a dangerous wave of a highly transmissible variant now making its way across the globe, the pandemic remains the fundamental risk facing the world. Urgent action is needed in three key areas.
First, accelerate vaccinations: to cover at least 40 percent of the population in every country by the end of 2021, and 60 percent by the middle of 2022.
The World Bank, WHO, WTO and IMF, in close collaboration with ACT-A, has formed a task force—a ‘war room’— to help achieve this goal and I very much welcome the G20 support to prioritize acceleration of the delivery of vaccines, diagnostics and therapeutics. By providing faster access to vaccines to high-risk populations, more than half a million lives could be saved this year. And a normal return to activity everywhere could add $9 trillion to the global economy through 2025—the $50 billion cost of this pandemic plan pales by comparison.
Second, implement sound macroeconomic policies: they continue to play a pivotal role in securing the recovery.
Fiscal policy should provide well-designed support, tailored to country circumstances, to protect the most vulnerable and minimize scarring. As economies exit the crisis, policies should facilitate stronger, more sustainable, and more inclusive growth.
Monetary policy should remain accommodative, as inflationary pressures are likely to be temporary. But should a pick-up in inflation turn out to be more permanent, some large economies further ahead in the recovery may need to tighten sooner than expected. Central banks will need to communicate policy intentions clearly to avoid triggering adverse spillovers. Should tighter financial market conditions materialize sooner than anticipated, the Fund is prepared to assist its members to ensure the recovery remains on track.
Third, step up support to vulnerable countries .
The IMF’s new SDR allocation of US$650 billion will increase countries’ reserves, create additional space for vaccine financing, and boost confidence in the recovery. To magnify the impact of the allocation, we will move quickly to explore options for economically stronger members to voluntarily use their SDRs to help poor and vulnerable countries.
Scaling up the IMF’s Poverty Reduction and Growth Trust (PRGT) is a tried-and-tested option that will enable us to provide zero-interest financial support to low-income countries through the medium term. We are also exploring the possibility of creating a new Resilience and Sustainability Trust for vulnerable members to build forward better, including through financing for greener, more resilient and sustainable growth over the medium term.
I greatly appreciate the support for these measures expressed by the G20 at this meeting. There was also support for our efforts to help countries facing unsustainable debt burdens.
Here, we are working closely with the World Bank and other partners to ensure effective implementation of the Common Framework. I commend the members of Chad’s Creditor Committee for their intensive work, which provides leverage for debt relief from private creditors and the assurances required for much-needed financing from the IMF and development partners. I welcome the G20 call for the timely formation of the Creditor Committee for Ethiopia to facilitate progress with review of the Fund-supported program there.
Finally, I would like to congratulate the Government of Italy and Minister of Economy and Finance Daniele Franco and Governor Ignazio Visco for their very successful chairmanship of the first hybrid G20 meeting since the pandemic. I would also like to thank the city and the people of Venice, as always, for their warm and gracious hospitality.
Statement released at meeting of the G20 Finance Ministers and Central Bank Governors