The head of the International Monetary Fund has urged group of 20 countries to take strong policy actions to reverse a “dangerous divergence” that threatens to leave most developing economies languishing for years.
While saying this on Wednesday February 24, 2021, IMF Managing Director, Kristalina Georgieva, said “much stronger international collaboration” was needed to accelerate the rollout of COVID-19 vaccines in poorer countries, including additional funding to help them buy doses and reallocation of excess vaccines from surplus to deficit countries.
She called for continued, targeted fiscal support by G20 governments to support economies, and said central banks should maintain accommodative monetary and financial policies to support flow of credit to households, and firms.
The IMF recently projected global GDP growth at 5.5% this year and 4.2% in 2022, but Georgieva warned that the outlook remained uncertain, citing concerns about different strains of the virus and the slow rollout of vaccines across most of the world.
She called for continued, targeted fiscal support by G20 governments to support economies, and said central banks should maintain accommodative monetary and financial policies to support flow of credit to households and firms.
But she warned that continued monetary policy support had raised “legitimate concerns around unintended consequences, including excessive risk-taking and market exuberance.”
G20 countries should also step up support to vulnerable countries through additional concessional financing, while leveraging private finance through stronger risk-sharing instruments and continuing work on debt relief, Georgieva said.
She said a new allocation of the IMF’s currency, or Special Drawing Rights, would substantially boost countries’ liquidity without increasing their debt burdens. It would also expand the capacity of donor countries to provide new resources, she said.
Italy, which leads the G20 this year, is pushing for a $500 billion allocation, a move backed by France, Germany and other big countries.
The United States had opposed such a move under former President Donald Trump, but has not yet communicated a firm position on a new SDR allocation under President Joe Biden.