Emerging markets and low and middle-income countries need to adopt fiscal consolidation to achieve economic growth and to speed up towards a sustainable and inclusive recovery from the COVID-19 crisis, according to the International Monetary Fund and Financial Committee (IMFC) chairman Lesetja Kganyago.
Kganyago made the comments in response to a question from Ahram Online about how these economies can deal with the elevating debt levels they are currently experiencing because of the pandemic. The comments were made during the IMFC press briefing held virtually on Thursday as a part of the IMF and World Bank Group annual meetings.
The IMF’s Managing Director Kristalina Georgieva stressed that such economies need an early and decisive restructuring for their debts to mitigate the heavy impacts on their economies, adding that these economies have worked swiftly in responding to the challenges imposed by the pandemic and they need to maintain this.
Kganyago stressed that the world needs strong international cooperation, especially on vaccine development and distribution.
In its 42nd communique, IMFC said that the current crisis threatens to leave long-lasting scars on the global economy, such as weaker productivity growth, heavier debt burdens, heightened financial vulnerabilities, and higher poverty and inequality. Other longstanding challenges also persist.
To support the recovery, the IMFC announced it will sustain its extraordinary and agile policy response, tailored to the different stages of the crisis and country-specific circumstances.
“We commit to using all available policy tools, individually and collectively, to restore confidence, jobs, and growth. We stand ready to assist the most vulnerable countries and people. We emphasize the need for international cooperation to accelerate the research, development, manufacturing, and distribution of COVID-19 diagnostics, therapeutics and vaccines, with the aim of supporting equitable and affordable access for all, which is key to overcoming the pandemic and supporting global economic recovery,” the IMFC said in the statement.
The committee is also looking forward to the IMF continuing its strong engagement in close collaboration with its partners, and it supports the IMF’s efforts to fully utilise and, if needed, further adapt its lending toolkit to help the membership address financing needs in the uncertain environment brought about by the pandemic, according to the statement.
The IMFC also welcomed the extension of debt service relief for another six months under the Catastrophe Containment and Relief Trust (CCRT) and progress made in securing additional loan resources for the Poverty Reduction and Growth Trust (PRGT), and supported the extension of the G20’s Debt Service Suspension Initiative (DSSI).
“We are disappointed by the absence of progress of private creditors’ participation in the DSSI, and strongly encourage them to participate on comparable terms when requested by eligible countries. We encourage the full participation of official bilateral creditors. We ask the IMF to continue to support effective and transparent DSSI implementation, together with the World Bank,” the committee said in the statement.
The IMFC reaffirmed its commitment to a robust, quota-based, and adequately resourced IMF at the centre of the global financial safety net, saying it will remain committed to revisiting the adequacy of quotas and will continue the process of IMF governance reform under the 16th General Review of Quotas, including a new quota formula as a guide, by December 15 2023.
The IMFC’s next meeting is expected to be held on 10 April 2021.