File photo: International Monetary Fund Managing Director Kristalina Georgieva speaks during a news conference after the International Monetary and Financial Committee (IMFC) meeting. AFP
Georgieva made her statements during the curtain raiser event held on Tuesday on the IMF’s and World Bank’s annual meeting, which are anticipated to kick off next week.
Georgieva said the IMF estimates the gap in grant financing for testing, tracing, and therapeutics to be $20 billion, which needs to be bridged in order to reach the goal of global vaccination.
The vaccination target, set by the IMF, World Bank, the World Health Organisation (WHO) and the World Trade Organisation (WTO), is to vaccinate at least 40 percent of people in every country by the end of 2021, and 70 percent by the first half of 2022.
However, Georgieva stressed that the delivery of doses to the developing world must be sharply increased.
“Richer nations must deliver on their donation pledges immediately. And, together, we must boost vaccine production and distribution capabilities and remove trade restrictions on medical materials,” she urged.
Delays in vaccination, divergence in economic growth globally, elevating debt levels, and global inflation are the key risks and obstacles to a balanced global recovery, Georgieva said.
That said, the IMF expects most emerging and developing countries to take many more years to recover from the harsh impacts of the pandemic, while economic output in advanced economies is projected to return to pre-pandemic levels by 2022, Georgieva stated.
Georgieva said that such a delayed recovery will make it even more difficult to avoid long-term economic scarring, including from job losses.
The IMF’s global world economic outlook report expects global growth to moderate slightly in 2021 to below the 6 percent that was expected in July’s report.
On the global debt, Georgieva said that the IMF estimates that the debt level has increased to almost 100 percent of GDP, which reflects the necessary fiscal response to the crisis as well as the heavy output and revenue losses due to the pandemic.
“Here we see yet another deep divide, with some countries more affected than others—especially in the developing world. Many started the pandemic with very little fiscal firepower. Now they have even less room in their budgets—and very limited ability to issue new debt at favourable terms. In short, they face tough times and are caught on the wrong side of the fiscal financing divide,” said Georgieva.
Regarding global inflation, Georgieva noted that headline inflation rates have increased rapidly in a number of countries.
The IMF expects price pressures to subside in most countries in 2022, and these pressures to persist in some emerging and developing economies.
“One particular concern with inflation is the rise in global food prices—up by more than 30 percent over the past year. Together with rises in energy prices, this is putting further pressure on poorer families. More generally, inflation prospects remain highly uncertain,” Georgieva explained.
Accordingly, the sustained increase in inflation could cause a rapid rise in interest rates and a sharp tightening of financial conditions, and both would pose a challenge for emerging and developing economies with high debt levels.