IMF to Allocate SDRs, Budget Loans of US$100Bn to Vulnerable Countries
The International Monetary Fund, IMF, has said it would work with members to channel US$100 billion and/or use budget loans to help the most vulnerable countries deal with covid-19 pandemic effects. IMF Managing Director Kristalina Georgieva made the statement today at the conclusion of her virtual participation in the G7 Leaders’ Summit.
According to IMF, the move will help boost global reserves while providing space for necessary fiscal expenditures to exit the pandemic and enable more sustainable recoveries.
Georgieva said the $650 billion allocation of Special Drawing Rights, the largest ever, would help boost global reserves and allow countries to fund needed fiscal measures to exit the pandemic.
Leaders also expressed a willingness to magnify its impact including through voluntarily channeling SDRs and/or budget loans to reach a total global ambition of $100 billion for the most vulnerable countries.
“I would like to thank Prime Minister Boris Johnson and the UK authorities for setting up a forward-looking agenda for the G7 summit, focusing on the most pressing challenges facing the world today”, she said.
First, on bringing the pandemic to an end everywhere, she said the IMF has been warning about dangerously diverging recoveries—and most recent data confirm that this trend not only continues, but deepens.
“Together with the World Bank, the World Health Organisation, and the World Trade Organisation, IMF staff recently proposed a $50 billion plan to end the pandemic by vaccinating at least 40 per cent of people in every country by the end of this year and 60 per cent by mid-2022.
“The most urgent part of the plan is to redirect excess vaccine doses from advanced economies to the developing world”, IMF Chief said.
She said G7 commitment of one billion doses in the next year welcome, saying it will make a material difference in the fight against the pandemic.
“Next, it is important to ensure that vials turn into actual shots in the arm and that production capacity is increased to protect against downside risks”, Georgieva said.
She explained that in terms of financing of the plan, there has been progress over the last weeks.
“From the start, we have emphasized the crucial importance of grants and, by our assessment, about one-third of the needed $35 billion in grant financing has now been secured from public and private sources.
“This is encouraging, but the work must continue to raise the rest—and to ensure transparent and well-coordinated implementation. The war is not yet won.
“This is why together with the World Bank, WHO, WTO and other institutions, we are forming a ‘war room’ — a task force to monitor and accelerate the implementation of this plan”.
Second, as the world emerges from this crisis IMF, others need to be mindful of its legacies and work to overcome them.
“To build a better future, it will be vital to boost productivity and growth, resolve debt overhangs, and strengthen economic policy frameworks.
“Policymakers will face difficult choices when gradually withdrawing policy support and proper targeting will be critical to support vulnerable people and viable firms.
“The G7’s emphasis on building better after the pandemic—and especially the focus on addressing Climate Change—is crucial. I welcome Leaders’ intention to launch a new clean, green initiative to catalyze green infrastructure investment, especially for developing countries.
“Combined with policies to incentivize investments such as carbon price and disclosures of climate-related risks, a green investment push will not only help to address the climate crisis, but also accelerate growth and create millions of new jobs.
“As policymakers cope with these post-pandemic challenges, they will need to boost revenues to finance investment in better public goods for their citizens.
“In this respect, I was heartened by the G7’s looking forward to reach agreement on a global minimum corporate tax at the July meeting of G20 finance ministers and central bank governors”, IMF added.
Georgieva express gratitude for the G7’s support of a new $650 billion allocation of the IMF’s Special Drawing Rights (SDRs)—the largest issuance in history.
She said this will help boost global reserves while providing space for necessary fiscal expenditures to exit the pandemic and enable more sustainable recoveries.
“In the coming months, I will be exploring with our membership options on how, together, we can get this done. This was a consequential Summit.
“The renewed spirit of international cooperation was palpable, with the G7 stepping up its efforts to help the world exit this crisis. I can assure you that the IMF is playing its part”, IMF Chief said.
IMF to Allocate SDRs, Budget Loans of US$100Bn to Vulnerable Countries
