The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva has asserted that in providing policies and fund support amid the coronavirus pandemic, this may lead to a rise in bankruptcies and financial stresses when such support is withdrawn with time.
Kristalina Georgieva made these comments when she called on G20 Finance Ministers and Central Bank Governors to provide strong policies to counter ‘dangerous divergence’ witnessed during this crises era.
“And we see dangerous divergence between and within economies. In emerging and developing countries, excluding China, we project by 2022 cumulative per capita income losses as high as 22 percent, versus 13 percent in advanced economies.“And we forecast that only half of the countries that were narrowing their income gaps relative to advanced economies will continue to do so over 2020-22. Within countries, the young, the low-skilled, and women have been disproportionately affected by job losses”.
Kristalina Georgieva
With advancements in vaccinations and strong monetary policy and fiscal actions, Kristalina Georgieva further opined that the world economy is on the path of recovery. Yet, uncertainties remain very high, as vaccinations still have a long way to go against new waves and variants of the virus.
“We need strong and determined action.
“First, speed up vaccinations across the world — it is the most impactful support for the recovery. We need international collaboration to accelerate production and make vaccines available everywhere as fast as possible.
“Second, resolve to provide lifelines to business and households, tailored to countries’ circumstances, until there is a durable exit from the health crisis. And prepare for risks and unintended consequences once policy support is gradually withdrawn. We are likely to see rises in bankruptcies and financial stresses, including excessive volatility in financial markets.
“Third, step up support to vulnerable countries. Together with the World Bank we are working with countries to implement strong reforms, address debt transparency and sustainability, and expand concessional financing.
Kristalina Georgieva
Touching on the issue of climate change, the IMF Managing Director hinted that there is a need to align the use of public resources with the goal to shape a climate-resilient, digital, and inclusive future.
“And we cannot forget the major threat from climate change.
“We strongly support the Presidency’s proposal on global climate risks and environmental taxation. We will play our part in the areas of our comparative strength, such as integrating climate in public revenues and spending policies, climate-related financial stability risks and data.
“I am also encouraged by the new impetus to modernize the international tax system to better fit 21st century economies and support the goal of inclusive development as well.
Kristalina Georgieva
Finally, Kristalina Georgieva urged G20 countries to deploy all tools at their disposal, adding that, “I am very encouraged by the growing support for a new Special Drawing Right (SDR) allocation, to boost reserves of all members in a transparent and accountable manner. And by the calls for an additional mechanism to enable our wealthier members to support low-income countries through on-lending part of their SDRs.
“We stand ready to present to our membership a robust assessment of long-term reserve needs and implementation modalities”.
