Sierra Leone: “The harsh reality is that poorer nations are at risk of missing out on what is a historic transformation to a new global economy built on green and digital foundations” said Kristalina Georgieva, International Monetary Fund (IMF) Managing Director.
New IMF research last week shows that low-income countries have to deploy some $200 billion over five years just to fight the pandemic. And then another $250 billion to return to the path of catching up to higher income levels.
She noted that the continent can cover only a portion of that on their own. “Success would call for a comprehensive effort—more domestic revenue mobilization, more external concessional financing, and more help to deal with debt. The G20 Debt Service Suspension Initiative and new Common Framework are a good start.”
For its part, the IMF has stepped up in an unprecedented way. “We have provided over $107 billion in new financing to 85 countries and debt service relief for 29 of our poorest members. In Sub-Saharan Africa, IMF financing last year was about 13 times more than the annual average over the previous decade” she said.
Georgieva says she is very encouraged that support is building among the IMF’s membership for a possible SDR allocation of $650 billion. This she added would benefit all our members, but especially the most vulnerable, by boosting reserves without adding to debt burdens. It will send a powerful signal of multilateral solidarity—freeing up resources for vaccination programs and other urgent needs.
Just as they have helped fight the crisis, the Fund will also help its members secure the recovery. But firstly, she said they must keep focused on escaping the crisis. “We must follow the example of the scientists by stepping up cross-border efforts, by doing whatever it takes to ramp up vaccine production, distribution, and deployment.”
Furthermore, one option is to pursue at the global level what has worked at the national level—and that is subsidizing vaccine producers, input suppliers, and “last-mile” distribution. The world needs a fair mechanism to redistribute vaccines from surplus to deficit countries and a fully funded COVAX facility to accelerate vaccination in poorer countries.
“This is how we can protect people’s health—and accelerate the recovery. Faster progress in ending the health crisis could add almost $9 trillion to global GDP by 2025. But the window of opportunity is closing fast. The longer it takes to speed up vaccine production and rollout, the harder it will be to achieve these gains” she stated. “Policies, of course, must be tailored to country-specific needs—their pandemic exposure as well as economic factors.”
While the crisis is still with us, the key, the IMF Boss stressed on is to help vulnerable households and viable firms. This she says requires targeted fiscal measures—within credible medium-term frameworks—as well as continued monetary accommodation.
“Given diverging recoveries, it is prudent to keep a close eye on financial risk—including stretched asset valuations. And major central banks have to carefully communicate their policy plans to prevent excess financial volatility—at home and abroad. This would support vital capital flows, especially to middle-income countries.”
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