Analysis of the IMFC press release – 2021 Annual Meetings
The communiqué of the 44th meeting of the International Monetary and Financial Committee (IMFC) was released on October 14, during the Annual Meetings of the World Bank and the IMF. The IMFC is the governing body of the IMF’s finance ministers and central bank directors. The IMFC press release generally sets out the consensus position on the Fund’s direction and key reforms. Individual ministerial statements to the IMFC, often revealing the real differences of opinion among IMF members, are also available online. The next IMFC meeting is scheduled to take place on April 21, 2022.
The IMFC press release began by highlighting a central and unsurprising theme of this year’s annual meetings: that the gaps in economic recovery pathways between countries were related to vaccination rates and the resources available for the Covid response. -19. The IMFC noted that “the global economic recovery continues. But divergences between economies persist, reflecting stark differences in vaccine access and political support. »Echoing the concerns of civil society (see Mail Spring 2021) underlines the press release, “the crisis is exacerbating poverty and inequalities”.
While the IMFC underscored its commitment to “help progress towards the global immunization goals of at least 40% of the population in all countries by the end of 2021 and 70% by mid-2022 “, he has remained silent on the issue of intellectual property. waiver of rights for Covid-19 vaccines, as requested by more than 100 countries at the World Trade Organization and as requested by the People’s Vaccine alliance.
Crisis of legitimacy? What crisis of legitimacy?
While much ink had been spilled on the fate of IMF Managing Director Kristalina Georgieva, and indeed on the legitimacy of the Fund and the Bank in light of the Doing Business Report scandal before the Annual Meetings (see Observer Fall 2021) – with over 1,30 civil society organizations and academics demanding sweeping governance reforms in both institutions – the Committee made only a brief mention of the issue, welcoming “the Council’s statement of ‘IMF administration on its review of the Bank’s World Doing Business Report 2018 survey.
Inflation, debt and tight fiscal space: the storm intensifies
Calling the policy environment “complex,” the IMFC underscored the need to “carefully calibrate our domestic policies” amid growing discussions about inflationary pressures in high-income countries and the significant potential impact of rising prices. interest rates in the United States and Europe on the debt profile of middle and low income countries. This echoes concerns expressed in the IMF’s latest Fiscal Monitor that “the large financing needs of governments are a source of vulnerability, particularly in emerging markets and low-income developing countries, where financing conditions are poor. sensitive to global interest rates ”. In this regard, the statement stressed that “clear communication of policy positions can help limit negative spillovers between countries” and that “central banks closely monitor price dynamics and can examine inflationary pressures which are transient” .
The Committee said it “would continue to prioritize health spending and protect the most vulnerable, while shifting attention, where appropriate, from crisis response to promoting growth and preservation of long-term fiscal sustainability “. This must have sparked concern among those who read Oxfam’s research released at annual meetings last year, which found that “84% of International Monetary Fund COVID-19 loans encourage, and in some cases oblige , poor countries… to adopt stricter austerity measures. in the aftermath of the health crisis ”(see Observer Fall 2020).
Regarding debt specifically, the IMFC welcomed “the G20’s commitment to redouble efforts to implement the Common Framework for the Treatment of Debt, which is also agreed by the Paris Club, in a timely manner. , ordered and coordinated ”. Notwithstanding the encouraging statement, as UK-based Jubilee Debt Campaign pointed out, the G20 statement “offered no new action on the debt crisis in low-income countries” raising concerns that countries facing an unsustainable debt burden are forced to prioritize debt repayment over urgent health and social spending (see Observer winter 2020). On the contentious use of surcharges (see Mail Annual 2021; Observer Summer 2021), the IMFC thanked the “IMF for its update on the surtax policy and looks forward to a related further analysis in the IMF Executive Board in the context of the interim review of precautionary balances”. Given the devastating critique of the policy contained in joint reports from Boston and Columbia Universities and the Center for Economic and Policy Research published ahead of the annual meetings detailing the regressive, procyclical and counterproductive impacts of the policy, the PRI and their citizens hope that evidence and common sense will prevail and that the interim review will lead to an end to surcharges.
Resourcing the Fund to “intensify” its work on climate and other macro-critical issues
At the first meeting since the IMF’s recently completed Global Surveillance Review (see Observer summer 2021) and in response to the IMF’s proposal to dramatically increase its climate work and capacity, the IMFC stressed that “the important role of the IMF in meeting the diverse needs of members for guidance on climate change. macroeconomic and financial implications of climate change issues and on the effectiveness of policy responses ”, and asked the IMF’s Executive Board“ to review the appropriate fiscal resources to ensure that the IMF has the staff and skills necessary to fulfill its mandate ”(see Observer fall 2021). The Committee’s support for an increase in the Climate Fund’s work comes against the backdrop of an August report by ActionAid USA and the Bretton Woods Project which warned that “current IMF policy advice is undermining capacity. many countries to undertake a just energy transition, and that the Fund needs to better understand how this council itself shapes the vulnerability of member countries to these risks.
Well done for the SDRs – now implement quota reform
The statement welcomed the “historic SDR allocation” and noted its support for “the IMF’s efforts to seek options for the voluntary channeling of SDRs from members with strong external positions, in accordance with their national processes, in accordance with their national processes. benefit of low-income and vulnerable middle-country countries “. income country. He pledged to scale up the Poverty Reduction and Growth Trust and supported the establishment of the Resilience and Sustainability Trust at the IMF, “to provide affordable long-term financing to help countries undertake macro-critical reforms to reduce risks to future balance of payments stability. , including those related to climate change and pandemics. The IMFC also called on the IMF and the World Bank to work together to explore “viable options for channeling SDRs through multilateral development banks,” a position shared by the Intergovernmental Group of Twenty-Four (G24) and the G20 (see Mail Annuals 2021). The document, however, did not support calls from civil society and academics to ensure that challenging SDRs allows for maximum flexibility and comes with political conditions (see Mail Annual 2021; Observer Fall 2021, Spring 2021).
On the related and controversial issue of the long-delayed IMF quota reform (see Observer Summer 2019), the IMFC affirmed its commitment to a “strong, quota-based and adequately resourced MFI at the center of the global financial safety net”, and noted that it remained “committed to reviewing the adequacy and will continue the IMF governance reform process as part of the 16th General Quota Review, including a new quota formula as a guide, by December 15, 2023.