Economy Finance

World Bank, IMF charged on economic transformation

A man is silhouetted against the logo of the World Bank at the main venue for the International Monetary Fund (IMF) and World Bank annual meeting in Tokyo. REUTERS-Kim Kyung-Hoon

The Development Committee of the World Bank Group (WBG) and International Monetary Fund (IMF) for Annual Meetings 2020 has called on the multilateral organisations to support and accelerate a resilient recovery centered on jobs and economic transformation.

In a communique released on Friday at the end of its virtual meeting held on October 16, 2020, the Committee asked the WBG to provide the knowledge, policy advice, and financial support to help countries strengthen social safety nets and facilitate the movement of capital and labor toward sectors that would be productive and sustainable in the post-pandemic context, while also providing the innovation needed to open up trade finance for small and medium enterprises (SMEs) and confront the challenges of informality.

The Committee to which Mrs. Zainab Ahmed, Minister of Finance, Budget and National Planning, is a member, urged the WBG to support the mobilisation and crowding in of private capital and finance, with innovative products from IFC and multilateral investment guarantee agency (MIGA), maintaining and building on the IFC 3.0 strategy to create markets and promote investments and quality infrastructure for a broad-based recovery and long-term development.

It stressed the importance of increasing domestic resource mobilisation in a manner that promotes fairness, equity, and inclusive growth, including by phasing out fuel subsidies and other distortive subsidies and taxes where feasible.

The Committee noted the importance of an immediate response in public health, food security, and education; and we call on all countries to support the availability of medical and food supplies that developing countries depend on to avoid the risk of a wider health crisis, famine and hunger.

“We strongly welcome the work underway to address the risks to gender equality and impacts on biodiversity that are exacerbated by COVID-19. We underscore that the WBG plays a critical role in key global challenges, and it is only by rebuilding stronger and better that the twin goals and SDGs can be achieved”, it stated.

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The Committee welcomed the second phase of International Finance Corporation (IFC’s) response, which is to include the restructuring and recapitalising of viable companies and financial institutions as well as support to health care value chains in emerging and developing economies.

“We also welcome the planned scaling up to US$35 billion of International Development Association (IDA)19 resources in fiscal year 2021 to help countries address their long-term development needs. The WBG should continue its efforts to deliver a bold and decisive response of up to US$160 billion by June 2021.”

Considering the severity and likely long-term effects of the crisis, the Committee encouraged discussions on the WBG financial capacity beyond fiscal year 2021, to ensure that the WBG remains adequately capitalised to fulfill its mandate.

In addition, “we commend the IMF for its rapid and effective crisis response, which has provided some US$100 billion in assistance to over 80 countries during the pandemic, primarily through emergency financing facilities. We call on the IMF to continue to deploy all available tools and resources to help members achieve a durable exit from the crisis while building more resilient and inclusive economies”.

The Committee declared its support for the extension of the Debt Service Suspension Initiative (DSSI) by six months and to examine, by the time of the 2021 WBG and IMF Spring Meetings, if the economic and financial situation requires to extend further the DSSI by another six months, with targeted complements to the April 2020 DSSI Term Sheet.

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It encouraged the WBG to explore, among others, additional proposals for COVID-19 emergency financing for IDA countries in its discussions with IDA deputies. It asked the WBG and IMF to continue supporting DSSI implementation, including by providing further details on the net new resources they are providing to each eligible country.

“We ask the WBG and the IMF to continue their work to strengthen quality and consistency of debt data and improve debt disclosure. Amid high public debt levels, shrinking economies, and rising fiscal pressures, we recognise that debt treatments beyond the DSSI may be required on a case-by-case basis.

“In this context, we welcome the G20’s agreement in principle on a “Common Framework for Debt Treatments beyond the DSSI”, which is also agreed by the Paris Club. We look forward to the endorsement of the Common Framework by members, subject to their domestic approval procedures,” it also stated.

“We encourage the WBG and IMF to continue to review the debt challenges of low-income countries and propose actions to address their fiscal and debt stress on a case-by-case basis.

“We also continue to encourage the WBG and IMF to review the debt challenges of middle-income countries and to explore customized solutions to their fiscal and debt stress on a case-by-case basis, including by providing additional resources in these challenging times, in line with the capital package commitments”, it stated.

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