The IMFC communiqué began by highlighting a central, and unsurprising, theme of this year’s Annual Meetings: that discrepancies in paths of economic recovery between countries were related to vaccination rates and resourcing available for the Covid-19 response. The IMFC noted that, “The global economic recovery continues. But divergences between economies persist, reflecting stark differences in vaccine access and policy support.” Echoing civil society concerns (see Dispatch Springs 2021) the communiqué stressed, “the crisis is exacerbating poverty and inequalities.”
While the IMFC underscored its commitment to “help advance toward the global goals of vaccinating at least 40 percent of the population in all countries by the end of 2021 and 70 percent by mid-2022”, it was silent on the issue of the intellectual property rights waiver for Covid-19 vaccines, as requested by over 100 countries at the World Trade Organisation and as demanded by the People’s Vaccine alliance.
Legitimacy crisis? What legitimacy crisis?
While much ink had been spilled on the fate of the IMF’s Managing Director, Kristalina Georgieva, and indeed the legitimacy of the Fund and Bank in light of the Doing Business Report scandal prior to Annual Meetings (see Observer Autumn 2021)– with over 130 civil society organisations and academics demanding radical governance reforms at both institutions – the Committee made only brief mention of the issue, welcoming “the Statement by the IMF Executive Board on Its Review on the Investigation of the World Bank’s Doing Business 2018 Report”.
Inflation, debt, and constrained fiscal space: The storm intensifies
Describing the policy environment as “complex”, the IMFC emphasised the need to “carefully calibrate our domestic policies” amid increasing discussions of inflationary pressures in high-income countries and the potential significant impact of a rise in interest rates in the US and Europe on the debt profile of middle and low-income countries. This echoes the concerns expressed in the IMF’s latest Fiscal Monitor that, “Large government financing needs are a source of vulnerability, especially in emerging markets and low-income developing countries, where financing conditions are sensitive to global interest rates.” In that regard the communiqué underscored that “clear communication of policy stances can help limit negative cross-country spillovers” and that, “Central banks are monitoring price dynamics closely and can look through inflation pressures that are transitory.”
The Committee stated that it will, “continue to prioritize health spending and protecting the most vulnerable, while shifting focus, as appropriate, from crisis response to promoting growth and preserving long-term fiscal sustainability.” This must have raised concerns among those who read Oxfam’s research released during last year’s Annual Meetings, which found that “84 percent of the International Monetary Fund’s COVID-19 loans encourage, and in some cases require, poor countries… to adopt more tough austerity measures in the aftermath of the health crisis” (see Observer Autumn 2020).
Addressing debt specifically, the IMFC welcomed, “the G20’s commitment to step up efforts to implement the Common Framework for debt treatment, which is also agreed by the Paris Club, in a timely, orderly, and coordinated manner.” The statement of encouragement notwithstanding, as UK-based Jubilee Debt Campaign emphasised, the G20 communiqué “offered no new action on the debt crisis in lower income countries” raising concerns that countries facing unsustainable debt burdens will be forced to prioritise debt repayment over health and social spending urgently required (see Observer Winter 2020). On the contentious use of surcharges (see Dispatch Annuals 2021; Observer Summer 2021), the IMFC thanked the, “IMF for its update on the surcharge policy and look forward to further related analysis at the IMF Executive Board in the context of the interim review of precautionary balances.” Given the devastating critique of the policy contained in a joint Boston and Columbia university and separate Center for Economic and Policy Research reports released ahead of the Annual Meetings detailing the regressive, pro-cyclical and counter-productive impacts of the policy, MICs and their vulnerable citizens will hope that evidence and commonsense prevail and that the interim review leads to an end of the surcharges.
Resourcing the Fund to “step up” its work on climate and other macro-critical issues
In the first meeting since the recently completed IMF Comprehensive Surveillance Review (see Observer Summer 2021) and in response to the Fund’s proposal to significantly increase its climate work and capacity, the IMFC highlighted, “the IMF’s important role in responding to members’ diverse needs for guidance on the macroeconomic and financial implications of climate change issues and on effective policy responses,” and asked the Fund’s executive board to “consider the appropriate budget resources to ensure that the IMF has the staff and skills required to carry out its mandate” (see Observer Autumn 2021). The Committee’s support for an increase of the Fund’s work on climate comes in the context of an August report by ActionAid USA and the Bretton Woods Project which warned that, “current IMF policy advice is undermining many countries’ ability to undertake a just energy transition, and that the Fund needs to better understand how this advice itself is shaping member countries’ vulnerabilities to these risks.”
Well done on SDRs – now deliver on quota reform
The communiqué welcomed the “historic SDR allocation” and noted its support for the “IMF’s efforts to seek options for voluntary channeling of SDRs from members with strong external positions, according to their domestic processes, to the benefit of low-income and vulnerable middle-income countries.” It committed to scaling 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 support countries undertaking macro-critical reforms to reduce risks to prospective balance of payment stability, including those related to climate change and pandemics.” The IMFC also called on the IMF and 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 Dispatch Annuals 2021). The document did not however support calls from civil society and academics to ensure SDR rechallenging enables maximum flexibility and comes without policy conditions (see Dispatch Annuals 2021; Observer Autumn 2021, Spring 2021).
On the related and contentious issue of the long-delayed IMF quota reform (see Observer Summer 2019), the IMFC asserted its commitment to “a strong, quota-based, and adequately resourced IMF at the centre of the global financial safety net,” and noted that it remains “committed to revisiting the adequacy of quotas and will continue the process of IMF governance reform under the 16th General Review of Quotas, including a new quota formula as a guide, by December 15, 2023.”