The communique of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G24) for the 2022 IMF and World Bank Spring Meetings, released on 19 April, highlighted the risks posed to the global economy by the uneven recovery from the Covid-19 pandemic. It noted that the challenges facing Emerging Market and Developing Economies (EMDEs), including rising food, energy and commodity prices, disruptions to supply, trade and financial markets and high debt levels, mean that ”[u]rgent global action is necessary to prevent hunger and food crises among vulnerable countries” and guarantee access to financing.

The G24 also referred to Russia’s war in Ukraine in a carefully neutral tone, expressing sadness at the deaths and devastation, while calling for more humanitarian aid and supporting international efforts to restore peace and security, noting the “crisis compounds and intensifies risks to the economic recovery worldwide.”

Uneven recovery, developing country debt, vaccine inequity and tightening monetary policy in advanced economies pose serious risks

The G24 expressed their concern about “increasing risks to financial stability that may disrupt economic recovery”, and the impact these might have on the global economic recovery from the pandemic, including conflict-related disruptions in supply, international trade and financial markets. They called for financing for developing economies to be increased, and for strong international cooperation to protect multilateral rules-based trade, food, energy security and financial stability. They called for policymakers in to be aware of the impact of interest rate rises in advanced economies, which could trigger capital outflows from developing economies, aggravating the debt vulnerabilities of highly indebted EMDEs and reducing their access to finance.

Improving “COVID-19 vaccine access and distribution, especially in low-income countries”, is critical the Group said, as is “building the vaccine capacity of EMDEs” to prepare for future pandemics (see Dispatch Springs 2021).

The Group stressed “the need for a strong global financial safety net, with an adequately-resourced and quota-based IMF at its centre.” They welcomed “the IMF’s strategy to flexibly tailor its assistance to fragile states considering the drivers of fragility, capacity and reform constraints”, and stressed that country ownership of engagement strategies was of critical importance in this regard.

While welcoming “the recognition of the role of pre-emptive macroprudential and capital flow measures in managing capital inflows in the IMF’s revised Institutional View on the Liberalization and Management of Capital Flows” (see Observer Spring 2022), they acknowledged that these measures are not a substitute for sound macroeconomic fundamentals and warranted adjustment, arguing that the next step was to extend the advice to include preemptive measures for capital outflows.

Recognising that while fintech and digital assets can facilitate cross border payments, the group noted that they also pose risks especially to EMDEs and urged the IMF to analyse the impact of these new assets, currencies and payment systems to help countries mitigate risks.

The Group called on the World Bank Group (WBG) to boost their lending capacity to support the public investments needed for a post-pandemic recovery, addressing drivers of inequality and preventing economic scarring, and for the WBG to “develop effective instruments to catalyze public-private partnerships, especially in infrastructure, which have fallen far short of expectations.” They noted this was especially important when governments were under fiscal strain, including in countries that have been severely affected by the pandemic but were not eligible for its traditional lending windows.

The G24 also called on the WBG to support middle income countries as they transform their economies to reduce poverty and inequality “and facilitating knowledge transfer”.

IMF should continue and expand its support for vulnerable states

The IMF should ensure the 16th General Review of Quotas (GRQ) for the IMF should happen no later than 15 December 2023, the G24 noted, and called for the IMF’s quota resources to be increased to respond to potentially high demands for liquidity by developing countries. The group called for a third chair for Sub-Saharan Africa on the IMF’s reserve board, and stated the realignment of quota shares to protect the shares of the Poverty Reduction and Growth Trust (PRGT) eligible countries and small developing states, which should not diminish the share of other EMDEs (see Inside the Institutions, IMF and World Bank decision-making and governance).

The G24 called on the IMF to urgently review the sources of its revenue, including surcharges (see Inside the Institutions, What are IMF surcharges?), with a view to assessing burden sharing among IMF member states and “to correct the regressive and procyclical character of its surcharge policy. It should consider suspending or temporarily substantially reducing surcharges to support countries with severe balance of payments constraints” (see Observer Spring 2022; Dispatch Annuals 2021).

The group welcomed “the creation of the Resilience and Sustainability Trust (RST; See Observer Spring 2022), through which SDRs can be voluntarily channelled to countries in need”, and called for “the IMF to ensure the RST is operational by the 2022 Annual Meetings.” They also called for the PRGT to be strengthened, including by rechannelled SDRs (see Observer Autumn 2021).

The group also noted that, “All actors, including private creditors, should work jointly to enhance debt transparency”, and improved coordination, timeliness and organisation in the treatment of debt under the G20 Common Framework, “to address the procyclical impact of sovereign debt ratings”, noting that the debt burdens for EMDEs had risen sharply over the last two years.

Efforts to combat climate change should be accelerated and expanded

The G24 called for accelerated action to address the threat of climate change, which meets the international commitments for equity and common but differentiated responsibilities (CBDR) as agreed in the Paris Agreement, noting that support for these goals should further the Sustainable Development Goals (SDGs).

Pointing out that financing for investment in climate action has fallen short of what is needed, the group called “on developed countries to deliver urgently their $100 billion climate finance per year commitment to support developing countries.”