Divisions relating to the war in Ukraine once again resulted in the failure of the International Monetary and Financial Committee (IMFC) to issue a Communiqué. The IMFC’s Chair, Nadia Calviño, First Vice President of the Government of Spain and Minister for Economy and Digitalisation issued a chair’s statement instead. In the press conference used to present the statement, Ms. Calviño noted with optimism that despite the lack of agreement on Ukraine, “there is consensus on the core issues of the IMFC… [in particular on] the importance of addressing our common challenges together.”

The statement’s opening two paragraphs focused on the war in Ukraine, deploring the invasion and referencing the March 2022 UN Resolution, which demanded the complete and unconditional withdrawal of Russia from Ukraine. The chair stressed that, “Today’s era must not be of war.”

While the statement stressed that things are less dire than projected in October 2022, it made clear that the challenges facing the membership remain many and complex and require continued vigilance. Keeping with a cautiously optimist reading – at odds with persistent complaints about the slow pace of progress on debt restructuring and the G24 communique, which decried severe deterioration of poverty and human suffering worldwide – Ms. Calviño highlighted that, “the global financial safety net has worked well so far.” Her emphasis on the central importance of multilateral institutions rang hollow, given geopolitical friction between large shareholders continues to block transformative progress at the BWIs and to threaten the multilateral system.

The chair echoed the call of middle and low-income countries during the Meetings that making progress on debt relief is “of the essence”. In that regard, she welcomed progress made by the Global Sovereign Debt Roundtable, although the effectiveness of it remains to be seen. Reflecting the unwillingness of the Fund to call a spade and recognise the debt crises during the Spring Meetings, and demonstrating what seems a bet on less severe than expected contraction, Ms. Calviño mentioned that, “the worst macroeconomic outcomes contemplated in the Fall have not materialized”, with inflation moderating “somewhat”. That said, the statement also acknowledged the “uncertain global context” and that, “debt vulnerabilities are elevated, while food and energy insecurity persist, affecting vulnerable countries and people the most…inequality is increasing, climate shocks are intensifying, and fragmentation risks are rising.” Ms. Calviño stressed the need for climate action and climate finance, from all sources, including the private sector.

Looking at the question of available resources, the failures of the Common Framework and the lack of progress on debt restructure, the IMFC chair noted that, “Policymakers have taken swift actions to strengthen confidence in the banking system, which remains sound and resilient.” The Statement did not contrast the recent swift action, such as that amounting to 109 billion Swiss Francs for Credit Swisse and the intervention to bailout up to $175 billion of Silicon Valley Bank deposits with continued inaction on debt restructure, declining overseas development assistance or lack of climate finance. The document at least pays lip service to Daniela Gabor’s concerns about the fragility created by the shadow banking system and notes that the Fund stands ready to “address regulatory gaps in the bank and in particular the non-bank financial sectors.” Echoing the G24 communiqué, the statement also noted that the Fund would, in an environment in which ‘allied shoring’ and debates about protectionism by the US and Europe are prevalent, focus trade to work to avoid protectionist measures.

The Fund, she says, looks forward to strong commitments at the 28th Conference of Parties (COP28) meeting and will continue to work to protect the most vulnerable.

Optimistically ignoring the extensive evidence on how the IMF’s policy advice has contributed to the multiple challenges that confront the globe, the statement focused significant attention to the Fund’s research and analytical work on “policies to address financial sector vulnerabilities; contain inflation, including monetary-fiscal interactions and policy responses to commodity-price shocks; the interplay between capital flows, capital flow management measures, and crises; fiscal policies to tackle elevated debt levels; and the impact of geo-economic fragmentation.”

Deafening silence on quota reform foreshadows exacerbation of legitimacy crisis

The chair’s statement dealt at some length with efforts to ensure adequate resources for the Fund’s low-income country arm, the Poverty Reduction and Growth Trust (PRGT). It emphasised that the Fund “will redouble our efforts to reach, by the 2023 Annual Meetings, the agreed 2021 fundraising targets for the subsidy and loan resources” for the PRGT, including through rechannelling of SDRs. The statement also mentioned the upcoming PRGT review. The document welcomed the contentious changes to the Fund’s financing assurances policy that “allow the possibility of upper-credit tranche engagement—subject to adequate safeguards—with members facing exceptionally high uncertainty,” referring to the change approved in March, which enabled the IMF to agree an Extended Fund Facility for Ukraine and thus engage for the first time with a country in an active conflict. Acknowledging concerns raised during the Spring Meetings of double standards, the Statement “welcomes the clarity of requirements which helps with even-handed application.”

The statement also took note of several upcoming policy reviews: Precautionary facilities, the access limits under the emergency financing instruments, the impact of the food shock window, as well as the Resilience and Sustainability Trust interim review scheduled for April 2024 and the ex-post report on the use of Special Drawing Rights following the 2021 General Allocation.

Despite strong scepticism expressed by various stakeholders during the Meetings about the prospect of urgently required, significant and equitable reforms resulting from the ongoing 16th quota review, the chair’s statement repeated previously used empty language that the IMFC 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, and ensure the primary role of quotas in IMF resources, by December 15, 2023.”

The statement was silent on two key civil society demands during the Spring Meetings: The end or suspension of the surcharge policy and a new allocation of SDRs.