Rich countries are poised to recover from the global pandemic much faster than poor ones based on better vaccine access — and policymakers need to act to avoid deepening inequality between nations, the head of the International Monetary Fund said.
Governments and multilateral organizations must help developing nations accompany advanced ones in transitioning to a more inclusive, digitalized, green economy, IMF Managing Director Kristalina Georgieva said in a round-table with reporters on Friday.
Countries need to revitalize international cooperation, Georgieva said — a goal that President Joe Biden’s administration also has identified for the U.S., the fund’s largest shareholder.
Failing to address unequal vaccine access could leave many countries in the world with social unrest or a decade of lost growth and advancement, Georgieva said.
About half of developing nations will see their per-capita income levels relative to advanced economies fall as a result of the pandemic, marking a reversal from recent decades, she said.
“This year we face the risk of great divergence,” Georgieva said. “The path to recoveries is uneven, and that unevenness can translate with substantial problems for the world in the years to come.”
In a wide-ranging, hour-long conversation, Georgieva highlighted the need to provide debt relief for developing economies struggling with unbearable burdens and for policymakers to continue to provide support for vulnerable populations until the crisis is over.
China’s continued process of opening up its financial services sector should help achieve more balanced growth that’s less reliant on public spending and more geared toward domestic consumption.
The world needs to come together to make sure vaccines are available in Africa, where only Morocco so far has started giving shots.
The IMF is providing analysis and working to bring together Zambia, Chad, Ethiopia with their creditors as the countries pursue debt relief
The IMF is continuing to discuss with its members the possibility of new issuance of special drawing rights, like the one in 2009, and will talk about the option as part of a review of long-term liquidity needs that takes place every five years and is due now.
Any SDR creation needs to be part of a comprehensive plan and accompanied other steps including debt relief for countries with unsustainable burdens so that the reserve assets don’t just go to paying past debts.
Emerging and developing markets that will need debt restructuring can reduce the pain taking action early.
The IMF and World Bank are in “very early conversations” to see if debt relief can be done in a way that prioritizes health and climate spending and rewards creditors being considered as part of their environmental, social, and corporate-governance commitments.
While there were fewer bankruptcies in 2020 than the average year, policymakers need to be prepared for the moment when the withdrawal of support shows that some businesses are no longer viable, in order to prevent scarring.
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