Officials in Washington are optimistic that with help from more developed countries and multilateral institutions, low-income and developing countries will not be left behind in the economic recovery.
This point was highlighted during a session of the International Monetary Fund (IMF)/World Bank Group Spring Meeting, being held virtually.
Speaking on the topic Economic Recovery: Toward a Green, Resilient and Inclusive Future, US Treasury Secretary Janet Yellen said she was upbeat that current steps being taken by the US government to help that economy would have positive spillover effects for less developed nations.
At the same time, Yellen said she was hopeful that a new Special Drawing Rights (SDR) allocation, which would see IMF member states including Barbados, getting more funding, would soon be approved.
“I think that what we’re doing domestically is helpful to the entire global community. Stronger growth in the US is going to spill over positively, to the entire global outlook. And we are going to be careful to learn the lesson of the financial crisis, which is, don’t withdraw support too quickly. We would encourage all those developed countries that have the capacity, using fiscal policy and monetary policy to continue to support a global recovery for the sake of the growth in the entire global economy,” said Yellen.
She insisted that it was the responsibility of the developed countries to make sure that decades of progress in fighting poverty globally and trying to close the income gaps between rich and poor countries were not reversed because of the COVID-19 pandemic.
As such, Yellen said she hoped the Bretton Woods institutions would provide “a package of resources” to help developing and low-income countries.
“I hope that we’ll make progress on approving an SDR allocation, which I think would be a very important way to support the reserve needs globally, especially of low-income countries. You mentioned tackling debt. I think that’s an extremely important initiative – concessional finance for the poorest countries. I hope that this will be the focus and the developed countries will band together to make sure that we provide that support,” she said.
Recently, Managing Director of the IMF Kristalina Georgieva reported widespread support among members for a new SDR allocation totaling some US$650 billion, more than doubling the current SDR allocation, which is equivalent to about US$293 billion.
This would provide additional liquidity support to the global economic system to supplement the reserves of IMF member states.
Georgieva made no mention of the SDR in Tuesday’s discussion but pointed out that global economic recovery was in progress, agreeing that actions taken by the United States to boost prospects for recovery in the US are helping the whole world.
Pointing to the need for every country to be given “a fair shot in the arm” in order to bring the pandemic to an end, the IMF official said “First and foremost, we have stepped up significantly, the provision of financial lifelines to vulnerable countries, emerging markets with weak fundamentals, [and] low-income countries.”
She said the IMF was also joining the World Bank in making sure that those with limited fiscal space and no access to markets were not left out of the recovery.
“We cannot ignore [the need for] that sustainability in this crisis, provision of more concessionary resources and also seeking ways in which we can boost reserves, especially for countries with no market access. So ultimately, this fair shot would bring the world together because in this crisis, we have no way to get through without pulling together,” added Georgieva.
Meanwhile, highlighting several challenges facing the world including climate change, rising poverty, inequality and violence, President of the World Bank Group David Malpass acknowledged that the most vulnerable and those in the informal sectors were most affected as a result of the COVID-19 pandemic.
“The inequality extends well beyond that to vaccinations, the concentration in wealth, the unequal impact of the fiscal stimulus and asset purchases and the imbalance in debt or credit relationships, particularly for people in the poorest countries,” he added.
He said the World Bank Group was therefore “leaning forward” as much as possible to face these challenges.
“In response to COVID-19, we took broad, fast action and quickly achieved over 100 active operations of support for developing countries,” he said, as he highlighted the funding being provided to aid several countries obtain vaccines and tackle debt.
“Finally, we’re finalizing a new climate change action plan, which includes a big step up in financing, building on our record climate financing over the past two years. It includes new analytical support to countries as part of integrated climate and development programmes,” added Malpass
During the discussion, the officials pointed to the need for greater unity in tackling issues relating to climate change and greater use of technology to help countries further develop and lessen the scourge of inequality especially among women.