Expansion of reserves and lending policy tweaks are IMF priorities, managing director says

Kristalina Georgieva says the fund will continue to push for a greener future, digitalisation and inclusive growth, as it helps states exit the crisis

IMF managing director Kristalina Georgieva. The fund is laying out its global policy agenda as the global economy recovers from its worst recession since the 1930s. AFP

The International Monetary Fund will focus on expanding its reserves and tweaking lending policies to help mid- and low-income countries recover from the impact of the covid-19 pandemic, as the fund pushes for a greener future, digitalisation and inclusive growth, its managing director said.

The Washington-based lender will look to develop capacities and “maintain the speed and force of its exceptional response” to help member states navigate a safe exit from the crisis and counter divergence risks, Kristalina Georgieva said on Wednesday, as she announced the IMF's global policy agenda, which outlines the fund's key priorities for the next six months.

“With countries moving out of the emergency phase of the crisis, and financial support transitioning from emergency facilities to upper credit tranche-quality arrangements, we will continue to tailor our lending,” Ms Georgieva, said on the sidelines of the IMF and the World Bank's annual spring meetings held virtually this week.

“We will keep our lending toolkit under review, including to facilitate structural transformations to a green and digital future.”

The IMF is laying out it policy priorities as the global economy recovers from its worst recession since the 1930s. On Tuesday, the fund raised its global economic forecast for a second time this year on the back of quicker Covid-19 vaccination campaigns. It expects the global economy to expand by 6 per cent in 2021, after contracting 3.3 per cent in 2020. Despite the upward revision and a faster-than-expected economic bounce back, the world is facing substantial loss in output, which is expected to be about 3 per cent lower in 2024 than its pre-pandemic estimated level, Ms Georgieva said last month.

The IMF is advocating to create as much as $650 billion in additional reserve assets to help developing economies cope with the pandemic.

The fund is also reviewing the scope of scaling up its capacity for concessional lending. “Strengthening reserves will contribute to bolstering resilience and provide timely assistance to countries in need”, Ms Georgieva said.

“Our debt agenda will continue to focus on improving the international debt architecture, enhancing debt transparency, assessing countries’ debt sustainability and [their] debt restructuring needs, and providing debt service relief to our poorest members,” she said.

On Monday, the IMF extended debt service relief for 28 of the world's poorest countries. The fund is pushing the G20 to further extend its Debt Service Suspension Initiative and said some 168 million special drawing rights ($238m) of grants are being issued under the Catastrophe Containment and Relief Trust (CCRT) to countries in need.

The IMF will also push to complete the review of the Financial Sector Assessment Programme with the World Bank, as well as its work on financial sector regulatory policies. It will ramp up work on the implications of central bank digital currencies and privately-issued digital money for monetary policy.

The IMF is working with partners to implement a G20 Roadmap to enhance cross-border payments and will “further explore the macrofinancial implications of the use of personal data in the digital economy and the need for global policy coordination,” Ms Georgieva said.

We will keep our lending toolkit under review, including to facilitate structural transformations to a green and digital future

The fund will adapt to members’ needs to move toward a green, resilient and inclusive global economy, she said. It will include the impact of climate change on macroeconomic and financial stability into its policy advice.

“Continuing to fulfil our mandate requires integrating climate change, digitalisation, and inclusive growth more closely into our surveillance, lending and CD [capacity development], given their profound macrofinancial implications,” Ms Georgieva said.

The IMF is also reviewing macroeconomic and financial policies that can address financial inclusion, gender equity and income and wealth inequality. It will continue reviewing the implementation of the framework for its enhanced engagement on governance in member countries.

“Our near- and medium-term work agenda will remain flexible to respond to unexpected exigencies on the highly uncertain path ahead,” Ms Georgieva said.