IMF chief calls on states to adopt inclusive policies that restore confidence

The fund will strengthen its support of members’ efforts to reduce debt vulnerabilities, increase debt transparency and debt management capacity

FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks during a conference hosted by the Vatican on economic solidarity, at the Vatican, February 5, 2020. REUTERS/Remo Casilli/File Photo
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Countries need to adopt policies that restore confidence, accelerate jobs creation and reduce inequality to promote resilient economies, as global public debt is set to rise to a record this year due to the impact of Covid-19, the International Monetary Fund’s managing director said.

“Nine months into the pandemic, we are still struggling with the darkness of a crisis that has taken more than a million lives, and driven the economy into reverse, causing sharply higher unemployment, rising poverty, and the risk of ‘a lost generation’ in low-income countries,” Kristalina Georgieva said on Wednesday as the fund and the World Bank hold their annual meetings virtually this week.

“All countries now face a long ascent—a journey that will be difficult, uneven, uncertain, and prone to setbacks. Think of how the virus is resurging in a number of countries.”

The global economy is set to contract 4.4 per cent this year as a result of the pandemic. The crisis may end up costing as much as $28 trillion in output losses over the coming five years and that requires governments to adopt a multi-pronged approach, Ms Georgieva said.

Countries need to press on with measures that protect lives and livelihoods in an inclusive manner, which will help check the pandemic and accelerate an economic recovery.

“A durable economic recovery is only possible if we beat the pandemic everywhere,” the fund’s chief said.

“Stepping up vital health measures is imperative. As is fiscal and monetary support to households and firms," Ms Georgieva added. "These lifelines—such as credit guarantees and wage subsidies—are likely to remain critical for some time, to ensure economic and financial stability. Pull the plug too early, and you risk serious, self-inflicted harm.”

Public investment in green projects and digital infrastructure can help build more resilient, inclusive economies, and be a “game changer”, that can boost employment, incomes and productivity, she said.

“Supporting workers as they transition to new jobs is another key feature of a more resilient and inclusive future. This is particularly important for women and young people, who have been disproportionately affected by the crisis,” Ms Georgieva said.

The global decline in work hours in the second quarter, compared with the last three months of 2019, is equal to the loss of 400 million full-time jobs, deepening from equivalent of 155 million full-time jobs lost in the first quarter, the fund said, citing the International Labour Organisation.

Ms Georgieva said global public debt is projected to reach a record high of 100 per cent of the global economy’s output in 2021, as governments need to increase spending to both fight the health crisis, cushion its economic impact and secure a recovery.

“Addressing this issue over the medium-term will be critical. But for many low-income countries, urgent action is required now,” she said. “Given their heavy debt burdens, they are now struggling to maintain vital policy support. They need access to more grants, concessional credit, and debt relief.”

The fund has made over $280 billion in lending commitments to member states, from its $1tn lending capacity. To date it has provided financing to 81countries, while extending debt relief to its poorest members.

The fund will strengthen its support of members’ efforts to reduce debt vulnerabilities, increase debt transparency and debt management capacity, Ms Georgieva said.