Solidarity key to building $650bn reserves and common debt framework, IMF chief says

International co-operation is integral to continued global economic recovery, Kristalina Georgieva says

FILE PHOTO: The International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, U.S., April 8, 2019. REUTERS/Yuri Gripas/File Photo

Solidarity among countries was key to unprecedented fiscal and monetary measures that were introduced to cushion the global economy from the pandemic's impact and will be essential for building $650 billion in additional reserves to support its continued recovery, according to the managing director of the International Monetary Fund.

The IMF initiatives such as the common framework for orderly debt resolution can also benefit from continued co-operation between its members, Kristalina Georgieva said on Tuesday at the Boao Forum on Asia.

“In a world of change, one thing remains constant – the importance of solidarity between countries,” she said. “By further strengthening this kind of global co-operation, we can turn a world of change into a world of opportunity for all.”

Ms Georgieva's comments echoed those of China's President Xi Jinping, who called for greater global economic integration and warned against decoupling.

“International affairs should be conducted by way of negotiations and discussions, and the future destiny of the world should be decided by all countries,” Bloomberg cited Mr Xi as telling the Boao Forum, which was attended in person by more than 2,000 officials and business executives in the southern island province of Hainan.

The Chinese president said “the world shouldn’t be led on by the unilateralism of a few countries” and some countries “bossing others around”.

Erecting trade barriers "works against economic and market principles would only harm others without benefiting oneself,” he said.

Globally, governments provided $16 trillion in fiscal support last year, backed by $9tn in monetary accommodation from central banks. Roll outs of mass inoculation programmes and faster-than-expected recoveries in some major economies have prompted the IMF to upgrade its global economic forecast for the second time this year.

The fund now expects the global economy to grow 6 per cent in 2021, compared with its previous forecast of 5.5 per cent. The revision comes after a 3.3 per cent contraction last year. Next year's growth is projected at 4.4 per cent, compared with an earlier estimate of 4.2 per cent.

“But we must not take the recovery for granted – there is a dangerous divergence in economic fortunes across and within countries,” Ms Georgieva said on Tuesday. “So long as the crisis is with us, vulnerable households and viable firms will need continued support.”

The IMF is reviewing the scope of scaling up its capacity for concessional lending and is pushing to create as much as $650bn in additional reserve assets to help developing economies cope with Covid-19.

“Strengthening reserves will contribute to bolstering resilience and provide timely assistance to countries in need”, Ms Georgieva said earlier this month.

A pivot to low-carbon and resilient growth in response to climate change still remains a challenge that is affecting the entire world. A co-ordinated green infrastructure push combined with carbon pricing could boost global GDP in the next 15 years by 0.7 per cent per year and create millions of jobs.

“We welcome China’s commitment to reach net-zero by 2060 – other major economies are making similar pledges,” she told the forum.

The US and China have promised to work together to tackle climate change after a visit by US global climate envoy John Kerry to Shanghai last week.

“We need to follow the philosophy of green development, advance international co-operation on climate change and do more to implement the Paris agreement on climate change,” Mr Xi said.