Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
Chaired by Sergio Francisco Recinos Rivera, President of the Central Bank of Guatemala
April 19, 2022
1. We are deeply saddened by the tragic deaths and devastation in Ukraine.
We strongly support international efforts to provide humanitarian support
and restore peace and stability and recognize that this crisis compounds
and intensifies risks and undermines economic recovery worldwide.
2. The pandemic has imposed huge costs. Many impediments to the global
recovery remain, with growth prospects increasingly divergent and
uncertain. GDP growth over the medium-term in many emerging market and
developing economies (EMDEs) is projected to fall below pre-pandemic
levels. Investing to spur recovery is highly constrained by limited fiscal
space and rising debt vulnerabilities. Rising inflationary pressures,
driven by spikes in food, energy and commodity prices, and pandemic and
conflict-related disruptions in supply, international trade, and financial
markets exacerbate output losses and inequality. Urgent global action is
needed to prevent hunger and food crises among vulnerable countries and
poorer households and avert financial distress in highly indebted EMDEs.
Close attention to the impact of refugee flows and the internally displaced
is needed. Strong multilateral cooperation is crucial to preserve
multilateral rules-based trade, ensure food and energy security, protect
financial stability, and sustain increased financing to developing
economies.
3. We call for an urgent and stronger global response to improve COVID-19
vaccine access and its distribution, especially in low-income countries.
All countries need to act to overcome supply barriers by facilitating
timely cross border flows of vaccine and treatments and sharing
technologies to boost their supply. Advanced economies should ensure
adequate funding of the Access to COVID-19 Tool Accelerator (ACT-A) and the
COVAX Facility to meet the global goal of 70 percent vaccination coverage
in all countries by mid-2022. We welcome the World Bank Group’s (WBG) $20
billion vaccine financing package, partnerships with COVAX and the African
Union, and assistance in building vaccine capacity in EMDEs. It is vital to
put in place an adequately funded and equitable global initiative to
support preparedness for and response to pandemics.
4. We are concerned about increasing risks to financial stability that may
disrupt economic recovery. In managing the exit from accommodative
macroeconomic policies, policymakers need to strike a balance between
containing surging inflation and supporting economic recovery. Faster than
expected increases in interest rates in advanced economies could raise
rates globally and trigger capital outflows from developing countries,
reducing access to financial markets, and further increasing debt
vulnerabilities. We urge the IMF to be vigilant in recognizing the
spillover effects in its bilateral and multilateral surveillance and to
provide timely and tailored advice and technical support to member
countries. The rapid growth of fintech and digital assets has the potential
to facilitate efficient cross-border payments, but also presents risks,
especially in EMDEs. In this context, more countries are exploring the
issuance of Central Bank Digital Currencies (CBDCs), which offer
opportunities, but also pose global policy challenges. Supporting EMDEs in
their digitalization efforts is crucial to avoid a digital divide. We urge
the IMF to analyze the implications of digitalization in payments systems
and cross-border capital flows as adoption of digital assets and currencies
accelerates, with a view to supporting countries mitigate risks.
5. Against this background, we will continue to strengthen the mix of
policies to ensure financial stability based on our countries’ specific
circumstances. We welcome the recognition of the role of pre-emptive
macroprudential and capital flow measures in managing capital inflows in
the IMF’s revised Institutional View on the Liberalization and Management
of Capital Flows, while considering that they cannot substitute for sound
fundamentals and warranted macroeconomic adjustment. An important next step
is to extend the analysis and advice to include preemptive measures for
capital outflows. We also encourage the IMF to further develop its work to
assist members address economic vulnerabilities to enhance resilience and
avoid undue reliance on capital flow measures.
6. We reiterate the need for a strong Global Financial Safety Net, with an
adequately resourced and quota-based IMF at its center. Within its mandate,
the IMF should continue to adapt its advice and lending toolkit to serve
the diverse needs of EMDEs and to respond to multiple global shocks. We
commend the timely and expanded use of the Fund’s emergency lending
facilities, which has provided vital support for pandemic response. We draw
attention to the role of precautionary financing instruments in helping
eligible countries deal with tail external risks. We welcome the IMF’s
strategy to flexibly tailor its assistance to fragile states considering
the drivers of fragility, capacity and reform constraints, and their
specific financing needs. Strong country ownership of country engagement
strategies with fragile states will play a fundamental role in effectively
implementing this strategy.
7. We call on the IMF to urgently review its sources of revenues, which
consists mainly of income from lending, including surcharges. This review
should assess the appropriate burden-sharing among IMF’s member countries
to support the sustained provision of a global public good. In this
context, we call on the IMF to correct the regressive and procyclical
character of its surcharge policy. It should consider suspending or
temporarily substantially reducing surcharges to support countries with
severe balance of payments constraints.
8. We call on the IMF to set clear timelines and deliverables to ensure the
timely completion of the 16th General Review of Quotas (GRQ) no
later than December 15, 2023. We call for an increase in the IMF’s quota
resources to ensure an adequately resourced IMF that is less dependent on
temporary borrowed resources to boost its lending capacity in times of
crises. Failure to deliver a quota increase will result in a sharp decline
in the IMF’s resource envelope as temporary borrowing arrangements expire –
at a time of potentially high liquidity needs in developing countries –
which could threaten the IMF’s effectiveness and credibility. We call for a
revised quota formula that further shifts quota shares from advanced
countries to dynamic EMDEs reflecting their growing weight in the global
economy. The realignment of quota shares must protect the quota shares of
all PRGT-eligible members and small developing states and should not be at
the expense of other EMDEs. The 16th GRQ should deepen
governance reforms to improve the voice and representation of EMDEs in the
IMF’s Executive Board, including introducing a third Chair for Sub-Saharan
Africa, but not at the expense of other EMDEs’ Chairs.
9. The $650 billion Special Drawing Rights (SDRs) allocation in 2021
provided a timely boost to global liquidity. We welcome the creation of the
Resilience and Sustainability Trust (RST) through which SDRs can be
voluntarily channeled to countries in need. We call on the IMF to ensure
the RST is operational by the 2022 Annual Meetings and to work in close
collaboration with the WBG in implementing the RST. We welcome the global
ambition to voluntarily channel $100 billion of unused SDRs to developing
countries that need liquidity support and urge further pledges to meet that
goal. We ask the IMF to ensure that support from the RST covers the broad
range of structural reforms and policies in developing countries that are
needed to enhance resilience and prospective balance of payments
sustainability, delivering the scale of medium-term financing required to
address them. We call for the strengthening the resources of the Poverty
Reduction and Growth Trust (PRGT), including from rechanneled SDRs, and
urge donor countries to provide the subsidy resources needed to ensure its
effectiveness and sustainability.
10. The WBG and other MDBs should use the strength of their balance sheets,
to the fullest extent possible, to boost their lending capacity while
preserving financial prudence and resilience. Scaled up financing from MDBs
needs to be sustained to support enormous and urgent public investments
needed to spur a post-pandemic recovery, address key drivers of inequality,
confront the education crisis, and prevent economic scarring, especially at
a time when fiscal resources are highly strained. We welcome the successful
IDA20 replenishment a year in advance to enhance support to low-income
countries (LICs) in confronting the health and economic impact of the
pandemic. We urge the WBG to develop innovative means to assist fragile
states that are not eligible to avail of its traditional lending windows
but have been severely affected by the pandemic. We welcome the WBG’s
timely financial assistance to Ukraine and look forward to its support to
other countries harmed by the conflict. We urge the WBG to extend
concessional financing to developing countries experiencing
disproportionate migration, displacement, and refugee flows, including from
the impact of the Ukraine crisis. We reiterate our call on the IMF and the
WBG to strengthen their analytical work on the macroeconomic and
development impacts of migration and refugee flows. In addition, the WBG
should develop effective instruments to catalyze public-private
partnerships, especially in infrastructure, which have fallen far short of
expectations. We welcome the WBG’s support to help countries harness the
development potential from digitalization.
11. We reiterate our call on the WBG to develop a medium-term strategy for
middle-income countries (MICs), considering their evolving landscape and
circumstances. Many MICs face challenges in transforming their economies to
improve their medium-term growth prospects and reduce high levels of
poverty and inequality. Recovering better from the economic contraction
will require policy reforms and significant public investments in
sustainable infrastructure, human development, and social protection. The
WBG and other MDBs must play a stronger role in development financing for
MICs and facilitating knowledge transfer.
12. Debt burdens in EMDEs have risen sharply in the past two years, driven
largely by reduced fiscal revenues and increased public spending for
pandemic response. Debt related risks need urgent attention to avert
economic distress in highly indebted countries. We welcome the improvements
in debt transparency, with the support of the IMF and the WBG, especially
in LICs. All actors, including private creditors, should work jointly to
enhance debt transparency. We call for measures to ensure timely, orderly,
and coordinated debt treatment under the G20 Common Framework, increase the
participation of private creditors, and address the procyclical impact of
sovereign credit ratings. Alleviating debt distress will require more
development financing, particularly concessional financing. We also call
for further support for EMDEs to address their development challenges and
needs, within an effective international financial architecture. We welcome
progress made in the multi-pronged approach, especially the implementation
of the performance and policy actions (PPAs) in IDA countries. We urge the
continued support of the IMF and WBG to strengthen capacity in debt and
public expenditure management and domestic resource mobilization.
13. We reiterate our call for the international commitment to accelerate
global actions to address the threat of climate change to reflect the
principles of equity and common but differentiated responsibilities (CBDR)
and respective capabilities as enshrined in the UNFCCC and Paris Agreement.
Support for low greenhouse gas pathways should create, not impede,
opportunities for inclusive growth and a better recovery and for protecting
the most vulnerable, thus contributing significantly to achieving the SDGs
and global climate goals. Achieving these objectives will require enormous
investments on sustainable infrastructure, energy transitions, adaptation
and reversing biodiversity losses, all of which will require scaled-up,
sustained and affordable long-term financing, especially grant financing
from developed to developing countries, technology transfer, and enhanced
technical assistance.
14. At the 26th UN Climate Change Conference (COP26), developing
countries urged stronger commitment from the international community to
scale up and improve the quality of climate finance. Financing to invest in
climate action has fallen far short of what is, and will be, needed, while
financing gaps are amplified by pressing fiscal constraints and the high
and increasing cost of capital for developing economies. As an initial
step, we call on developed countries to deliver urgently their $100 billion
climate finance per year commitment to support developing countries and aim
to significantly surpass this target in the years ahead to match investment
needs. Going forward, COP27 should aim for an accelerated and ambitious
climate finance agenda, a process to track progress in fulfilling financial
commitments and the means to bridge financing gaps as needed. Concessional
finance and adaptation finance should substantially increase and climate
financing for loss and damage mainstreamed. Innovative financing
instruments should also be explored, in alignment with the principle of
CBDR. In addition, scaling up WBG and other MDB financing and catalyzing
substantial private finance are critical to achieve inclusive and
sustainable development. The WBG’s and MDBs’ climate initiatives should be
in line with Nationally Determined Contributions. They must ensure strong
country ownership of country climate and development reports (CCDR). MDBs’
climate initiative to achieve sustainable development should ensure access
to energy and energy security.
15. Climate change and biodiversity loss are two major and interlinked
global challenges. At COP15 Phase II, we look forward to the adoption by
the Convention on Biological Diversity of an ambitious, pragmatic, and
balanced Post-2020 Global Biodiversity Framework to curb and reverse global
biodiversity loss.
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