The present challenges facing the world reveal major fault lines in the global economic and financial system and with many countries likely to need financial assistance, it is critical to maintain a reliable global financial safety net, the International Monetary Fund (IMF) says.
The pandemic was a crisis like no other and two years later, the recovery has been hampered by further crisis upon crisis, says the International Monetary Fund (IMF) Annual Report.
"We live in a more shock-prone world. The development of vaccines and unprecedented monetary, fiscal, and financial support, including the IMF’s historic general special drawing right (SDR) allocation of about $650 billion, made a global recovery possible. But Russia’s invasion of Ukraine upended it, severely setting back global economic prospects," it says.
"Today’s economic challenges -- from the pandemic and spillovers of war to climate change and digital money -- reveal economic and geopolitical fault lines in the global economic and financial system. With many countries likely to need financial assistance, it has become ever more critical to maintain a reliable global financial safety net with the IMF at its center," the report says.
To better support its members during these difficult times, the IMF is revisiting its policy advice, lending activities, and capacity building, including through the establishment of the Resilience and Sustainability Trust in April 2022.
The 2022 IMF Annual Report highlights the IMF’s role in Covid-19 recovery and the impact of Russia’s invasion of Ukraine; inflation; how to achieve an equitable recovery; debt; and climate change, digital money, and inclusion.
The report says economic risks have risen sharply and geopolitical and social tensions have escalated as poverty and inequality have increased. Inflation in many countries has risen sharply, fuelled by a combination of surging energy, food, and commodity prices, labour shortages, and supply disruptions.
Public and private debt has reached new highs. With more limited fiscal space, countries will face increasingly difficult policy trade-offs as they tackle rising inflation, heightened macro-financial risks, and slowing growth. Emerging market and developing economies with large foreign currency borrowing and external financing needs will also need to prepare for possible turbulence in financial markets as the monetary policy stance in advanced economies tightens, it warns.
Even as policymakers focus on cushioning the impact of the war in Ukraine and the pandemic, the world is also facing sweeping forces of longer-term change, including those from the effects of climate change and the digital revolution. The impacts of these forces will inevitably play out in the balance of payments of individual countries, making structural reforms and improvements to policy frameworks all the more important for building resilience and achieving long-term, inclusive growth, said the IMF report.
In FY 2022, the IMF continued to support its members in our three core areas:
• Economic surveillance: 126 country health checks completed.
• Lending: $113 billion to 23 countries, including $9 billion to 14 low-income. countries?(for a total of $219+ billion since the start of the pandemic).
• Capacity development: $242 million for hands-on technical advice, policy-oriented training, and peer learning.
"Working together is the only way we can successfully address the challenges we face. Our member countries can count on us to nurture collective action for a strong and inclusive economy," said Kristalina Georgieva, Managing Director of IMF. -TradeArabia News Service