The IMF’s policy-making committee today said that the global growth prospects is threatened by increasing trade disputes, geopolitical tensions and low income countries’ heavy debt burden. In a statement at the end of three days of meetings, the International Monetary and Finance Committee (IMFC), heeding the voice of countries like India, the US, Britain and France, called on the IMF and the World Bank to work on a multi-pronged programme to enhance debt transparency and sustainability.
“Debt vulnerabilities are rising in many countries, particularly in low income countries (LICs). We call on the IMF and the World Bank Group to work together on a multi-pronged work programme to enhance debt transparency and sustainability and address LICs debt vulnerabilities,” the statement said. On the conclusion of the annual spring meeting of the International Monetary Fund and the World Bank, the IMFC meeting chaired by South African Governor of Reserve Bank Lesetja Kganyago in a communique urged the IMF to work closely with members to strengthen fiscal frameworks and improve debt management capacity, and to work with debtors and creditors on promoting sustainable lending practices and tackling data gaps.
Welcoming efforts to conduct a rigorous, evenhanded, candid and transparent assessment of excessive global imbalances and exchange rates in the 2018 External Sector Report, the IMFC said it look forward to the stock-take on capital flow management measures based on the Institutional View. Supporting the IMF’s collaboration with stakeholders on financial technology, crypto assets and cyber security, the communique called on the IMF to set out a clear process for supporting country authorities in developing their medium-term revenue strategies.
“We support further efforts to address the withdrawal of correspondent banking relationships and its adverse consequences, including on remittances, trade flows, and financial inclusion. We reaffirm our support for the IMF’s work to help countries achieve the 2030 SDGs. We support the IMF’s continued efforts to assist countries in dealing with the macroeconomic consequences of large refugee inflows,” it said. Seeking to enhance resilience and raising medium-term prospects, the communique welcomed the IMF’s enhanced engagement on governance issues, including corruption, as well as efforts to establish a framework to guide its involvement in social protection issues.
“We agree that the IMF will need to consider the effects of technology and digitalisation in its macroeconomic analysis, including on inequality, productivity, labor and financial markets, fiscal policy, monetary policy, and measurement of the digital economy,” it said. Observing that global growth has further strengthened and is increasingly broad-based, driven by a strong rebound in investment and trade, the IMFC said risks are broadly balanced in the near term, but remain skewed to the downside beyond the next several quarters.
Rising financial vulnerabilities, increasing trade and geopolitical tensions, and historically high global debt threaten global growth prospects, it said. Demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward, it warned. “The window of opportunity remains open and should be used expeditiously to advance policies and reforms that sustain the current upswing, enhance resilience, and raise medium-term growth for the benefit of all,” it said.
The IMFC said it will continue to use all policy tools to achieve strong, sustainable, balanced, inclusive, and job-rich growth. “In line with central bank mandates and mindful of financial stability risks, monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets,” the communique said. Fiscal policy should be flexible and growth-friendly, rebuild buffers where needed, avoid procyclicality, create space to invest in infrastructure and workforce skills, and ensure that public debt as a share of GDP is on a sustainable path, it said.
“We will continue to monitor and, if necessary, address emerging risks and vulnerabilities in the financial system. Policies should also enhance inclusion to widely share the gains from technology and economic integration and manage associated risks. We will work together to reduce excessive global imbalances in a way that supports global growth by pursuing appropriate and sustainable policies,” the communique said. Observing that strong fundamentals, sound policies, and a resilient international monetary system (IMS) are essential to the stability of exchange rates, contributing to strong and sustainable growth and investment, the IMFC said flexible exchange rates, where feasible, can serve as a shock absorber.
“We recognize that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes,” the statement said.