Multiple social and economic challenges in many emerging and developing economies (EMDEs), have become a growing concern for the Intergovernmental Group of 24 (G24).
The G24 listed such challenges to include food insecurity, increasing inequality, persistent unemployment and informality, setbacks in education and human capital development, heightened debt vulnerabilities, conflict, fragility and migration, climate change and increasing inflation risks, which it said remain and weigh on medium-term prospects of most EMDEs.
In a communiqué issued at the end of its meeting on the International Monetary Affairs and Development, yesterday, the Group said: “Growth in per capita incomes of advanced countries and many MDEs continue to diverge, largely driven by uneven vaccine access, fiscal space and financial capacity to respond to the crisis.”
Chaired by the Iranian Central Bank Governor, Ali Salehabadi, the meeting noted that after severe output losses due to the pandemic, growth in the near term in many EMDEs is improving largely due to increasing domestic demand and higher commodity prices.
The Group said: “The sudden tightening of financial markets poses additional downside risks. Securing inclusive and sustainable growth will require international cooperation to provide widespread access to and distribution of affordable vaccines, ensure adequate external financial support to meet sustainable development goals and maintain financial market stability.”
In particular, the G24 said: “We welcome all efforts, including by the Multilateral Leaders Task Force on Scaling COVID-19 Tools – composed of the World Bank Group (WBG), IMF, WHO and WTO – to tackle obstacles of reaching 40 percent vaccine coverage in all countries by end-2021, 60 percent by mid-2022 and 70 percent by end-2022.”
Securing inclusive and sustainable growth will require international cooperation to provide widespread access to and distribution of affordable vaccines, ensure adequate external financial support to meet sustainable development goals and maintain financial market stability.
Other initiatives are the new $650 billion Special Drawing Rights (SDR) allocation to boost global liquidity, while urging a meaningful voluntary channelling of SDRs from countries with strong external positions to low- and middle-income countries that need support.
“We welcome channelling SDRs through the Poverty Reduction and Growth Trust (PRGT). We also welcome the proposed Resilience and Sustainability Trust (RST) to support low-and-middle-income countries vulnerable to transformational challenges, including pandemic prevention and preparedness and challenges to sustainable development, to support recovery, improve financial resilience and promote balance of payments viability.”
The G24 also commended the International Monetary Fund (IMF’s) continued efforts to adapt its lending toolkit, technical assistance and advice to the evolving needs of EMDEs, including fragile and conflict affected states (FCS).
It however asked the IMF to consider the review of Access Limits and Surcharge Policy, and to correct what it described as “the regressive and procyclical character of the Surcharge Policy and suspend, or at least substantially reduce, existing surcharges to support pandemic responses.
“We encourage the IMF to review its financial governance and address equity considerations in its revenue structure, including the role of surcharges. In addition to donor contributions, the IMF should explore predictable sources of funding to enhance the PRGT and increase its own resources devoted to capacity building that will particularly benefit low-income countries.”
Climate change, energy transition
Based on the latest Intergovernmental Panel on Climate Change (IPCC) report, which highlights the immense impacts of climate change particularly on developing countries, the Group therefore urged international commitment to accelerate transition to a low-carbon.
According to them, “The world should reflect the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) as enshrined in the Paris Agreement. Low carbon pathways should offer opportunities to boost, and not impede, poverty reduction, job-creating growth, technological advances, trade openness and inclusive development in EMDEs.”
Furthermore, they called on the developed countries to “fulfil their commitment not only to provide $100billion annually to developing countries at the earliest possible time, but also increase the share of concessional resources and adaptation finance and aim for greater ambition over the longer term.”
This is in addition to significantly scaling financial and technical assistance from MDBs and climate related funds, such as the Climate Investment Fund, Green Climate Fund and Global Infrastructure Facility, to bolster the investments necessary to jointly achieve both development and climate goals.