G20 Virtual Meeting
G20 Finance ministers and central bank governors attended a virtual meeting on July 18, 2020. The finance ministers and governors of major economies discussed the need for abrupt and extensive policy measures. It was added that the extra funding from the IMF is required. Especially since the economies are struggling both in terms of response capacity and coping mechanism.
Policy Response to the pandemic
Moreover, the contagion spread has varied across nations. Economies tend to have varied responses and recovery rates. Bankruptcies and financial instability still pose a threat to the economic outlook. This pushes the policymakers around the world to ensure capital mobility and strengthen the foundation for resilient growth.
The attendant parties agreed to consider the delay in debt payments for the world’s poorest countries. The decision will come in the second half of this year since the economic outlook remains volatile.
Plan of Action & recommendations
Furthermore, in the meeting chaired by Saudi Arabia, debt repayments worth $5.3 billion will be delayed this year. Multilateral development banks and private creditors will aid in debt relief. Vice governor of the People’s Bank of China (PBOC), Chen Yulu joined the meeting held over coordinated response amid COVID-19, reported PBOC\’s website on Saturday night.
G20 members implored the IMF to navigate through its financial tools and extend customized services in times of need. The members welcomed the IMF’s efforts towards strengthening its crisis response capacity.
Special Drawing Funds
Additionally, PBOC Governor, Yi Gang asked IMF for special drawing rights. He said \”It would be a quick, practical, fair and cost-effective\” measure, especially for vulnerable emerging markets and developing economies. In a piece of writing for the Financial Times, the governor mentioned drawing rights to be effective for emerging markets and developing economies in particular.
Governor Yi further added that a “general allocation” or “new issue” of SDR is required on an urgent basis to fight the crisis. He called it a “mistake” to not have taken this step already.
Likewise, based on estimates from Peterson Institute for International Economics, he said that the effect of general allocation of SDRs will outweigh the debt suspension plan in terms of benefit.
IMF response to the concerns
Moreover, IMF Managing Director Kristalina Georgieva in his statement brought attention to the need for making better use of SDRs.Further, he remarked that the IMF will explore new means to help in times of crisis. \”As we enter the next phase of the crisis, further policy action will be required, as well as increased international cooperation. The G20 Action Plan is key to this effort,\” Georgieva said. He warned against premature retention of fiscal or monetary policies. As this will incur large costs.
The economic outlook of G20 countries
China will be the only G20 economy projecting positive economic outlook this year, cites Moody\’s International Services. This year, China has reported a 3.2% growth in the second quarter. Developing economies, however, still need support to finance critical spending, making all countries safer, says Chen Shan, an IMF official.
Global GDP will decline by 4.9% this year. The uneven recovery following the recession will predominately suffer from unemployment and bankruptcy hike.
