May 30, 2024
World Economy

IMFC chair’s statement analysis Spring Meetings 2024: Tinkering at the margins while global crises unfold  


Summary

The International Monetary and Financial Committee (IMFC) has failed to issue a joint communiqué since the Annual Meetings in October 2021, before the war in Ukraine. The IMFC is the direction-setting body of finance ministers and central bank directors for the IMF. The IMFC communiqué usually sets out the consensus position about the direction of the Fund and key reforms. Individual ministerial statements to the IMFC, often revealing the true differences of opinion amongst the IMF’s membership, are also made available online.

The 2024 Spring Meetings is now the fifth occasion in a row in which the IMFC chair has issued a statement, after tensions over geopolitics prevented the committee from agreeing on a joint communiqué. The statement was cautiously positive, noting that the global economy was heading for a “soft landing” after years of turbulence, but that downside risks remained. However, this relatively sanguine view does not reflect the IMF’s own projection that the five-year global economic growth forecast is “at its lowest in decades” – or the reality that those living in many low-income countries (LICs) face: Economies have yet to recover from the Covid-19 pandemic, a growing debt crisis and disproportionate impact from the world’s failure to address the growing climate crisis (see Dispatch Springs 2023).

The IMFC’s new chairperson, Minister of Finance of Saudi Arabia Mohammed Al-Jadaan, stressed the IMFC’s priorities were to achieve price stability and safeguard financial stability, mentioning in his press briefing that the IMF’s precautionary balances, which provide its membership with a buffer against shocks, were expected to reach its medium-term target of $33 billion in Special Drawing Rights (SDRs) this month. Jadaan also mentioned the IMF’s efforts to strengthen its work on capacity development and improve domestic resource mobilisation (taxation) of member states to increase their capacity to govern effectively – however this is at odds with its enforcement of harsh austerity measures on states experiencing financial crises. The minister also noted that committee members would continue to strengthen the global financial safety net and address global debt vulnerabilities, welcoming the progress on debt restructurings under the G20 Common Framework (CF) on Debt.

Political considerations stifle solutions to systemic risks

However, the CF has arguably failed LICs (see Observer Summer 2022, Winter 2020). Established in November 2020, it was meant to accelerate the process of debt relief, but the restructurings that have happened under it have taken three times as long as before, with private creditors only brought into the process at the end of negotiations – which gives them leverage to hold out for a better deal, as they did recently in negotiations with Zambia. The World Bank has strongly criticised the deal Chad reached under the CF, raising concerns about the country’s longer-term ability to repay its debts. In an interview with The Guardian during the Spring Meetings, World Bank chief economist Indermit Gil noted the CF hadn’t provided any actual debt relief, adding that “The common framework won’t deliver what leaders say it will.”

The United Nations Conference of Trade and Development (UNCTAD) has noted that debt is at record levels, with many LICs in debt distress or at high risk of debt distress, and that almost half of humanity lives in countries that spend more on debt servicing than on education or health (see Observer Winter 2023). “While a systemic debt crisis…looms on the horizon, a development crisis is already underway,” said Anastasia Nesvetailova, Head of UNCTAD’s macroeconomic and development policies branch. “A new, development-centred approach to debt is needed,” she stressed. Relieving the debt burdens of LICs is essential if they are to effectively manage the green transition and adapt to climate change, which the chair’s statement recognised as a pressing structural challenge.

Questions remain about willingness of key actors to constructively engage in critical reform

In his statement, Jadaan said that IMF member states were working to approve the 50 per cent increase in quota share ratified by its Executive Board last December as part of the 16th General Review of Quotas in their domestic legislatures by mid-November this year. He noted that members have made interim arrangements to increase bilateral borrowing if the quota increase was delayed for any reason. He also mentioned the committee’s members called on the IMF’s executive board to deliver possible approaches for further quota realignment by June 2025, as part of the 17th General Review of Quotas, which civil society has urgently called for to ensure quota shares reflect changes in the world economy and are more representative (see Observer Winter 2023). However,  geopolitical tensions and reluctance to embrace reform make expectations for a fair realignment of quotas overly optimistic (see Observer Spring 2024, Observer Winter 2023, Observer Autumn 2023; Dispatch Annuals 2023).

The IMFC chair said he looked forward to welcoming Sub-Saharan Africa’s third chair, which is intended to improve the continent’s voice and overall regional representation.

Geopolitical division is the new normal

It appears that the geopolitical tensions that have prevented the IMFC agreeing on a joint communiqué for the last two years have to a significant extent become routinised. This year’s chair’s statement, issued in lieu of a joint communiqué, came out promptly after the committee’s press briefing, without the delays of the last two years.

At the press briefing Jadaan stressed that, despite disagreements over conflicts in the Middle East and Ukraine, all members of the IMFC were committed to supporting the IMF, and while it was not the forum to resolve geopolitical and security issues like the war in Ukraine, the humanitarian crisis in Gaza and shipping disruptions in the Red Sea, members were cognisant of the effects these conflicts could have. The difference in tone between the new Saudi chair’s carefully apolitical statement and the approach of the previous Spanish chair, Nadia Calviño, was noticeable. Her last statement called on all states “to uphold the principles of international law including territorial integrity and sovereignty, international humanitarian law, and the multilateral system that safeguards peace and stability” and stressed the importance of peacefully resolving conflicts, calling for “a comprehensive, just and durable peace in Ukraine.”

Jadaan also stressed the commitment of IMFC members to avoid protectionist measures, which flies in the face of the recent call by the president of the US, a committee member, to triple tariffs on Chinese steel and aluminium, and the US and EU‘s recent embrace of industrial policy.



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