As the global economy aches from a litany of challenges, the International Monetary Fund (IMF) has said that an estimated $1 trillion a year is needed for renewable energy alone, saying the money will pay dividends in terms of growth and jobs.
The Managing Director of the Fund, Kristalina Georgieva, made the disclosure in Washington DC at a media briefing.
She noted that the world needs a step change in international cooperation to reduce the impact of economic fragmentation and geopolitical tension, especially over Russia’s invasion of Ukraine.
She urged the G20 leadership to strengthen the international financial architecture.
She said that the IMF has soothed 96 countries with $300 loan since the outbreak of the COVID-19 pandemic, adding additional 23 new borrowing arrangements have been approved.
Georgieva further disclosed that IMF’s Global Policy Agenda concentrates on the path to restoring both short and medium-term prospects for sustainable and inclusive growth.
“So long as financial pressures remain limited, we expect central banks to stay the course in the fight against inflation—holding a tight stance to prevent a de-anchoring of inflation expectations. Further effort to reduce budget deficits is critical to support the fight against inflation and reduce debt, but this must be coupled with targeted support for the most vulnerable.
“And central banks should address financial stability risks where they emerge, working closely with regulators and supervisors. The key is to monitor risks that may be hiding in the shadows in banks and non-bank financial institutions, or in sectors such as commercial real estate. Vigilance is imperative”, she advised.
The IMF Chief suggested rebuilding the foundation to sustain future prosperity—by acting now to advance structural transformations and counter fragmentation.
“We also need to step up international cooperation to reduce the harm from fragmentation. Our analysis shows that the long-term cost of trade fragmentation could be as high as 7 percent of global GDP. If we add technological decoupling, some countries could lose up to 12 percent of GDP. Fragmentation of capital flows, including foreign direct investment, would be another hit to global growth.
“Nearly half of our financing commitments in the past three years have been done through our precautionary facilities—like the one approved for Morocco last week. They serve as an additional buffer to countries with strong economic fundamentals.
“Yet, for the most vulnerable members of our global family, additional support from the international community is essential. I am making a double plea on their behalf: help them resolve crushing debt burdens; and help ensure that the IMF can continue to support them going forward.
“On the first, the Global Sovereign Debt Roundtable is making tangible progress. Co-chaired by IMF, the World Bank, and India as G20 Chair, this forum brings together public and private creditors, as well as borrowers, to accelerate restructuring cases, including those under the G20’s Common Framework. The roundtable met yesterday, and I was encouraged by the positive outcomes”, she explained.
The IMF Chief also disclosed that concessional financing has increased more than four-fold since the onset of COVID-19. “Coming into these meetings, we had been calling for $4.7 billion in loan resources and $1.6 billion in additional subsidy resources to maintain this interest-free support.
“I am very encouraged that some of our economically stronger members are already stepping up. Just in the past few days five countries—Ireland, Japan, Portugal, Saudi Arabia and the UK—have all come forward with substantial new pledges or contributions.
“And we call on all members to work this year to successfully complete the review of quotas—the building blocks of the IMF’s financial structure—so that we can continue to strongly fulfill our mission”, she added.
