The world’s financial leaders are likely to pledge on Friday to support a robust global recovery and to boost the International Monetary Fund’s resources so it can help poorer countries fight off the effects of the global health crisis.
Finance ministers and central bank governors of the world’s top 20 economies, called the G20, will hold a video-conference on Friday and the global response to the unprecedented havoc wreaked by the coronavirus on the economy will top the agenda.
Hopes for constructive discussions at the meeting, chaired by Italy, are high among G20 countries because it is the first since Joe Biden, who vowed to rebuild cooperation in international bodies, become US president.
“The ministers will talk about the need for fiscal policies for a swift and robust recovery, because they want to avoid the risk of too early a reduction in fiscal support,” one G20 official said.
The meeting comes as the United States is readying a $1.9 trillion fiscal stimulus and the European Union has jointly put together already more than 3 trillion euros to keep the economy going despite COVID-19 lockdowns.
But despite the large sums, problems with the global rollout of vaccines and the emergence of new variants of the coronavirus mean the future of the recovery remains uncertain.
While the IMF sees the US economy returning to pre-crisis levels already at the end of this year, it may take Europe until the middle of 2022 to reach that point.
The recovery is fragile elsewhere too — factory activity in China grew at the slowest pace in five months in January, hit by a wave of domestic infections, and fourth quarter growth in Japan slowed from the third with new lockdowns clouding the outlook.
“The initially hoped-for V-shaped recovery is now increasingly looking rather more like a long U-shaped recovery. That is why the stabilization measures in almost all G20 states have to be maintained in order to continue supporting the economy,” a second G20 official said.
But while the richest economies can afford to stimulate an economic recovery by borrowing more on the market, poorer ones would benefit from being able to tap credit lines from the IMF — the global lender of last resort.
To give itself more firepower, the Fund proposed last year to increase its war chest by $500 billion in the IMF’s own currency called the Special Drawing Rights (SDR), but the idea was blocked by the then US president, Donald Trump.
The change of administration in Washington on Jan. 20 also changed the prospects for more IMF resources and US Treasury Secretary Janet Yellen backed the idea in a letter to the G20 on Thursday.
Civil society groups, religious leaders and some Democratic lawmakers in the US Congress have called for a much larger allocation valued at $3 trillion, but sources familiar with the matter said they viewed such a large move as unlikely for now.
The G20 is also likely to agree to extend a suspension of debt servicing for poorest countries by another six months.
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