"Weak global economy, high inflation and rising fragmentation demand strong G20 action"

" \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n Weak global economy, high inflation and rising fragmentation demand strong G20 action \r\n When the G20 finance ministers and central bank governors meet in Gandhinagar next week, the world will be looking for joint action to address rising economic fragmentation, slowing growth, and high inflation. Agile multilateral support is vital to tackle common challenges posed by debt vulnerabilities, climate change, and limited concessional financing \u2013 especially for countries hit by shocks not of their making. \r\n Outlook: resilience amid challenges \r\n In April, the IMF projected global growth at 2.8 percent in 2023, down from 3.4 percent in 2022.\u00a0The bulk of it\u2013over\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDQsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vQmxvZ3MvQXJ0aWNsZXMvMjAyMy8wNS8wMS9hc2lhLXBvaXNlZC10by1kcml2ZS1nbG9iYWwtZWNvbm9taWMtZ3Jvd3RoLWJvb3N0ZWQtYnktY2hpbmFzLXJlb3BlbmluZz91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkiLCJidWxsZXRpbl9pZCI6IjIwMjMwNzEzLjc5NTkzNTYxIn0.hqCbSTBcF1R9dMlCVrpbwAjOFbkRaQTqz05QOJkpMjs\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDQsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vQmxvZ3MvQXJ0aWNsZXMvMjAyMy8wNS8wMS9hc2lhLXBvaXNlZC10by1kcml2ZS1nbG9iYWwtZWNvbm9taWMtZ3Jvd3RoLWJvb3N0ZWQtYnktY2hpbmFzLXJlb3BlbmluZz91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkiLCJidWxsZXRpbl9pZCI6IjIwMjMwNzEzLjc5NTkzNTYxIn0.hqCbSTBcF1R9dMlCVrpbwAjOFbkRaQTqz05QOJkpMjs\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw2L0GlTrcs7foJoHg_OgxVi\">70 percent \u2013is expected to come from the Asia-Pacific region. \r\n Yet, recent high frequency indicators paint a\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDUsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvLS9tZWRpYS9GaWxlcy9SZXNlYXJjaC9pbWYtYW5kLWcyMC8yMDIzL2cyMC1zdXJ2ZWlsbGFuY2Utbm90ZS5hc2h4P3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.uEMw9s41oH3Wjmoz7V24niskgVLuKYmm96_Li9oo3Jk\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDUsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvLS9tZWRpYS9GaWxlcy9SZXNlYXJjaC9pbWYtYW5kLWcyMC8yMDIzL2cyMC1zdXJ2ZWlsbGFuY2Utbm90ZS5hc2h4P3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.uEMw9s41oH3Wjmoz7V24niskgVLuKYmm96_Li9oo3Jk\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw3b0QC5e1NPKcAiM-JGRWzs\">mixed picture : weakness in manufacturing contrasts with resilience in services across the G20 countries and strong labor markets in advanced economies. At the same time, financial fragilities uncovered by tight monetary policy require careful management\u2014particularly as restoring price stability remains a priority. \r\n Global headline inflation seems to have peaked, and core inflation has eased somewhat, particularly in India. But in most G20 countries\u2014especially advanced economies\u2014inflation remains well above central banks\u2019 targets. \r\n\r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n \r\n Tackling inflation and boosting growth\u00a0 \r\n In the fight against inflation there are some early signs of monetary policy transmitting\u00a0to activity, with bank lending standards tightening in the euro area and the United\u00a0States. That said, policymakers should avoid \u201cpremature celebrations\u201d: lessons from\u00a0previous inflationary episodes show that easing policy too early can undo progress on inflation. \r\n That\u2019s why it is vital to stay the course on\u00a0 monetary policy \u00a0until inflation is durably\u00a0brought down to target, while closely monitoring financial sector risks. Here, clear\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDcsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vQmxvZ3MvQXJ0aWNsZXMvMjAyMy8wNi8wNS9jZW50cmFsLWJhbmtzLWNhbi1mZW5kLW9mZi1maW5hbmNpYWwtdHVybW9pbC1hbmQtc3RpbGwtZmlnaHQtaW5mbGF0aW9uP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.p5FxXRVFNnccpjl-m6qMWG7mx6jpwLH-oj47fiopUxk\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDcsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vQmxvZ3MvQXJ0aWNsZXMvMjAyMy8wNi8wNS9jZW50cmFsLWJhbmtzLWNhbi1mZW5kLW9mZi1maW5hbmNpYWwtdHVybW9pbC1hbmQtc3RpbGwtZmlnaHQtaW5mbGF0aW9uP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.p5FxXRVFNnccpjl-m6qMWG7mx6jpwLH-oj47fiopUxk\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw2nTJc7QBIKiDRTZxjDABRO\">central bank \u00a0communication and financial sector oversight are needed to reduce the risk\u00a0of disruptive shifts in financial conditions. \r\n Fiscal policy \u00a0must also play its part. Tightening the purse strings after a period of\u00a0pandemic-related exceptional support can support disinflation, rebuild buffers, and\u00a0enhance debt sustainability, while temporary and targeted measures may be needed to\u00a0help vulnerable people cope with the immediate cost-of-living crisis. \r\n At the same time, consolidation efforts should protect growth-enhancing investments\u00a0where space allows. Why? Because while prospects are mixed in the near term, the\u00a0medium-term outlook for the global economy remains bleak. \r\n The IMF forecast for global growth over the medium-term is around 3 percent \u2013 well\u00a0below the historical average of 3.8 percent during 2000-19. Moreover, economic\u00a0fragmentation will both undermine growth and make it harder to tackle pressing global\u00a0challenges, from rising sovereign debt crises to the existential threat of climate change. \r\n The Importance of Joint Action \r\n The good news is that we have seen how the international community can deliver when\u00a0differences are set aside. \r\n In June, we saw the breakthrough on\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDgsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIyL3ByMjMyMzUtaW1mLXdlbGNvbWVzLWRlYnQtdHJlYXRtZW50LWFncmVlbWVudC1yZWFjaGVkLWJ5LXphbWJpYT91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkiLCJidWxsZXRpbl9pZCI6IjIwMjMwNzEzLjc5NTkzNTYxIn0.L_7apW3DvkVz95pzk3buR3XCN6J_GEVTm5kPpyQggE0\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDgsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIyL3ByMjMyMzUtaW1mLXdlbGNvbWVzLWRlYnQtdHJlYXRtZW50LWFncmVlbWVudC1yZWFjaGVkLWJ5LXphbWJpYT91dG1fbWVkaXVtPWVtYWlsJnV0bV9zb3VyY2U9Z292ZGVsaXZlcnkiLCJidWxsZXRpbl9pZCI6IjIwMjMwNzEzLjc5NTkzNTYxIn0.L_7apW3DvkVz95pzk3buR3XCN6J_GEVTm5kPpyQggE0\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw2XkTs3e4FzYU21sMco52Xp\">Zambia\u2019s \u00a0debt restructuring. That was a\u00a0significant milestone for the G20 Common Framework which was born out of efforts\u00a0from the country authorities as well as both Paris Club members and other countries\u00a0such as China, India, and Saudi Arabia. The agreement unlocks further financing as part\u00a0of the $1.3 billion IMF arrangement agreed in August 2022. \r\n In addition to progress on debt restructuring for Chad, this outcome also builds on trust\u00a0and better understanding among creditors and debtors ushered in through the Global\u00a0Sovereign Debt Roundtable. \r\n But the work is not yet done. More effort is needed to accelerate the debt restructuring\u00a0process through clear timelines, debt service suspension during negotiations, and\u00a0improved creditor coordination on debt treatment for countries outside the Common\u00a0Framework. \r\n The G20 last month also announced the achievement of the $100 billion in pledges of\u00a0special drawing rights (SDRs) to be channeled from richer to poorer countries. Set by\u00a0the G20 in the wake of the IMF\u2019s record $650 billion allocation of SDRs in 2021, meeting this target is a strong signal of broad international solidarity. We should also\u00a0take inspiration from members who lifted the ambition of their pledges for SDR\u00a0channeling: France and Japan to 40 percent of their allocations, and China to 34\u00a0percent. \r\n Such exceptional generosity has allowed the IMF to do even more for our members.\u00a0Around $29 billion in SDRs pledged to the Poverty Reduction and Growth Trust (PRGT)\u00a0since 2020 is helping us deliver higher and larger financial support to low-income\u00a0countries at zero interest. \r\n Moreover, some $42 billion in SDRs have already been provided to the IMF\u2019s\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDksInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vVG9waWNzL1Jlc2lsaWVuY2UtYW5kLVN1c3RhaW5hYmlsaXR5LVRydXN0P3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.uLrRD7gUsj0ZmGB9Wwg5Un2wdGOCQumdNFQyYRFDl-A\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDksInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vVG9waWNzL1Jlc2lsaWVuY2UtYW5kLVN1c3RhaW5hYmlsaXR5LVRydXN0P3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.uLrRD7gUsj0ZmGB9Wwg5Un2wdGOCQumdNFQyYRFDl-A\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw2iC4Bm5UUD_z-LLv73pHRz\">Resilience\u00a0and Sustainability Trust (RST) \u00a0that was launched last year. Nine members have had\u00a0their RST funding approved and dozens more have submitted requests. \r\n Programs under the RST will support climate reforms, such as integrating climate\u00a0considerations into fiscal planning in Costa Rica and strengthening climate-related risk\u00a0management for financial institutions in Seychelles. And in\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMTAsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIxL3ByMjMyMjQtcndhbmRhLXBhcnRuZXJzLWV1cm8tMzAwbS1maW5hbmNpbmctcHJ2dC1pbnZlc3RtZW50LWNsaW1hdGUtcmVzaWxpZW5jZS1yc2YtaW1mP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.piq5EzC_s5f17buLPFVdyNfRlwgSCVnRAoXo-OCTVtQ\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMTAsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIxL3ByMjMyMjQtcndhbmRhLXBhcnRuZXJzLWV1cm8tMzAwbS1maW5hbmNpbmctcHJ2dC1pbnZlc3RtZW50LWNsaW1hdGUtcmVzaWxpZW5jZS1yc2YtaW1mP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.piq5EzC_s5f17buLPFVdyNfRlwgSCVnRAoXo-OCTVtQ\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw1RGkyVKYHZiB2f24djyimy\">Rwanda \u00a0and\u00a0<a href=\"https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMTEsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIyL3ByMjMyMzEtYmFyYmFkb3MtZm9ybXMtY29hbGl0aW9uLW11bHRpbGF0ZXJhbC1iYW5rcy1kZXZlbG9wLWluZnJhcy1pbnZlc3RtZW50cy1idWlsZGluZy1yc2YtaW1mP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.UGS26jk9yiIk0QJItSbNSPK7j5S2rubJFh4M4hIApy0\/s\/1181822789\/br\/222606380873-l\" target=\"_blank\" rel=\"noopener noreferrer\" data-saferedirecturl=\"https:\/\/www.google.com\/url?q=https:\/\/lnks.gd\/l\/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMTEsInVyaSI6ImJwMjpjbGljayIsInVybCI6Imh0dHBzOi8vd3d3LmltZi5vcmcvZW4vTmV3cy9BcnRpY2xlcy8yMDIzLzA2LzIyL3ByMjMyMzEtYmFyYmFkb3MtZm9ybXMtY29hbGl0aW9uLW11bHRpbGF0ZXJhbC1iYW5rcy1kZXZlbG9wLWluZnJhcy1pbnZlc3RtZW50cy1idWlsZGluZy1yc2YtaW1mP3V0bV9tZWRpdW09ZW1haWwmdXRtX3NvdXJjZT1nb3ZkZWxpdmVyeSIsImJ1bGxldGluX2lkIjoiMjAyMzA3MTMuNzk1OTM1NjEifQ.UGS26jk9yiIk0QJItSbNSPK7j5S2rubJFh4M4hIApy0\/s\/1181822789\/br\/222606380873-l&source=gmail&ust=1689342947732000&usg=AOvVaw3urXdzgZAzEJb3yOH5Rd38\">Barbados ,\u00a0 resources from the RST are complementing support from multilateral development\u00a0banks which together are expected to catalyze additional financing from the private\u00a0sector, including private investment in climate projects. \r\n Supporting Vulnerable Countries \r\n Important as these milestones are, however, they alone are not enough. \r\n Many vulnerable emerging market and low-income economies are at the sharp end of\u00a0multiple shocks and fundamental transitions. \r\n Take climate change, where they have contributed very little to the problem, but are\u00a0most vulnerable to the consequences. Or the cost-of-living crisis and high interest rates,\u00a0which take a disproportionate toll, pushing more countries toward debt distress and\u00a0threatening development prospects. Add to this increasing economic fragmentation that\u00a0could deprive them from the benefits of an integrated global economy that delivered\u00a0high growth and raised living standards for billions of people. \r\n Taken together, these challenges mean countries will need more support in the months\u00a0and years ahead\u2014to ensure economic stability and get back on the path to income\u00a0convergence with advanced economies. Strong multilateral institutions have a vital role\u00a0to play in providing this support, especially IDA, the World Bank\u2019s fund for low-income\u00a0countries, and the IMF. \r\n IMF Reforms and Resources \r\n Many countries have navigated difficult transitions before, and at each turn the IMF has\u00a0been part of the global response, adapting to help our members and their people\u00a0confront new challenges. Now \u2013 faced by a fresh set of transitions \u2013 we will continue to\u00a0adapt and respond with agility: through both timely policy changes and stronger\u00a0resources. \r\n The overriding priority is a prompt and successful completion of the 16th quota review:\u00a0increasing the overall size of the IMF\u2019s quota resources\u2014which are critical for a robust\u00a0global finance safety net\u2014 with mindfulness of how the global economy has evolved. \r\n This must be complemented by decisions to replenish the Fund\u2019s concessional resources\u00a0for vulnerable countries: a fully funded PRGT and a replenished Catastrophe\u00a0Containment and Relief Trust that provides debt service relief when countries are hit by\u00a0large shocks. \r\n In parallel, we are exploring reforms to our lending toolkit, including adjustments to\u00a0precautionary instruments to better suit the needs of our membership. We are also\u00a0looking at ways to better account for how climate change affects debt sustainability and\u00a0to enhance our support for countries hit by climate related shocks. \r\n Together, these steps will ensure the IMF remains an inclusive institution capable of\u00a0serving the needs of its entire membership, especially vulnerable emerging and\u00a0developing economies. \r\n G20\u2019s Key Role \r\n In a more shock-prone world and at a time of fundamental transitions \u2013 from climate\u00a0change and debt distress to trade tensions and economic fragmentation \u2013 the world has\u00a0high expectations of international policymakers, and rightly so. \r\n We must act now and act together to get all countries back on a sustainable path to\u00a0growth and prosperity. \r\n This calls for strong leadership from the G20 to ensure the international financial\u00a0architecture is fit for purpose with a well-resourced and representative IMF at its center.\u00a0The global response must be commensurate in size to the world\u2019s challenges. "

"Weak global economy, high inflation and rising fragmentation demand strong G20 action"

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