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IMF sees strong foundations for global recovery, big downside risks -Breaking

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By Andrea Shalal

WASHINGTON, (Reuters) – The extraordinary policy actions of the Group of 20 countries and COVID-19 vaccinations have helped to sustain a global recovery. However, new variants of viruses, inflation, and disruptions in supply chains pose risks for future growth, according to the International Monetary Fund.

Kristalina Georgieva (Managing Director) urged courageous action to stop the epidemic and make way for a sustainable economy in Wednesday’s blog. This was before Friday’s G20 Finance and Health Ministers Meeting.

This month, the IMF trimmed its 2021 global growth forecast to 5.9% https://www.reuters.com/business/imf-cuts-global-growth-outlook-supply-bottlenecks-hobble-pandemic-recovery-2021-10-12 from its 6.0% forecast in July, citing nagging supply chain disruptions and inflation pressures. The modest revision was a mask for large downgrades in some countries.

Georgieva stated that G20 countries can improve their chances through 2022 by calibrating their own fiscal and monetary policies.

Georgieva stated that growth-enhancing reforms such as job search support and retraining programs, along with lowering regulatory barriers for entry to new businesses, can boost the aggregate G20 real GDP by $4.9 trillion over 2026.

Her statement stated that joint action was necessary to raise $20 billion to pay for additional funding in order to test, treat, or provide vaccines.

G20 members should speed up the implementation of Common Framework for Debt Treatments in order to assist developing countries financially. It will allow vulnerable countries not to have to decide between providing healthcare and paying their creditors.

The Common Framework could also be made more attractive by offering incentives to debtors. She said that early engagement of all creditors, even the private sector, would make it more efficient and appealing. Also, the Common Framework might offer faster timelines for resolution.

G20 nations should take immediate action to redirect part of the newly-allocated Special Drawing Rights (or emergency reserves) to IMF’s Poverty Reduction and Growth Trust.

Her call was also made to the G20 leaders for a comprehensive plan to achieve net-zero carbon emissions in mid-century.

Georgiega referenced a IMF study that showed increasing energy efficiency, and switching to renewables can result in the net creation new jobs. Renewable technologies are less labor-intensive than traditional fossil fuels.

According to the research, a global investment plan that is focused on “green supply policy” can increase global GDP by approximately 2% and create 30,000,000 new jobs.

Georgieva repeated her demand for an international carbon pricing floor and stated that the richer countries must fulfill their promise of $100 billion per annum for green investments in developing nations.

G20 members could also channel their SDRs to a new IMF Resilience and Sustainability Trust https://www.reuters.com/business/imf-chief-expects-members-reach-100-bln-target-shifting-reserves-vulnerable-2021-10-13 that they backed at the IMF and World Bank annual meetings earlier this month, she said.

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