The head of the IMF on Friday called on industrialized countries to make more resources available to low-income countries and warned of a looming “great divergence” in global growth that could jeopardize stability and spark social unrest in the years to come .
International Monetary Fund executive director Kristalina Georgieva told reporters that 50% of developing countries are at risk of falling further, raising concerns about stability and social unrest.
To avert bigger problems, she said rich countries and international institutions should bring in more. She also urged heavily indebted countries to seek debt restructuring sooner rather than later and improve conditions for growth. “Last year the focus was on the ‘Great Lockdown’. This year there is a risk of ‘great divergence’,” Georgieva told reporters during a videoconference. “We estimate that developing countries whose incomes have been converging for decades will be in a very difficult position this time around.”
Setbacks to living standards in developing countries would make it much more difficult to achieve stability and security for the rest of the world, she said.
“What’s the risk? Social unrest. You can call it a lost decade. It can be a lost generation,” she said.
Georgieva said advanced economies spent an average of 24% of GDP on support measures during the pandemic, compared with 6% in emerging markets and 2% in low-income countries.
Georgieva, a former World Bank executive, said vaccination efforts are mixed and poor countries face “enormous difficulties” even if official development funds were to decline.
Only one country in Africa – Morocco – has started vaccinating its citizens, she said, citing serious concerns about increased mortality in many African countries.
“We must do everything in our power to reverse this dangerous divergence,” she said. Developing countries could also miss a significant shift in rich countries towards more digital and green economies.
She said that accelerating vaccinations could add $ 9 trillion to the global economy by 2025, with 60% of the benefits benefiting developing countries.
Georgieva said she is still working with IMF shareholders to enlist support for a reallocation of the IMF’s own currency or special drawing rights (SDRs) that could provide resources to poorer countries.
Former US President Donald Trump blocked such a move, much like a central bank that prints money. Support from the United States, the IMF’s dominant shareholder, is more likely under President Joe Biden, whose administration, according to sources familiar with their views, is open to a new allotment. The Biden administration has not publicly addressed the problem.
Georgieva said an SDR allocation of $ 250 billion in 2009 helped stabilize the world economy during the global financial crisis, and the current situation is more serious.
She said the IMF is conducting a periodic review of long-term liquidity needs that may warrant a new SDR allocation, but did not provide any further details.
A group of seven tax officials will discuss a possible new SDR allocation when they meet on Feb.12, the sources said.
(Except for the headline, this story was not edited by GossipMantri staff and published from a syndicated feed.)