G20 to increase IMF war chest and extend debt service freeze
BRUSSELS / WASHINGTON (Reuters) – Global finance chiefs will agree on Wednesday to increase the International Monetary Fund’s reserves by $ 650 billion and extend the debt service freeze for developing countries to help them cope with the coronavirus pandemic, according to a draft statement.
The draft, seen by Reuters, also showed finance ministers and central bank governors of the world’s 20 largest economies (G20) renewing their commitment to tackle trade protectionism – a benchmark dropped since March 2017 on insistence. of the administration of former US President Donald Trump.
He also refined the language on tackling climate change, a topic watered down in G20 statements during the Trump era.
“We will further step up our support to vulnerable countries as they address the challenges associated with the COVID-19 pandemic,” said the project, which will be approved at a virtual meeting of G20 financial leaders on Wednesday.
“We call on the IMF to make a comprehensive proposal for a new general allocation of special drawing rights (SDRs) of USD 650 billion to meet the long-term global need to supplement reserve assets,” the project says.
Increasing the IMF’s reserves, or SDRs, would increase liquidity for all members, without adding to the debt burden of some 30 countries already in debt or facing debt distress, finance officials and economists said.
The project showed that the G20 also agreed to a final extension until the end of 2021 of the Debt Service Suspension Initiative, intended to free up money in developing countries to fight COVID-19. .
Extending the freeze on debt service payments by the poorest countries could provide them with billions of dollars to spend on vaccines and stimulus measures, World Bank chief David Malpass told reporters on Monday.
“We reiterate our appeal to the private sector, when eligible countries request it, to participate in the DSSI under comparable conditions,” said the draft press release.
MORE EQUITABLE AND WIDER ACCESS TO VACCINES
More than 250 faith groups and nonprofits urged G20 leaders, the White House and the IMF to move beyond a moratorium to effectively cancel debt and expand debt relief for developing countries , in a letter to be delivered on Wednesday.
The project specified that debt assessments would be done on a case-by-case basis.
The IMF on Tuesday raised its global growth forecast for 2021 to 6%. However, highlighting a dramatic divergence between the outlook for the United States and much of the rest of the world, he said the pandemic could undo years of progress in poverty reduction.
The project says the G20 also supports equitable access to COVID-19 vaccines and encourages efforts to rapidly scale up vaccine production and distribution, without which there would be no stable and sustainable recovery.
“In this regard, we recognize the role of COVID-19 vaccination as a global public good,” the project says.
The G20 rally will also give US Treasury Secretary Janet Yellen an opportunity to push for a global minimum tax on corporate profits.
The draft showed that the G20 expected an agreement by mid-year on where large multinational companies, including digital giants like Google, Amazon or Facebook, should be taxed and on what minimum rate.
At Yellen’s request, the G20 project removed a reference in the press release to stable exchange rates first inserted by the Trump administration, reverting to language that underscores the importance of underlying fundamentals.
“We (…) note that the flexibility of the exchange rate can facilitate the adjustment of our economies”, also added the project.
“… We will refrain from competitive devaluations and will not target our exchange rates for competitive ends. “
Yellen had told U.S. senators during his confirmation hearing that the value of the dollar should be determined by the markets, a break from Trump’s desire for a weaker currency.
Writing by Jan Strupczewski; Editing by Mark John and John Stonestreet