International Monetary Fund’s Chief Kristalina Georgieva on Tuesday urged G20 nations to restore the primacy of the multilateral agency’s quota resources by restoring review in time.She also urged G20 Leadership to strengthen the global Financial Safety Net.
Georgieva was speaking at G20 Finance Minister and Central Bank Governor meeting under India’s Presidency. “Today, while the IMF has nearly $1 trillion in lending capacity, quota resources—which are critical to ensure the predictability of the IMF’s firepower—have shrunk in relative terms. I appeal to G20 countries to restore the primacy of IMF quota resources by successfully completing the 16th quota review by the end of this year,” she said
A quota formula is used to help assess members’ relative position in the world economy and it can play a role in guiding the distribution of quota increases. The current formula was agreed to in 2008. Sixteenth review is now undergoing. India’s share in quota is 2.75 per cent.
Talking about international financial architecture, she highlighted that it has served the world well. Since the second world war, the global economy has expanded by more than 10 times in real terms. This has brought tremendous improvements in wellbeing for people – for instance, average global life expectancy in 1950 was just about 45 years. Now there is need to understand that the world today is more shock-prone and fragile, with climate change, pandemics, and Russia’s invasion of Ukraine all causing widespread turmoil. Resilience to shocks is not evenly distributed – some countries are in better position to protect their people than others.
Keeping these in mind, she proposed priorities for G20 countries and she said: “To protect the most vulnerable countries and their people, we need to strengthen the global financial safety net. While advanced and strong emerging market economies have a cushion of more than $10 trillion in international reserves, the rest of the world relies on pooled resources of international institutions such as the IMF,” she said.
Acknowledging the fact that support for low-income countries having quadrupled in recent years and demand still high, she called on urgent basis to replenish subsidy resources in the Poverty Reduction and Growth Trust (PRGT). “I call on the G20 to close the PRGT’s subsidy gap and put it on sustainable footing for the future, including by exploring options for using the IMF’s internal resources,” she said.
Talking about, the IMF’s newest instrument, the Resilience and Sustainability Trust (RST) funded through on-lending SDRs. “The G20 has reached its target of committing $100 billion for SDR channeling to vulnerable countries. For the IMF, this has mobilized US$45 billion for the PRGT and US$42 billion for the RST. Let us work together to increase the firepower of the RST,” she said.
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Talking about the global economic situation, she said that even as more wealth flows in global economy, its fragility has gone up. “Our world may be wealthier today than when the current international financial architecture was established, but it is also more fragile,” she said during two-day-long deliberation which concluded on Tuesday. Interestingly, this remark has been made at a time when two key agencies said that the growth of global wealth has declined. BCG Global Wealth Report 2023 says the growth of global financial wealth declined by four per cent to $255 trillion. A report by Harun also revealed that the total global wealth reduced by 10 per cent to $13.7 trillion.