IMF wants donor coordination, for countries like Sri Lanka, expanded

The IMF is looking for ways to expand donor coordination to middle-income countries, such as Sri Lanka, IMF Managing Director Kristalina Georgieva said on Thursday in Washington, DC.The IMF is also pressing for a more effective debt resolution mechanism, she said. Georgieva added that they want the G20 Common Framework to become more predictable, with clear guidelines and equality of treatment for all creditors, public and private.

“We are also looking for ways to expand that kind of donor coordination to middle-income countries, such as Sri Lanka,” she said.

The IMF Managing Director said for countries suffering from the food crisis, they have expeditiously opened emergency financing—the Food Shock Window—to provide rapid financing for urgent needs.Given below are excerpts of her statement, “We are appealing to policymakers to act with a sense of urgency now, and to act together. We see very clear areas where we can do better, even in this more complex environment.

“First, bring inflation down. We know that rising interest rates come at a cost to growth. But we also know that not tightening enough, to put a leash on inflation, would mean interest rates staying higher for longer, resulting in even more harm to growth and people. For central banks, this means taking decisive action when necessary, and communicating as clearly as they can.

“Second, act now to put in place responsible fiscal policy. We must prioritize protecting vulnerable households and businesses. But we have to do that at a time when fiscal buffers are exhausted because of the pandemic and levels of debt are very high. The obvious conclusion is that policy measures need to be temporary and well-targeted. Steer away from across-the-board fiscal support that is neither effective nor affordable.

“If we are to help people and fight inflation, we must ensure that fiscal and monetary policies go hand in hand. When monetary policy hits the brakes, fiscal policy should not step on the accelerator—that would make for a very dangerous ride.

“Third, act now to safeguard financial stability, particularly as we see rising financial sector risks. Macroprudential policies need to be even more vigilant and proactively address pockets of vulnerability.

In this environment, we also must support vulnerable emerging markets and developing countries. It is tough for everybody, but it is even tougher for countries that are now being hit by a stronger dollar, high borrowing costs, and capital outflows—a triple blow that is particularly heavy for countries that are under a high level of debt. We are focusing on debt this week, especially for low-income countries where over 60% are at or near debt distress.”