The resolve to employ all appropriate policy tools, individually and collectively, to mitigate risks, enhance resilience, and shore up growth had yet again found the pride of place at the Fortieth (40th) Meeting of the International Monetary and Financial Committee (IMFC) chaired by Mr. Lesetja Kganyago, Governor of the South African Reserve Bank.
The meeting, which was one of the many meetings at the just concluded World Bank/IMF 20199 Annual Meetings held in Washington DC, the IMFC decided that available fiscal space should be used to support demand as needed. And where consolidation is needed to ensure debt sustainability, the fiscal policy should be carefully-calibrated, growth-friendly, and safeguard social objectives. In line with central banks’ mandates, the Committee agreed that monetary policy should ensure that inflation remains on track toward, or stabilises around targets and that inflation expectations remain anchored. Apart from stressing that Central Banks’ decisions need to remain well-communicated and data-dependent, it also decided it will continue to monitor and, as necessary, tackle financial vulnerabilities and risks to financial stability, including macroprudential policies.
After extending sympathies to the people and government of The Bahamas for the loss of human lives and the devastating impact of the recent natural disaster, the Committee,of which Zainab S. Ahmed, the Honourable Minister of Finance, Budget And National Planning is a member, reviewed global outlook and policy priorities, saying that the global economy is projected to grow by about 3% this year, but the pace has continued to weaken since April. “Growth is projected to pick up next year, but the outlook is highly uncertain and subject to elevated downside risks. These include trade tensions, policy uncertainty, and geopolitical risks, against a backdrop of limited policy space, high and rising debt levels, and heightened financial vulnerabilities. Other longstanding challenges also persist.”
According to IMFC, strong fundamentals, sound policies, and a resilient international monetary system are essential to the stability of exchange rates, contributing to strong and sustainable growth and investment. Flexible exchange rates, where feasible, can serve as a shock absorber; in that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. The Committee decided to refrain from competitive devaluations and not target exchange rates for competitive purposes.
The IMFC is looking to advance structural reforms to lift growth, employment, and productivity; enhance resilience and promote inclusion. It reaffirms its commitment to strong governance, by tackling corruption. “We will advance policies that foster innovation and more competitive and flexible markets, and strive to address challenges from demographic shifts. We will provide opportunities for all people to contribute to economic activity and share its benefits, and effectively assist those bearing the cost of ongoing transitions. We will enhance our efforts to reduce policy uncertainty and strengthen international frameworks and cooperation,” it resolved.
The Committee noted that free, fair, and mutually beneficial goods and services trade and investment are key engines for growth and job creation. And that strong international trading system, with well-enforced rules addressing current and future challenges, would support global growth. To this end, it recognised the need to resolve trade tensions and support the necessary reform of the World Trade Organization (WTO) to improve its functioning.
The IMFC decided to cooperate in order to reduce excessive global imbalances through macroeconomic and structural policies that support sustainable global growth and stressed the importance of timely, full, and consistent implementation and finalisation of the financial sector reform agenda as soon as possible, and the ongoing evaluation of the effects of these reforms. It was also the resolve to address fragmentation through continued regulatory and supervisory cooperation, adapt financial regulation to structural changes and the evolving global financial landscape, and close data gaps.
The Committee is working toward a modern and globally fair international tax system, particularly taxation related to digitalisation, and will address harmful tax competition, artificial profit shifting, and other tax challenges. It is in its decision to continue to address correspondent banking relationship withdrawal and its adverse consequences, having decided to also continue to tackle sources and channels of money laundering and terrorism financing, proliferation financing, and other illicit finance.
“We will continue to work together to enhance debt transparency and sustainable financing practices by both debtors and creditors, public and private; and strengthen creditor coordination in debt restructuring situations, drawing on existing fora.”
The whole understanding is important because sustained joint action is essential to address the challenges that transcend borders, with a focus on supporting efforts toward achieving the 2030 Sustainable Development Goals (SDGs). We will continue to support domestic and multilateral efforts to address, build resilience to, and deal with the macroeconomic consequences of pandemics, cyber risks, climate change and natural disasters, energy scarcity, conflicts, migration, and refugee and other humanitarian crises. It is to continue to collaborate to leverage financial technology while addressing related challenges.
