The poster is on display at the International Monetary Fund building on Monday, April 5, 2021, in Washington. The IMF and the World Bank open their virtual spring meetings. (AP Photo / Andrew Harnick)
WASHINGTON (AP) – The International Monetary Fund on Thursday approved an $ 650 billion expansion of the 190-nation credit institution’s resources to provide more support to vulnerable countries as they fight the coronavirus pandemic.
IMF Managing Director Kristalina Georgieva said the $ 650 billion increase in reserves was the largest in IMF history. The move will provide much-needed reserves for poor countries struggling with a deep recession caused by the pandemic and the need to receive and administer millions of doses of vaccines, she said.
By comparison, to combat the global recession that followed the 2008 financial crisis, the IMF agreed to increase the IMF’s reserves by $ 250 billion to what the agency knows as Special Drawing Rights.
US Treasury Secretary Janet Yellen told the IMF commission that the increase in the SDR would provide “the much-needed boost to global reserves.” She said it would be important for rich countries that do not need increased resources to provide additional support to poorer countries.
The idea of increasing the IMF’s reserves received support when the Biden administration approved the plan in February, marking a reversal by the Trump administration, which opposed the effort.
Republican lawmakers in Congress have objected to the IMF’s increase in resources, saying the increase would benefit countries seen as opponents of the United States such as China, Russia and Iran.
The Treasury Department said the United States reserves the right to refuse to engage in any SDR transactions with “any country whose policies are contrary to US interests.”
Officials said the first distribution of the increased reserves could begin in August, after a detailed plan was submitted for approval by the IMF’s board of directors in June.
The announcement from the IMF’s political panel, composed of finance ministers representing the agency’s membership, also backed efforts to mitigate the effects of climate change on the global economy. This is another change by the Trump administration, which removed the United States from the Paris Climate Agreement, an action that the Biden administration reversed.
“In line with the Paris Agreement, we are committed to tackling climate change through measures to accelerate the transition to greener societies and job-rich economies, while protecting those affected,” the IMF said in a statement.
In her speech, Yelen said the IMF and the World Bank must play a key role in supporting efforts to combat climate change.
“The United States is fully committed to working with international partners to tackle climate change,” Yelen said in a statement.
Meetings between the IMF and the World Bank have been held in practice, as well as since the pandemic hit in early 2020. But Georgieva said the plan is for the two institutions’ autumn meetings to return to face-to-face meetings in Washington. of success in limiting the pandemic.
Formal meetings are due to end on Friday with a session of the Development Committee, the World Bank’s political panel. Yellen and Federal Reserve Chairman Jerome Powell are the US representatives at the sessions.
The IMF released an updated economic forecast this week, which predicts the global economy will grow by 6% this year, up from a 5.5% growth forecast in January. The better performance is largely due to the acceleration of vaccinations and Joe Biden’s $ 1.9 trillion relief program that went through Congress last month.
But the IMF statement warned: “The prospects for recovery are highly uncertain and uneven within and between countries” due to factors such as unequal access to vaccines and a lack of financial resources in many low-income countries.