IMF warns economy recovery threatened by virus, inflation

The International Monetary Fund is warning of rising threats to a global recovery posed by the ongoing coronavirus pandemic and an outbreak of inflation

Global Finance (Copyright 2021 The Associated Press. All rights reserved.)

The International Monetary Fund is warning of rising threats to the global economic recovery posed by the ongoing coronavirus pandemic and an outbreak of inflation.

The lending agency called Thursday for greater efforts from wealthy nations to boost coronavirus vaccination rates in poorer countries, while also urging the Federal Reserve and other central banks to respond quickly if current inflation pressures prove not to be transitory.

The IMF panel that sets policy for the 190-nation organization wrapped up its annual meeting with a joint statement expressing concerns about the wide divergence in vaccination rates between wealthy and poor countries.

The group urged greater efforts by wealthy nations toward achieving a goal of having 40% of the population of all countries vaccinated by the end of this year and 70% by the middle of next year.

While nearly 60% of the population in advanced economies are now fully vaccinated, only about 4% of the population in poorer countries are.

“We will take steps to help boost the supply of vaccines and essential medical products and inputs in developing countries and remove relevant supply and financing constraints,” the finance officials pledged.

“The emergence of virus variants has increased uncertainty and risks to the recovery are tilted to the downside,” the group said. “The crisis is exacerbating poverty and inequality.”

The United States was represented at the finance meetings by Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.

The finance officials also noted rising global inflation pressures and said the Fed and other central banks need to “act appropriately” if the price spikes prove to be more of a threat to the economic recovery.

The Fed signaled last month that it soon could begin the process of unwinding some of the extraordinary support it put in place in response to last year's coronavirus-triggered recession. The move would be a first step toward possible interest rate hikes that would slow growth and keep inflation under control.

The IMF issued an updated economic forecast this week that slightly downgraded its forecast for global growth to 5.9% from 6% in July. The downgrade reflected persistent supply chain disruptions and the wide disparity in vaccination rates. For the United States, the IMF forecast growth of 6% this year, down from its July forecast of 7%.

The IMF policy panel also endorsed the findings of the agency's executive board on Monday of “full confidence” in IMF Managing Director Kristalina Georgieva. The support for Georgieva came following an investigation into allegations that, while a top official at the World Bank, she and other World Bank officials pressured staff to boost the rankings of China and other countries in an influential business-climate survey that has since been discontinued.

Georgieva told reporters Wednesday that the review showed there was no “there there” to the charges. But Yellen said in a speech Thursday to the IMF policy panel that the results of the review by an outside law firm “could reduce confidence in the international financial institutions if there is not strong action to boost accountability, protect data integrity and prevent misconduct.”

Critics have cited the incident to support their contentions that China and other nations are seeking to exercise improper influence over the IMF, the World Bank and other international financial institutions.

Yellen said the IMF and the other organizations need to find ways to enhance the rights of whistleblowers.

“The United States will monitor developments closely and evaluate any new facts and findings should they become available,” Yellen said.

Anti-poverty groups on Thursday expressed disappointment that the IMF was not more specific on how the agency plans to boost vaccination rates and provide increased resources to fight climate change.

“Given how the pandemic is becoming worse in most of the world's countries, I'm concerned by the lack of action at the meetings on vaccine distribution, debt relief and general pandemic response,” Eric LeCompte, executive director of the religious development group Jubilee USA Network, said in a statement.

“It's baffling that we still don't have plans for the funding and distribution of vaccines to reach all developing countries,” LeCompte said.