IMF Harps on Reforms to Strengthen Financial Sector Resilience  


By Obinna Chima 

The International Monetary Fund (IMF) has stressed the importance of a timely and consistent implementation of the financial sector reform agenda as soon as possible to further strengthen financial sector resilience across the world.

The Fund also said there was need to continue to monitor and, if necessary, address emerging risks and vulnerabilities in the financial system. According to the IMF, countries should also pursue policies that would enhance inclusion to widely share the gains from technology and economic integration and manage associated risks.

This formed part of the communiqué at the end of the 37thMeeting of the International Monetary and Financial Committeein Washington DC.

The committee noted that global growth had further strengthened and was increasingly broad-based, driven by a strong rebound in investment and trade.

It stated that risks were broadly balanced in the near term, but remained skewed to the downside beyond the next several quarters.

“Rising financial vulnerabilities, increasing trade and geopolitical tensions, and historically high global debt threaten global growth prospects. Demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward.

“The window of opportunity remains open and should be used expeditiously to advance policies and reforms that sustain the current upswing, enhance resilience, and raise medium-term growth for the benefit of all.

“We will continue to use all policy tools to achieve strong, sustainable, balanced, inclusive, and job-rich growth.

“In line with central bank mandates and mindful of financial stability risks, monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets,” the committee said.

Furthermore, it urged policy makers in member countries to ensure that fiscal policies are flexible and growth-friendly as well as to rebuild buffers where needed.

The committee also advised against procyclicality, saying countries must create space to invest in infrastructure and workforce skills, and ensure that public debt as a share of Gross Domestic Product was on a sustainable path.

“Structural reforms should aim to lift productivity, potential growth, and employment, while effectively assisting those bearing the cost of adjustment. “Strong fundamentals, sound policies, and a resilient international monetary system (IMS) 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. We recognise that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability.

“We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes. We will cooperate to tackle shared challenges.

“We reaffirm the importance of implementing the conclusions of the G-20 Hamburg Summit on trade and recognise the need for further dialogue and actions.

“We are working to strengthen the contribution of trade to our economies. We will continue to work for a globally fair and modern international tax system, address tax and competition challenges, including from digitalisation, as appropriate; and tackle the sources and channels of money laundering and terrorism financing, proliferation financing, corruption, and other illicit finance,” it added.

The committee supported efforts toward reaching the 2030 Sustainable Development Goals (SDGs), saying it would work towards enhancing debt transparency and sustainable financing practices by both debtors and creditors and addressing debt vulnerabilities in low-income countries (LICs).

“We will support countries dealing with the macroeconomic consequences of pandemics, cyber risks, climate change and natural disasters, energy scarcity, conflicts, migration, and refugee and other humanitarian crises.

“We urge the IMF to work closely with members to strengthen fiscal frameworks and improve debt management capacity, and to work with debtors and creditors on promoting sustainable lending practices and tackling data gaps,” it added.