WASHINGTON, July 20 (Reuters) – The International Monetary Fund’s No.2 official on Tuesday called on countries to shift from saving their economies from collapse to relaunching growth-oriented policy reforms to improve their prospects recovery and make them more sustainable.
The IMF’s first Deputy Managing Director, Geoffrey Okamoto, said in a blog post on the IMF website that the COVID-19 pandemic had delayed and reversed some pro-growth reforms and that their restoration could help offset the production lost during the pandemic.
Reforms that allow faster restructurings and the resolution of unsustainable businesses and labor policies to help retrain workers and align them with job vacancies can help move workers and capital to more promising sectors and dynamics of the economy, Okamoto said.
Improved competition policy frameworks such as those debated in Europe and the United States can reduce the concentration of market power between a few firms and create more dynamic competition and innovation.
“Using this moment for some of these difficult reforms means that the still ongoing monetary and fiscal stimulus will serve as a stepping stone to a brighter, more sustainable future rather than a crutch to a weaker version of the pre-COVID economy.” 19 “, Okamoto mentioned. “Seizing the opportunity could offer years of solid post-COVID-19 growth and advancement in living standards.”
The call for a refocus on reforms comes as the IMF shifts from unconditional emergency financing to the COVID-19 pandemic to negotiating more traditional IMF lending programs, which require recipient countries to they meet the criteria for policy reform.
The Fund last week approved a new three-year $ 1.5 billion extended credit facility agreement for the Democratic Republic of the Congo, which includes reforms to increase revenue collection, improve governance of the management of natural resources and strengthen the country’s monetary policy framework to ensure the independence of the central bank. .
The IMF is also negotiating a new expanded Fund facility with Argentina, which struggled to secure a $ 57 billion IMF loan, arranged in 2018, the Fund’s largest. Read more
The IMF estimates that comprehensive pro-growth reforms in product, labor and financial markets could increase annual GDP growth per capita by more than one percentage point in emerging and developing economies over the course of the year. the next decade.
Countries taking such measures could double their speed of convergence with the standard of living of advanced economies compared to pre-pandemic years, Okamoto said.
For advanced economies, pro-growth reforms that target supply could guard against lingering inflationary risks caused by excessive demand pressures.
These reforms can boost investor confidence in emerging market economies that were able to maintain access to global capital markets during the pandemic and help those countries cope with any tightening financial conditions, especially if inflation persists in the markets. advanced economies, leading to interest rate hikes.
Higher growth through reforms can help poorer countries avoid severe fiscal austerity, allowing them to maintain social and health spending while investing in the future, Okamoto said.
Reporting by David Lawder; Editing by Andrea Ricci
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