Zhang Zhixiang: The Role of IMF in Fighting Against COVID-19 Pandemic and Recovering Global Economy

2020-05-05 IMI

This is a speech draft by Mr. Zhang Zhixiang at the online launch meeting of IMF World Economic Outlook on April 29, 2020. Zhang Zhixiang, Member of IMI Academic Committee, Former Director General of International Department, PBoC, and Former IMF Executive Director for China I am very appreciative of Mr. Barnett’s detailed and comprehensive presentation with insight analysis on the world and regional economic outlook and and Mr. Wei’s kind response. I try to make my comment and observation as brief as possible. First I would like to emphasize that unity and solidarity are the only correct answer to the question of how to fight against coronavirus. Today virus has spread in over 200 countries without any regard to national boundaries, developed and developing economies, different races and ages. Before vaccine and effective therapies are made available, mankind must rely on unified efforts to contain the virus from further spreading and to rally medical forces to fight against the virus. In China we have gained the experience. When Wuhan was first hit by the virus in January this year, the city of more than 10 million population was closed. But people in Wuhan did not fight by themselves, rather all kinds of support from other parts of the country rushing to Wuhan, including more than 40 thousand medical personnel and huge amount of medical equipment as well as daily necessities. In a little more than 2 months, containment measures proved to be effective and normal daily life order resumed. We believe that unity and solidarity are also essential and effective in the fight against the virus globally.. As the IMF Managing Director said on April 9, It is this common threat that brings us all together to harness the greatest strengths of our humanity---Solidarity, courage, creativity and compassion. We do know that we will come out of this crisis more resilient. This certainly also applies to the concerted efforts of all member countries to facilitate speedy return to strong ,sustainable, balanced and inclusive growth. Second, the IMF should be commended for its timely and productive efforts in helping its members’ respond to the COVID-19 pandemic by making US$ one trillion available in lending capacity. The IMF has also decided to increase the access limits of Rapid Financing Instrument and the Rapid Credit Facility , as well as introduced the Short-term Liquidity Line with the aim of providing emergency funding to EMDCs hit by the pandemic. I have read that China has rapidly made her commitment to contribute to the Catastrophe Containment and Relief Trust , in responding to the IMF’s call. It is widely supported that the IMF should continue to play a central role in the global financial safety net, which is essential for the world to work together to fight the pandemic and promote economic growth. But how the IMF could well play the central role, which leads me to the third point. Third, it is of great importance for the IMF to acquire adequate financial resources so as to assist its member countries especially at the time in dealing with both challenges caused by coronavirus and the urgent need to restore normal economic growth order. The IMF financial resources mainly come from two sources, the IMF quotas and the New Arrangement to Borrow. Currently the total amount of IMF quotas is SDR 477 billion, which is about US$677 billion. NAB is the arrangement made between a number of members and the Fund to stand ready to lend additional resources to the Fund as a 2^nd line of defense. In January 2020, the IMF’s Executive Board approved a doubling of the NAB from SDR 182 billion to SDR 365 billion which is about US$475 billion as a new NAB period from 2021 to 2025. This doubling is subject to creditors consents and if targeted to become effective on January 1, 2021. We can see that the total amount of financial resources available to the Fund is barely a little more than US$ 1 trillion. What is more, the IMF should be well prepared for more uncertainties as Mr. Barnett said in his presentation. Therefore, it is absolutely essential and indispensable for the IMF to get adequate amount of resources for it to play the central role in accordance with its mandate. Since NAB can only be regarded as a temporary funding arrangement, the adequate size of quotas is the only alternative to meet this requirement. So we have every reason to look forward to the timely and positive result of the 16^th General Review of quotas. Finally, I wish to briefly touch on the SDR issue. SDR is the international reserve assets issued by the Fund for supplementing the official reserves of the member countries. Now the total amount of SDR allocated is SDR 204 billion, about US$283 billion. According to experience in timely and effectively response to crisis in the past, it is believed that new and timely allocation of SDRs will be helpful and important.

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Zhang Zhixiang: The Role of IMF in Fighting Against COVID-19 Pandemic and Recovering Global Economy

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