Are the IMF and Global Financial Safety Net Meeting Pandemic and Climate Needs?: Tracking the COVID-19 Recovery

By William N. Kring

Amidst the backdrop of an enduring pandemic, rising inflation, growing external debt and Russia’s war in Ukraine, finance ministers and central bankers convene in Washington, D.C. this week for the 2022 Spring Meetings of the International Monetary Fund (IMF) and the World Bank. These meetings could not come at a more critical time.

The myriad of challenges facing the global economy are likely to result in multiple countries experiencing debt distress and potentially defaulting on sovereign debt obligations. Despite this growing crisis being widely chronicled by experts and policymakers, and a debt restructuring proposal endorsed by 48 finance ministers, coordinated international political will is lacking. As a result, many emerging market and developing economies will likely need to tap into the breadth of resources that comprise the Global Financial Safety Net (GFSN), a set of institutions and mechanisms that provide insurance against crises and financing to mitigate their impact. This safety net has four main layers: countries’ own international reserves; bilateral swap arrangements whereby central banks exchange currencies to provide liquidity to financial markets; regional financial arrangements by which countries pool resources to leverage financing in a crisis; and the IMF.

At the Boston University Global Development Policy (GDP) Center, the Global Economic Governance Initiative (GEGI) has developed a series of trackers to monitor the COVID-19 crisis response and recovery. Throughout the pandemic, these interactives have proven to be sources of vital public information for policymakers, reporters, researchers, civil society, students and others to explore and draw insights on the crisis and recovery process. Since April 2021, these interactives are updated quarterly, as researchers seek to provide accountable and accessible information to monitor, track and aid the global economic recovery effort.

New updates to the trackers were launched in April 2022. See highlights from the latest releases below:

Global Financial Safety Net Tracker

The GFSN Tracker, comprised of two components, allows users to explore and track the global financial agreements and short-term crisis finance. The first component of the interactive displays the total amount of financing provided by the IMF, regional financial arrangements (RFAs) and central bank bilateral currency swaps deployed to combat the COVID-19 crisis. Country specific data, approved loan amounts, RFA membership and country income group information are available for highlighted countries within the interactive. This COVID-19 tracking source is the first of its kind providing regular updates and overviews of all RFA loans and central bank currency swaps disbursed in response to the pandemic. A recently updated feature allows users to visualize the directionality of swap flows from the lending to borrowing countries. The second component of the interactive is the GFSN Annual Lending Capacity, where countries are color-coded based on the lending capacity available to them through the IMF, RFAs or central bank currency swaps.

As of March 31, 2022, the GDP Center and the Latin American Institute at Freie Universität Berlin estimate the financing available from the GFSN has again increased to approximately $3.7 trillion in lending capacity, or 4.5 percent of global gross domestic product (GDP). However, distribution and availability of these emergency funds has been highly uneven and unequal. According to researchers, there is an urgent need to coordinate the different elements of the GFSN to improve country access to vital fiscal resources. Explore the interactive and read the policy brief.

IMF COVID-19 Recovery Index

Between March 2020 and April 2022, the IMF approved $170.6 billion for 146 programs in over 90 countries, emphasizing support for public health, protecting vulnerable people and a green recovery. The IMF COVID-19 Recovery Index assesses this global economic recovery process, calculating a composite score for each IMF country program or borrowing country, based on three equally weighted scores across these three pillars.

While many IMF programs are encouraging emergency measures for public health and the protection of vulnerable people, efforts in greening the recovery have so far been limited. For example, the Index shows that IMF COVID-19 response programs for 98 of 142 programs analyzed do not address climate change, or green recovery efforts at all. 

In our latest update of the IMF COVID-19 Recovery Index, we evaluated 14 new programs (11 conditional and three unconditional). These new programs maintain the trend observed in previous assessments, and therefore, the average Index showed no significant change (2.1 over a maximum of 3.0). Conditional programs, on average, are more engaged with policies that support the most vulnerable, the healthcare system and a green recovery. Among those programs, Nepal’s arrangement under the Extended Credit Facility ($395.9 million, approved in January 2022) reached the maximum score of three across the three pillars. This program included conditionalities to execute programs to support each of these pillars or advised measures to address related risks. 

Meanwhile, on average, unconditional programs recognized countries’ efforts to support the most vulnerable and the health system, but failed to address climate-related issues. This is the case with the programs approved for Tanzania ($372.4 million, November 2021) and for the Republic of Equatorial Guinea ($67.4 million, September 2021), which scored two out three in the support for the vulnerable and health pillars but scored zero over three in the green recovery pillar. Explore the data and read the journal article.

IMF COVID-19 Surveillance Monitor

The IMF COVID-19 Surveillance Monitor measures the extent of the IMF’s attention to health outcomes, support for vulnerable people and firms and climate change before and during the pandemic. The interactive tracks and displays the frequency of topic mentions of these issue areas in IMF in-country assessments, known as Article IV consultations.

In 2019, the IMF gave relatively little attention to the health system, supporting the vulnerable and climate change in its surveillance work. As countries work to recover from the pandemic, a regular review of IMF surveillance guidelines will aid ongoing efforts to examine the IMF’s measures and advice for better post-COVID-19 outcomes.

In April 2022, the data update for the Monitor provides a better understanding how IMF surveillance mechanisms identify the risks and mitigation tools available to countries in the aftermath of the COVID-19 crisis. The data reflect increased engagement on climate issues and health in Article IV reports during 2020 and 2021. However, following gains in 2020, support for the vulnerable lost momentum and decreased in 2021. The IMF revised guidance on bilateral surveillance and the Comprehensive Surveillance Review (CSR) integrated macro-critical trends, such as climate. That said, the Fund should adapt its tools and resources to the current global challenges by incorporating climate risks cohesively and comprehensively into its analysis. Explore the data and read the working paper.

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