The International Monetary Fund (IMF) has expressed happiness with G20’s support for the agreement on a minimum corporate tax rate for profitable companies.
G20 (Group of 20) consists an 19 advanced and developing countries and the European Union (EU).
The Managing Director of IMF, Kristalina Georgieva, said in a statement on Saturday at the end of the hybrid meeting of the G20 Finance Ministers and Central Bank Governors in Venice, Italy that this would help highly profitable companies to pay their fair share of taxes and contribute to the recovery of the global economy from the pressures from the COVID-19 pandemic.
“I am very encouraged by the substantial progress made by the G20 at this meeting on a number of crucial issues.
In particular, I want to recognize the G20’s support for the historic agreement on a minimum corporate tax rate.
“This will help countries preserve their corporate tax base and mobilize revenue by ensuring that highly profitable companies pay their fair share everywhere,” Georgieva stated.
Although the IMF managing director noted the continued recovery of the global economy along the line of its April projection of six percent this year, she said the divergence across economies was intensifying, as the world was facing a two-track recovery.
While growth in major advanced economies and some emerging market countries, continue to accelerate, propelled by a combination of strong fiscal and monetary policy support, and rapid vaccinations, growth in many other countries, particularly the poorest, without access to vaccines and with surging infection rates, are suppressed.
With a dangerous wave of a highly transmissible variant of COVID-19 now making its way across the globe, she said the pandemic remains the fundamental risk facing the global economy.
Apart from a new Special Drawing Right allocation of $650 billion to member countries, the largest in IMF history, to help them in their recovery efforts, Georgieva said actions were urgently needed in three key areas.
These include accelerating vaccinations to cover at least 40 percent of the population in every country by the end of 2021, and 60 percent by the middle of 2022.
In this connection, she said the IMF stands ready to work closely with World Bank, World Health Organization and World Trade Organization to tackle the problem.
In close collaboration with ACT-A, she said a task force—a ‘war room’— has been constituted to help achieve the objective.
She welcomed the G20 support to prioritize acceleration of the delivery of vaccines, diagnostics and therapeutics.
“By providing faster access to vaccines to high-risk populations, more than half a million lives could be saved this year.
“And a normal return to activity everywhere could add $9 trillion to the global economy through 2025—the $50 billion cost of this pandemic plan pales by comparison,” the IMF boss said.
Also, she called for the implementation of sound macroeconomic policies to ensure it continued to play a pivotal role in securing the recovery for the global economy.
The IMF said fiscal policy should provide well-designed support, tailored to country specific circumstances, to protect the most vulnerable and minimize scarring.
As economies exit the crisis, the Fund said policies should facilitate stronger, more sustainable, and more inclusive growth.
Again, the MD said monetary policy should remain accommodative, as inflationary pressures are likely to be temporary.
However, should a pick-up in inflation turns out to be more permanent, she said some large economies further ahead in the recovery may need to tighten sooner than expected.
“Central banks will need to communicate policy intentions clearly to avoid triggering adverse spillovers.
Should tighter financial market conditions materialize sooner than anticipated, the Fund said it was prepared to assist its members to ensure the recovery remains on track.
In addition, the IMF stressed the need tonstep up support to vulnerable countries .
The IMF’s new SDR allocation of $650 billion, she pointed out, would increase countries’ reserves, create additional space for vaccine financing, and boost confidence in the recovery.
To magnify the impact of the allocation, she said the IMF would move quickly to explore options for economically stronger members to voluntarily use their SDRs to help the poor and vulnerable countries.
“Scaling up the IMF’s Poverty Reduction and Growth Trust (PRGT) is a tried-and-tested option that will enable us to provide zero-interest financial support to low-income countries through the medium term.
“We are also exploring the possibility of creating a new Resilience and Sustainability Trust for vulnerable members to build forward better, including through financing for greener, more resilient and sustainable growth over the medium term.
The support for these measures expressed by the G20 during the meeting and support for efforts to help countries facing unsustainable debt burdens, she said, was crucial for a speedy recovery.
She assured that the IMF would continue to work closely with the World Bank and other partners to ensure effective implementation of the Common Framework.
On the work of the Chad’s Creditor Committee, the IMF MD commend members for their intensive work, which provided leverage for debt relief from private creditors and the assurances required for much-needed financing from the IMF and development partners.
On climate risks, the IMF boss commended the G20 for the focus on and role of carbon pricing mechanisms in the country.
During the G20 Conference on Climate on Sunday, the Managing Director of IMF said she intended to follow up on a proposed international carbon price floor, which could significantly accelerate the global economy’s transition to low-carbon growth.
Members include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.