The International Monetary Fund and the heads of regional financing arrangements (RFAs) have reaffirmed their commitment to enhancing cooperation in the face of the multiple shocks that are testing the resilience of the world economy.
Participants in the seventh High-level RFAs Dialogue, held in Washington DC on October 12, also underscored the urgency of taking concerted and continued action in the global fight against climate change.
No region will be spared from the impacts of climate change, with many parts of the world already experiencing more frequent and severe extreme weather events that disrupt lives and livelihoods, according to the participants.
RFAs are agreements through which groups of countries mutually pledge financial support to countries experiencing financial difficulties in their regions.
Attending the meeting were representatives of the Arab Monetary Fund; the Asean+3 Macroeconomic Research Office with the Chiang Mai Initiative Multilateralization, represented by the People’s Bank of China as its 2022 co-chair; the BRICS Contingent Reserve Arrangement, represented by the South African Reserve Bank; the Eurasian Fund for Stabilization and Development; the European Commission; the European Stability Mechanism; and the Latin American Reserve Fund.
The RFAs outlined ongoing progress to integrate climate considerations into their operations, in accordance with their individual mandates and policies.
Efforts are focused on building up internal analytical and technical expertise, enhancing monitoring capabilities to better account for climate vulnerabilities and risks, disseminating and sharing information across their memberships, and greening internal policies to support social and environmental responsibilities through various activities such as portfolio investments.
The RFAs also sought to strengthen the Global Financial Safety Net. The GFSN comprises a set of institutions and mechanisms that contribute to preventing or mitigating crises. It seeks to provide countries with insurance against crises, financing when shocks hit, and incentives for sound macroeconomic policies, thus helping to avoid spillovers and alleviate moral hazard concerns.
The IMF expressed its readiness to deploy and continuously adapt its toolkit to ensure its effectiveness. It highlighted its ongoing efforts to support their members’ climate change mitigation, adaptation, and transition to a low-carbon economy.
These include, in the last few years, the adoption of a climate strategy, which envisions a greater focus of the fund’s surveillance on climate-related issues; a stronger focus on the climate-financial nexus and the enhancement of the fund’s analytical and capacity development work on climate, including through the production of climate macroeconomic assessments.
The IMF also updated the RFAs on the Resilience and Sustainability Trust, approved in April this year, which enhances the fund’s toolkit by providing affordable, long-term financing to help vulnerable countries build their resilience to long-term challenges to balance of payments stability, such as climate change or pandemics.