Today, Commonwealth Finance Ministers gathered on the sidelines of World Bank and International Monetary Fund (IMF) meetings in Washington DC for the 2022 Commonwealth Finance Ministers Meeting (CFMM) to discuss the emerging economic issues facing the global economy and Commonwealth countries.
The effects of the COVID-19 pandemic, ongoing geopolitical tensions and their impact on global production and supply chain disruptions have resulted in global inflationary pressures for many Commonwealth members.
In her opening speech, the Commonwealth Secretary General, The Rt Hon Patricia Scotland KC, highlighted the important role that fiscal authorities play in addressing some of these challenges. She says:
“The economic challenges we face require concerted efforts to develop viable strategies to revive and revitalize our economies for the benefit and well-being of Commonwealth citizens. To achieve the future we want, a future that leaves no one behind, global and regional collaboration remains imperative. We must recognize that while the rising cost of living affects everyone, it disproportionately affects climate-vulnerable, small, developing and low-income countries. More needs to be done to provide them with inclusive debt relief and financial support. In addition, there is also a need to strengthen debt management systems to contain public debt to manageable levels.
Several finance ministers underlined the need for policy support measures to address the cost of living crisis as well as food insecurity, especially for member countries dependent on commodity imports.
Chairing this year’s meeting, the Honorable Dr Uzziel Ndagijimana, Minister of Finance and Economic Planning of Rwanda said:
“I am happy that today one of the issues discussed is the fight against inflation from a budgetary policy. Fiscal authorities have an important role to play in the fight against inflation, but not in isolation from central banks. These fiscal tools should cushion the effect on vulnerable households and businesses, helping them cope with the rising cost of living and the cost of doing business; as well as safeguarding food and energy security.
Focusing on a theme of “A Path to Economic Recovery: A Macroeconomic Perspective”Ministers discussed the recommendations based on the following topical issues:
- Tax measures to fight inflation
- A budgetary framework for resilient and sustainable development; and
- Managing high debt in an environment of economic uncertainty
Among Commonwealth countries, average inflation rose from 4.1% in 2021 to around 6.6% in 2022. However, smaller Commonwealth states saw larger increases, with inflation doubling from 2 .7% in 2021 to 5.4% in 2022.
Some key recommendations presented at the meeting include:
- The provision of fiscal support: Well-designed and carefully targeted fiscal support to reduce the negative impact on growth without significantly increasing inflation.
- Provide support to deal with supply chain disruptions: Efforts should be aimed at removing bottlenecks that disrupt the supply chain.
- Review of fiscal rules: the need to review existing fiscal rules to assess their relevance in the current economic environment of persistent exogenous shocks;
- A call for effective debt management and the promotion of debt transparency
Ministers had candid discussions on the inflationary pressures facing their countries and reviewed recommended actions that need to be taken to cushion the effects of inflation and stimulate economic growth.
Ministers also called for a comprehensive review of fiscal rules as they are no longer relevant and do not reflect today’s extraordinary and peculiar economic conditions, which include the “triple crisis”.
Ministers welcomed the IMF’s new tool, the Resilience and Sustainability Trust, which aims to help low-income and vulnerable middle-income countries build their resilience to economic shocks. However, they urged the IMF to put in place realistic and practical eligibility conditions, especially for small, vulnerable countries.
To chart the way forward, ministers agreed to establish a Commonwealth Task Force which will provide an integrated advocacy strategy and solutions to address economic challenges.
- Angela Kolongo Communications Officer, Communications Division, Commonwealth Secretariat
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