© Reuters. US Treasury Secretary Yellen attends an economic conference at the White House in Washington
Written by Andrea Shalal and David Lauder
WASHINGTON (Reuters) – US Treasury Secretary Janet Yellen warned on Thursday of the dangers of permanent divergence in the global economy in the wake of the Covid-19 crisis, urging major economies to inject significant new financial support to secure a strong recovery.
In a statement before the Steering Committees of the International Monetary Fund and the World Bank, Yellen stressed the need for major economies to continue to support developing countries as they grapple with the COVID-19 pandemic, climate change and high debt burdens.
She urged the World Bank to help countries, especially the world’s poorest, get timely access to COVID-19 vaccines, and supported accelerated negotiations to renew the World Bank’s International Development Association fund for the poorest countries – a goal the Bank aims to reach by December. .
Yellen said the United States has pledged $ 4 billion to the global COVAX vaccine distribution initiative, and is urging others to join it. She said Washington, which has only provided vaccines to Mexico and Canada so far, is exploring sharing overdoses, but did not provide details.
Yellen’s comments reflect the Biden administration’s focus on strong international cooperation to address global challenges – a sharp departure from the “business alone” approach taken by the administration of former President Donald Trump.
The (COVID-19) crisis has exacerbated the trend of increasing income inequality, raising concerns about a divergent path within and across countries. We also face the existential threat of climate change. We can only solve these problems through strong international cooperation, Yellen said in remarks prepared for her first meeting with the International Monetary and Financial Affairs Committee of the International Monetary Fund and the World Bank’s Development Committee.
The former Federal Reserve Chairman said that significant financial and monetary support from major economies has improved the global economic outlook significantly, but that more efforts are needed.
Managing Director of the International Monetary Fund, Kristalina Georgieva, told reporters that she was encouraged by the fact that the United States and China – the two largest economies in the world – shared a consistent view of the prospects for recovery, and “acknowledged their responsibility for the positive spillover effects.”
“Like passengers on a plane, and we are all passengers, it is important that they work simultaneously. Then we can fly faster and we can get further,” Georgieva said.
She said IMF members also heard that the Fed was committed to calling early before any quicker return to normal monetary policy – a change the International Monetary Fund had warned that it could have unintended consequences for capital flows in emerging markets.
Yellen said Washington is implementing a $ 1.9 trillion COVID-19 relief plan and is working on another large infrastructure package, urging other major economies to take similar measures.
“The job is not finished yet, given the high degree of uncertainty and the risk of permanent scars,” she said. “I urge the major economies … to strive to provide large amounts of new financial support to secure a strong recovery.”
Yellen said developing countries should work with the International Monetary Fund and the World Bank on structural reforms and pursue full, conditional IMF financing programs, when necessary. She added that some countries may need a deeper debt treatment.
It called on all creditors to implement the new G20 framework to address “fully and transparently” debt and avoid “unnecessary delays that could prolong the debt burden and exacerbate growth shocks.”
She also urged the World Bank to lead “transformational climate investments” and to continue to develop a rigorous agenda on climate and green recovery from the crisis.