Transforming the Global Financial Architecture: New report advocates for International Monetary Fund (IMF) reforms to empower low- and middle-income countries

The United Nations Economic Commission for Africa (ECA) today launched the report: The IMF and the Future of the Global Financial Architecture, at the Ministerial Segment of the 5th Extraordinary Session of the African Union Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration held in Abuja, Nigeria.

Ms. Hanan Morsy, Deputy Executive Secretary and Chief Economist at the ECA who supervised and guided the report, said it was prepared in consultation with the African Ministers of Finance, Planning, and Economic Development, the African Union, and the African Development Bank. It proposes a new work agenda for the International Monetary Fund (IMF) “to better respond to the challenges that African low- and middle-income countries are facing.”

The Report is grounded on the work of the Africa High-level Working Group on the Global Financial Architecture, which is coordinated by the ECA. This Group comprises African Ministers of Finance, Planning and Economic Development, the African Union, the African Development Bank, Afreximbank, and the World Bank. It includes the participation of IMF staff and Executive Directors.

The Report’s key messages include:

1. Global Financial Safety Net: The IMF should make Special Drawing Rights (SDR) allocation decisions in a rule-based analytical manner to reduce the discretionary and political nature of the allocation process and ensure that SDRs are directed to countries that require them.

2. A New Global Debt Architecture: The IMF should propose reforms to overhaul the G20 Common Framework to be more effective, time-bound, and transparent, strengthen the International Debt Legal Framework, and review and update the IMF-World Bank Debt Sustainability Analysis to make it more SDG- and solvency-focused.

3. The Resilience and Sustainability Trust (RST) and a New Agenda for Green Development: The IMF should facilitate the scaling up of debt-swaps-for-nature, climate and adaptation, enable credit enhancement for green finance, support countries’ efforts to design and implement frameworks to attract private finance, mobilize more resources for the RST to allow for increased IMF lending with longer maturities, and work together with partners to support the resilience of transition policies.

4. A New Agenda for Market Access: The IMF should establish benchmarks based on macroeconomic fundamentals, support African countries in building capacity to regularly collect and publish high-quality data, expand the IMF African Regional Technical Assistance Centers (AFRITAC) mandate to include support on ESG investment and green capital markets, promote global financial stability by avoiding penalization of pre-emptive restructuring by Credit Rating Agencies (CRAs), support regulatory and oversight reforms, and support the establishment of Africa regional CRA.

5. An IMF for the 21st Century: The IMF should recalibrate its operating model and lending instruments to better address global shocks and alleviate countries’ liquidity needs in the short term and reform the quota formula to support more equitable access to SDRs, make permanent the higher access to the Poverty Reduction and Growth Trust (PRGT) and the General Resources Account (GRA), and expand IMF advocacy and policy work on global imbalances in the medium to long run.

According to Ms. Morsy, the analytical work of this report has fostered a more productive dialogue with the IMF and has also been instrumental in catalysing tangible progress on several critical issues – these include increased concessional financing, a 50 per cent general quota increase, approval of the use of SDRs to purchase hybrid capital, advancing reforms to the RST to better serve vulnerable countries, enhanced representation for Africa on the IMF Executive Board through a third Chair, and reduction of IMF Surcharge.

“Today’s economic landscape demands a reimagined IMF that genuinely serves all its member countries. This report advocates for changes to empower vulnerable nations, fostering a more inclusive global financial system,” said Ms. Morsy, adding: “While substantial progress has been made, the report acknowledges that much work remains. The collaborative efforts among African nations and stakeholders will be crucial in pursuing an equitable and efficient financial architecture that addresses current challenges and future developments.”

To download the report, please visit https://www.uneca.org/the-imf-and-the-future-of-the-global-financial-architecture (English version)

Distributed by APO Group on behalf of United Nations Economic Commission for Africa (ECA).