International Council 2020 Recap

1. Central Banks: Crisis Panacea? 
International Council 2020 commenced with a discussion of the crisis-fighting role of central banks with Janet Yellen, Lorenzo Bini Smaghi, and Bill Dudley. Compared to the 2008 financial crisis, panelists agreed that the central bank response to Covid-19 was quicker and stronger, due in part to the toolkit developed in 2008. But gaps in that toolkit remain. Yellen argued that the Fed should have the authority to buy a broader range of assets (e.g. corporate bonds) while Bini Smaghi argued that greater centralization would help the European Central Bank achieve its objectives. Yellen and Bini Smaghi favorably assessed central bank coordination throughout today’s crisis, though both noted that the symbolic response (e.g. a central bank communique) was lacking. 

Read more: 
In Conversation: NY Fed Presidents on Covid-19 

2. Rebuilding for the Future 
International financial institutions have played an indispensable role throughout the coronavirus crisis. In her conversation with John Lipsky, IMF Managing Director Kristalina Georgieva argued that “we need the Bretton Woods spirit today more than ever.” Consistent with this message, the Managing Director argued that global coordination around the coronavirus crisis has been strong, particularly at the working level in the G20. But work remains. The IMF projects that the global recovery will be uneven, partial, and uncertain over the short-term. To ensure a more sustainable, equitable recovery, the Managing Director called on international institutions and national governments to make investments that will improve infrastructure, reduce carbon emissions, and address inequality.  

Read more: 
World Economic Outlook: A Long and Difficult Ascent  
Global Financial Stability Report: Bridge to Recovery
Fiscal Monitor: Policies for the Recovery

3. Debt and Development
Sovereign debt distress will likely impede global recovery. World Bank president David Malpass joined William R. Rhodes to discuss debt and development. Despite recent G20 efforts, Malpass identified several weaknesses in the sovereign debt resolution system that must be addressed. First, commercial creditors and all official bilateral creditors must participate fully. Second, the international community must work to reduce the stock of debt for the poorest countries, not just delay debt service. Apart from debt issues, the World Bank has taken dramatic steps throughout the crisis to support developing economies, including launching 111 programs and disbursing $16B in grants. President Malpass also announced a newly approved financing package including $12B for vaccines and called for an additional $25B for the International Development Association. 

Read more: 
G20 Finance Ministers and Central Bank Governors Communiqué
World Bank Announces $25B IDA Supplemental 
World Bank Approves $12B for Vaccine Access

4. Emerging Market Debt and Financial Stability Risks
A diverse group of leading experts—including Wei Christianson, Arminio Fraga, and Maria Ramos—continued discussion of sovereign debt with Rhodes. Panelists discussed debt issues in Africa, Asia, and Latin America. According to Ramos, the debt outlook for Africa has changed dramatically over the last decade, as new issuance reached $17B and average debt to GDP spiked to 64% in 2020. Despite these concerning statistics, Christianson argued that the world economic and financial system is better prepared for this shock than the 2008 crisis, due in part to stable global inflation, stronger external positions, and increased domestic lending. In his remarks, Fraga noted that there is a profound need for global coordination on debt, but tensions between the world’s largest economies are slowing progress.

Read more: 
The International Architecture for Resolving Sovereign Debt Involving Private-Sector Creditors

5. Financing a Global Public Health Response 
International Council 2020 closed with a discussion of health financing. Cristina Valencia, an epidemiologist at the World Health Organization, started the conversation by noting the health funding gaps many countries face, particularly in Latin America. The World Bank has played an essential role in filling these funding gaps by approving $14B and more than 25 programs to support health systems, outlined Feng Zhao. Funding is essential, but so is efficient use of available resources. Kalipso Chalkidou noted that governments must establish processes to ensure that health investment decisions are made thoughtfully, transparently, and with sufficient input. Alexander Preker moderated the conversation. 

Read more: 
Latin America has a Covid-19 Cash Gap (William R. Rhodes, Cristina Valencia)
When Will We Have a Covid-19 Vaccine? (Anthony McDonnell, Kalipso Chalkidou, Prashant Yadav)