​G-20’s uncoordinated response to pandemic decried by central banker calling for `forceful’ global approach

21 Apr 2020 10:38 pm by Neil Roland

The “patchy” international response to the pandemic was underscored last week by the flawed Group of 20 economic powers’ approach to vulnerable countries’ needs, Bank of Finland Governor Olli Rehn said.

Rehn called for a “forceful,” coordinated policy to inject liquidity into poor countries' economies by expanding allocation of the International Monetary Fund’s special drawing rights.

“So far, we have seen a rather patchy policy response — for instance, Wednesday’s G20 meeting was not exactly the greatest triumph of international cooperation,” he said last week.

He added: “To my regret, this reminds me of Liaquat Ahamed’s modern classic 'Lords of Finance,' in which he describes the policymakers and their mistake in the 1920s and 1930s, and the dramatic collapse of international policy coordination that contributed to the Great Depression and the subsequent Second World War.”

“A globally symmetric crisis calls for a globally coordinated and forceful policy response,” Rehn said in his speech. “It is imperative that the IMF has sufficient resources.”

— G-20 statement —

The G-20 finance ministers and central bank governors couldn’t reach a consensus on increasing IMF drawing rights, according to their statement last week, despite a public plea by German chancellor Angela Merkel, French president Emmanuel Macron, and two African heads of state.

The main obstacle was the US, French finance minister Bruno Le Maire told reporters after meeting with Treasury Secretary Steven Mnuchin.

SDRs are an international asset used to supplement IMF member countries’ official reserves. The IMF’s current stock is worth about $275 billion.

Former US Treasury Secretary Lawrence Summers and former UK Prime Minister Gordon Brown have called for issuance of more than $1 trillion in new SDRs.

“If ever there was a moment for an expansion of the international money known as Special Drawing Rights, it is now,” they wrote in the Washington Post last week. “If global money is to stay in balance with the domestic monetary expansion in rich countries, an increase in SDRs of well over $1 trillion is urgently needed.

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