From April 19 to 22, 2018, representatives of the State Bank of Vietnam (SBV) attended the International Monetary Fund (IMF)/World Bank Spring Conference 2018, and the joint meeting of the Office of the Managing Director of the Southeast Asian Nations Group at the IMF and the World Bank.
This year's conference took place in the context of global investment and trade continuing to flourish since the second half of 2017. With financial conditions continuing to support growth, the IMF forecasts the growth of the world economy will slightly increase to 3.9% in 2018 and 2019, with the emerging economies growing faster, while growth in emerging and developing countries is expected to be stronger. This is seen as a good opportunity to tackle risks and obstacles, to promote potential and inclusive growth, and to strengthen the resilience and coping capability against shocks. However, in the context of aging populations and weaker productivity, the potential growth in advanced economies may fall much lower than the average level before the crisis period; while growth in emerging economies, especially commodity exporters, remains below potential levels. Risks continue to exist, such as policy uncertainties in some big countries, the process of normalization of monetary policies accompanied by a tightening of global financial regulations and conditions, and the trends of trade protectionism, rising trade tensions... may cause the recovery momentum to slow down in the coming time.
In this context, the Meetings emphasized the importance of utilizing current economic conditions to further accelerate structural reforms, deepening economic cooperation and linkages to create motivation and enhance the resilience of the economies aiming for a quality, sustainable, equitable and comprehensive growth.
In addition, the Meetings also informed and discussed a number of issues, including:
Global debt surged to a record high of nearly 225% of the GDP in 2016, with public debt in advanced and emerging economies reaching over 105% of the GDP, creating a burden of debt service for these economies. In particular, the debts in poor and developing countries have risen sharply, raising concerns about the possibility of failing to meet the United Nations’ Sustainable Development Goals (SDGs). Therefore, the Meetings recommended that countries take advantage of the current economic recovery to consolidate fiscal buffers and to strengthen the resilience of the economy.
With a rating of triple As and the first successful issuance of 1.5 billion USD of bonds in the global capital market last April, the World Bank's International Development Association (IDA) pioneered a new development financing model that meets the ambitions of its shareholders, the investors’ demands and the development needs. This is a turning point in the history of nearly 60 years of operation and development of IDA in supporting the development of 113 countries around the world. Prior to this, IDA operated on equity capital from shareholders (large and developed countries) with a combined capital of 158 billion USD, with the main activities being providing technical consultancy and affordable financing for programs and projects aimed at promoting economic growth in the poorest countries in the world - from resolving disputes, violence and vulnerabilities, climate change, and gender inequalities to enhancing governance, institutional development, employment generation, and supporting the growth of the private sector for economic transformation. “The successful issuance of these bonds allows IDA to significantly increase its resources from the capital market to address the biggest global challenges and to help millions of people escape from poverty," said Mr. Jim Yong Kim - President of the World Bank.
In a major development, the Development Committee of the World Bank Group’s Board of Governors reached a consensus to approve an ambitious package of measures that include a USD 13 billion increase in paid-in capital, which consists of USD 7.5 billion paid-in capital for the International Bank for Reconstruction and Development (IBRD) and USD 5.5 billion paid-in capital for the International Finance Corporation (IFC), through both general and selective capital increases. The World Bank shareholders also endorsed a 52.6 billion USD callable capital increase for the IBRD. The boost in capital will be augmented by a broad range of internal measures, including operational changes and effectiveness reforms, loan pricing measures, and other policy steps to create an even stronger World Bank Group. These capital increases are important in light of the rapidly changing and increasingly complex global economic landscape, helping (i) the WB to continue to mobilize additional funding for development, address overlapping challenges and better deal with the global stability and security risks, especially in poorer and more vulnerable countries; and (ii) enhance the presence and the voice of emerging and developing economies, create more balance in the proportion of shares among countries.
On this occasion, the representatives of the State Bank of Vietnam also met and worked with the IMF and the WB representatives, expressing the SBV’s gratitude and appreciation for the supports of the IMF and the WB toward the banking sector through the provision of advisory, policy recommendations, technical assistance, finance and human resources development, especially the recent WB support to strengthen the banking sector, assisting to strengthen the capability of bad debt handling and promoting inclusive finance in Vietnam.
VA