Several finance ministers from Commonwealth member states have stressed the need for policy support measures to tackle the cost-of-living crisis.
They also highlighted the need to address food insecurity especially for member countries dependent on imports of basic commodities.
The call was echoed on Wednesday, October 12, during this year’s Commonwealth Finance Ministers Meeting (CFMM 2022) hosted in Washington DC, at the side-lines of the ongoing World Banks and International Monetary Fund (IMF) meetings.
The ministers, according to a statement, met to discuss emerging economic issues facing the global economy and the commonwealth countries.
With the impact of Covid-19 pandemic lingering and the ongoing geo-political tensions disrupting global output and supply chains, commonwealth members are grappling with high global inflationary pressures.
To this end, Commonwealth Secretary General, Patricia Scotland, emphasised the important role that fiscal authorities play in tackling some of these challenges.
"The economic challenges facing us necessitate concerted efforts to develop viable strategies to revive and revitalise our economies for the benefit and well-being of Commonwealth citizens.
"To achieve the future we want, a future that leaves no one behind, global and regional collaboration remains imperative. We need to acknowledge that while the rising cost of living affects everyone, it disproportionately affects climate-vulnerable, small, developing, and low-income countries,” she said.
Scotland pointed out that more needs to be done to provide inclusive debt relief and financial support for them all.
"Furthermore, there is also the need to strengthen debt management systems to contain public debt at manageable levels.”
Like Scotland, several finance ministers stressed the need for policy support measures to tackle the current spike in the cost of living.
For instance, Rwanda’s Consumer Price Index (CPI), the main gauge of inflation, indicated a 14.8 per cent increase by May this year, compared to the same time last year.
"I am happy that today, one of the issues being discussed is tackling inflation from a fiscal policy stance. Fiscal authorities have important roles to play in combating inflation but not in isolation of the central banks,” said Minister of Finance and Economic Planning, Uzziel Ndagijimana.
Ndagijimana, who also chaired the meeting, said that the fiscal tools should cushion the effect on vulnerable households and businesses, helping them to cope with the rising cost of living and cost of doing business; as well as safeguarding food and energy security.
According to latest data, average inflation rose from 4.1 per cent in 2021 to an estimated 6.6 per cent in 2022, among Commonwealth nations.
However, Commonwealth small states have experienced larger increases, with inflation doubling from 2.7 per cent in 2021 to 5.4 per cent in 2022.
The ministers recommended a well-designed and carefully targeted fiscal support to reduce the negative impact on growth without adding significantly to inflation.
"Efforts must be directed at tackling the bottlenecks that are causing supply chain disruptions,” reads part of the recommendations.
They also said there is a need to review the existing fiscal rules to assess their relevance in the current economic environment of persistent exogenous shocks.
Debt management, transparency
Ministers held discussions regarding the inflationary pressures facing their countries and considered the recommended measures that need to be taken to cushion the effects of inflation and boost economic growth.
They welcomed the IMF's newly introduced tool, the Resilience and Sustainability Trust (RST), which is aimed at helping low-income and vulnerable middle-income countries build resilience to economic shocks.
Under the RST, Rwanda secured $310 million (approximately Rwf318 billion) from the fund, a facility that is expected to foster the country’s climate change ambitions.
However, ministers urged the IMF to put in place realistic and practical eligibility conditions, particularly for small and vulnerable countries.