INTERNATIONAL MONETARY AND FINANCIAL COMMITTEE

Forty-First Meeting
April 16, 2020
Statement No. 41-26

Statement by Mr. Hoekstra
Kingdom of the Netherlands—The Netherlands
On behalf of
Republic of Armenia, Belgium, Bosnia and Herzegovina, Bulgaria,
Republic of Croatia, Cyprus, Georgia, Israel, Luxembourg,
Republic of North Macedonia, Republic of Moldova, Montenegro,
Kingdom of the Netherlands—The Netherlands, Romania, and Ukraine

Statement by Mr. Hoekstra
The Netherlands
On behalf of
Armenia, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel,
Luxembourg, Macedonia, Moldova, Montenegro, the Netherlands, Romania, and Ukraine
Global economic context, prospects and policies
The Constituency expresses its sympathy and solidarity with all countries and people affected by
COVID-19 and offers its sincere condolences to all concerned.
These are exceptional times, not the least because the COVID-19 outbreak is causing a severe
downturn and, if insufficiently addressed, could leave long term scars on the economy. The
Constituency therefore welcomes the comprehensive policy measures taken to date on a national,
European and global level in response to the pandemic’s challenges, which are unfolding with
unprecedented speed and size. Our first priority is preserving lives and to support health systems to
the greatest extent possible. The Constituency affirms the need for strong and coordinated action
and to do everything necessary to confront this extraordinary human and economic crisis, to restore
overall confidence, in order to support a rapid recovery.
COVID-19 is causing strong negative supply and demand shocks to the global economy, combined
with a rapid tightening of financial conditions. Policies taken at the national and European level focus
on safeguarding the economy through measures such as providing liquidity support for affected
firms, supporting households in avoiding unemployment income losses, and instilling confidence.
Small and medium sized enterprises and firms in severely affected sectors in particular need their
authorities’ support through, for example, credit guarantees and tax deferrals or reductions.
Governments can support employment by subsidizing short-term work schemes and extensions of
paid sick leave. Ministers of Finance of the European Union agreed on a comprehensive package of
measures to shield firms, workers and countries from the impact of COVID-19.
Central banks provide large-scale liquidity to banks and financial markets through refinancing
operations and asset purchases, to secure the availability of low-cost financing for governments,
businesses and households. Fortunately, global regulatory policies implemented since the global
financial crisis have borne fruit, and the financial sector is in a stronger position today. Resolute
additional fiscal and monetary measures and the use of flexibility in existing regulations can aid the
financial sector in continuing its role in intermediating funds to the real economy.
That said, the policy responses to the COVID-19 crisis are to be timely, targeted and in place as long
as required to support the economy. Automatic stabilizers, where available, are a natural first line
of defense against shocks. They should operate to their fullest extent and be complemented with
discretionary measures if warranted. The global shock also demonstrates a need for well-designed
safety nets to protect citizens from income losses.

Coordinated and decisive policy action at the global and regional level help to reduce uncertainty,
restore confidence and ensure financial stability. We need to continue to closely monitor the COVID19’s economic effects and to adapt our responses if needed to the evolving situation.
The rapid tightening of financial conditions as well as unprecedented capital outflows are of key
concern to the Constituency. Emerging and developing countries are particularly vulnerable to the
impact of COVID-19. They are strongly affected by the synchronised economic downturn, including
through declines in tourism receipts and (commodity) exports, lower remittances and large capital
outflows, which confronts them with rapidly declining foreign exchange reserve buffers and puts
external debt sustainability at jeopardy. It is therefore of the utmost importance that a decisive and
well-resourced IMF is at the centre of the global financial safety net, able to deploy its toolkit
effectively and flexibly.
COVID-19 calls for a strong and targeted response by the IMF in collaboration with other IFIs, and
we fully support the IMF in mobilizing all available tools to support countries in need, including full
use of emergency financing, providing policy advice and technical assistance. We stand ready to
enhance the IMF policy toolkit where necessary to help address the crisis.
The COVID-19 crisis will amplify the already existing trend of rising debt to GDP levels in LICs. In
this light, we welcome in principle the debt relief initiative of the IMF and World Bank for official
bilateral creditors to suspend debt payments from IDA-countries that request forbearance. We also
support a strengthening of the IMF Catastrophe Containment and Relief Trust (CCRT) to help the
poorest countries face their debt obligations to the IMF. The Netherlands therefore contributes EUR
25 million to the CCRT. Luxembourg is ready to contribute to the CCRT.
While the focus should now be on addressing the immediate needs, it remains important not to lose
sight of the medium term and prepare the economic recovery. COVID-19 illustrates the importance
of resilience to enable countries to weather shocks in the economy. At the same time, additional
fiscal measures may be necessary to support the recovery. Once the implications of the COVID-19
crisis recede, a growth-friendly composition of expenditures, including investments in health care,
education and innovation, as well as the design and implementation of structural reforms, should be
resumed to increase resilience and raise the long-term growth capacity of our economies.
Also, a strong and robust financial sector ensures continuous access to financing for households and
firms. Financial sector regulation should continue to be geared towards safeguarding financial
stability, while maintaining the flexibility needed to ensure that the financial sector can continue to
fulfil its role in the face of potential strong shocks to the real economy, such as the COVID-19
pandemic.
Fund policies
Against the backdrop of the shock of COVID-19 to the economy, the Fund continues to play a central
role in supporting the membership through well-tailored policy advice and surveillance, lending, as
well as capacity development. In addition, there is a need to step up global coordination, as many
of today’s pressing challenges, such as climate change, requires cross border cooperation.

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Surveillance
The current CSR and FSAP reviews provide an opportunity for the Fund to upgrade its surveillance
work in line with the membership’s evolving needs and new risks such as the implications of
technological developments, climate change and ageing societies.
The incorporation of multilateral surveillance in Article IV could be improved, including through better
coverage and discussion of spillovers that may impact global stability. Many cross-cutting issues are
of strategic importance to a large share of the membership. The carbon pricing tool developed in the
Fiscal Monitor of October 2019 could for example be structurally embedded in Article IV surveillance.
We strongly support the deepening of financial surveillance both in the form of FSAPs and Article
IVs, given the importance of the financial sector for domestic and global stability. We strongly
support frequent FSAPs for a sufficiently large number of systemic countries, and would emphasize
the need to also conduct FSAPs for non-systemic countries. We also welcome further integration of
FSAPs into Article IV surveillance, for instance through knowledge sharing and cross-mission
participation.
Climate change
Risks from climate change and from the transition to clean energy are macro-critical for the full
membership. Therefore, we strongly support the systemic integration of climate-related risks into
IMF surveillance. We encourage the Fund to develop further expertise and ensure sufficient capacity
and resources in this area to strengthen its analytical work.
It is crucial that countries take appropriate fiscal measures to mitigate climate change, strengthen
resilience to climate-induced events, and allow for sufficient budgetary space to finance these
mitigation and adaptation policies. The Fund is well-placed to assess climate change mitigation and
adaptation policies and analyse the economic and financial consequences of potentially disruptive
energy transition paths. Climate-related risks in the financial sector should be an integral part of
FSAPs. The Fund should guide authorities to boost resilience of the financial system to these risks.
Debt sustainability
As mentioned, we are concerned with the overall trend of rising debt-to-GDP levels in a broad range
of low income and emerging market economies, which will be, in many cases, significantly worsened
by the COVID-19 crisis. Furthermore, we welcome the Fund’s efforts to strengthen its monitoring of
debt sustainability. We especially look forward to the Review of the Debt Limits Policy and the MACDSA. The ultimate goal of such frameworks should be to help countries to get and maintain access
to sustainable financing to reach the development aspirations of their populations. Particular
challenges remain with respect to the increasingly complex debt composition in terms of instruments
and creditors, the vulnerabilities of external foreign currency denominated debt, and debt
transparency.
More generally, we support the Fund in continuing its guidance and assistance in containing debt
levels in low income and emerging market economies, in particular those countries that have
previously been subject to debt relief through the HIPC and other initiatives. Capacity building in
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debt management remains an essential element of the Fund’s technical assistance programs, as well
as optimizing domestic revenue mobilization and improving the effectiveness of public spending.
Furthermore, we see a continued important role for the Fund in facilitating international creditor
coordination and in efforts to sustain fair burden sharing in case of debt restructurings or sovereign
default. This can be achieved by promoting transparency, well-designed debt contracts and
continued dialogue between all sovereign borrowers and all major creditors.
Social spending
We support the Fund’s engagement on social spending and the efforts to operationalize its framework
on social spending. In this way, the Fund can continue to play a key role in promoting policies that
contribute to sustainable and inclusive growth.
Resources
The Constituency reiterates its support for an adequately resourced, quota-based Fund, remaining
at the centre of the Global Financial Safety Net. As noted before, the current shocks to the economy
and financial markets caused by COVID-19 underscore the importance of a well-resourced IMF at
the centre of the Global Financial Safety Net. The Constituency calls for a timely implementation of
the package on IMF resources as agreed on during the 2019 Annual Meetings.
Support from the IMF to members of the Constituency
Within our Constituency, Armenia, Bosnia and Herzegovina, Georgia and Ukraine currently benefit
from financial support from the Fund, while Moldova recently successfully completed its ECF/EFF
arrangements and intends to continue its engagement with the Fund. The members of our
Constituency deserve continued support from the Fund and the international community in achieving
their policy goals and responding adequately to the economic impact of COVID-19.

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