From Thursday 16 October to Saturday 16 October 2102, Luxembourg's Minister for Finance, Pierre Gramegna, was in Washington D.C. in the USA to participate in the annual meetings of the International Monetary Fund (IMF) and the World Bank.
In view of the pandemic situation, these meetings have recently taken a hybrid form; Luxembourg was one of the few countries outside the members of the G20 to participate physically.
Minister Gramegna thus co-chaired with Kristalina Georgieva, Managing Director of the IMF, and Tharman Shanmugaratnam, Principal Minister and Coordinating Minister for Social Policies of Singapore, a round table on options to further amplify the impact of the historic allocation of special drawing rights (SDR) of 650 billion dollars which took effect in August 2021, with the support of Luxembourg. Indeed, with a view to supporting the global economic recovery and addressing medium and long-term challenges, the roundtable participants discussed a possible transfer of part of their SDRs, if necessary by through a resilience and sustainability fund to vulnerable countries. SDRs are part of the official foreign exchange reserves of IMF member countries and were created in 1969 to improve the stability of the international monetary system by providing additional liquidity.
During his speech, Minister Gramegna insisted on the need for good cooperation between the IMF and the World Bank, in order to ensure the coherence of the actions of the two organisations in this area. The Minister of Finance also recalled that Luxembourg is one of the few countries which invest 1% of their GNI (gross national income) in development aid and assured the members of the IMF of Luxembourg's support for this new initiative, which aims to provide the most needy countries with the necessary liquidity to face climate change and possible future crises.
On the sidelines of the plenary meetings, Minister Gramegna also had a working meeting with Alfred Kammer, Director of the European Department at the IMF. The two interlocutors discussed the world economic situation, particularly with regard to the evolution of the health situation and developments relating to inflation. They also discussed the Luxembourg experience linked to the issuance of the sustainable sovereign loan issued in September 2021, as well as the pioneering role of the Luxembourg Green Exchange at the international level. In addition, they took stock of the challenges linked to the rise in real estate prices, seen across Europe. Finally, Minister Gramegna and Alfred Kammer had an exchange of views on a possible adaptation of the rules of the Stability and Growth Pact with regard to the challenges linked to exiting the crisis. In this regard, Minister Gramegna pleaded in favour of an approach aimed at looking at investment expenses, particularly in climate transition on the one hand, and current operating costs on the other, differently.
During a meeting with Paul Hilbers, Executive Director of the IMF, they discussed the European recovery plan and Luxembourg's efforts in favour of climate finance. In this context, Paul Hilbers praised Luxembourg’s commitment to multilateralism and the IMF’s action in managing the economic consequences of the crisis.
In the same vein, the Minister of Finance met Emil Stavrev, Head of Mission to the IMF, to outline the main thrusts of Luxembourg's 2022 draft budget, perfectly in line with the Fund's recommendations to support the end of the crisis. They also discussed the evolution of international taxation, in particular with regard to the recent agreement reached at the level of the OECD on minimum taxation. Minister Gramegna once again underlined Luxembourg's support for this historic agreement, which will allow the establishment of common rules (level playing field) at the global level.
At the World Bank, Minister Gramegna met Axel Van Trotsenburg, Director of Operations, to discuss the growing role of climate finance in achieving the Sustainable Development Goals (SDGs) of the United Nations. In this regard, Axel van Trotsenburg underlined the recognised expertise of the Luxembourg financial centre in this area, illustrated by the fact that the green loans of the World Bank are listed on the Luxembourg Green Exchange of the Luxembourg Stock Exchange. There emerged from the discussion a broad convergence of views on the fact that the climate crisis can only be resolved by mobilising unprecedented financial resources, by involving the private sector and by creating a credible and viable market for sustainable finance instruments. In this regard, Minister Gramegna observed that the recent green loan from the European Commission, with a record volume of €12 billion, was issued under Luxembourg law and will also be listed on the Luxembourg Stock Exchange.
The Minister of Finance also had a bilateral meeting with his Turkish counterpart, Elvan Lüfti, to discuss bilateral relations between the two countries, as well as ways to further strengthen ties between Turkey and the European Union. As Turkey recently joined the Paris Agreement, the two counterparts also discussed the importance of sustainable finance for achieving the dual climate and digital transition, as well as the positive contribution that the fund industry has made. Luxembourg investment can contribute in this area. Capitalising on the expertise acquired by Luxembourg in the field of sustainable finance, in particular through the recent issuance of the sustainable sovereign loan, the two counterparts agreed to a closer collaboration and an exchange of good practices in matter.
Minister Gramegna also took advantage of his visit to Washington D.C. to strengthen bilateral ties with the United States. He continued the dialogue started earlier this month at the OECD with José W. Fernandez, US Under Secretary for Economic Growth, Energy and the Environment, to explore avenues for increased collaboration between the two countries, particularly in the areas of investment and the fight against climate change.
Minister Gramegna commented “The annual meetings of the IMF and the World Bank are a privileged moment to discuss at the highest level on the current challenges for the world economy and the international financial system. I am particularly pleased that the United States has resumed its historic role in multilateral organisations and is now fully engaged in the fight against climate change. It is only through constructive collaboration between all countries that we can address this existential challenge for humanity. In this context, Luxembourg fully assumes its responsibilities. Through the recognised expertise of our financial centre in the area of sustainable finance, Luxembourg has significant leverage, making it possible to make a tangible contribution to financing the transition to a carbon neutral economy, aware that these efforts will only be effective if all the countries contribute. I am pleased that Luxembourg has decided to participate in the additional allocation of special drawing rights (SDRs) to the tune of 650 billion dollars, benefiting in particular the least developed countries.”
After Washington, the Minister of Finance is participating in a financial mission to New York, where he will meet with major players in the financial sector to discuss current trends and to promote Luxembourg as a leading international and diversified financial centre.