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Union Finance Minister Nirmala Sitharaman raised the issue for fairness and accuracy in sovereign ratings for emerging markets and developing economies (EMDEs) during her address at the International Monetary Fund's (IMF) 2024 Annual Meeting.
Speaking in Washington, D.C., at the IMFC Plenary session on "Managing Director's Global Policy Agenda," on Friday, Sitharaman emphasized that sovereign ratings should more accurately reflect the economic fundamentals of EMDEs, ensuring fair access to capital and improved ability to attract private investment. "There is need for sovereign ratings to adequately account for EMDEs economic fundamentals to ensure the cost of capital for them and their ability to attract private capital is factored in," Sitharaman said. She also urged greater engagement with credit rating agencies to improve rating methodologies, so they more accurately capture a country's repayment ability and economic resilience. "FM also underlined engagement with credit rating agencies and calling for improvements in methodology to ensure that they capture the fundamentals reflecting the ability and willingness to repay," the Ministry of Finance noted in a social media post. Additionally, Sitharaman called for governance reforms within the IMF and other global institutions to better align with the evolving global economic landscape. She highlighted that the IMF's role has expanded significantly in its 80-year history, and adapting to this shift is crucial. "Recognising the evolution of the IMF as a multilateral institution over the last 80 years, the Union Finance Minister said that the current global order warrants governance reforms in major global institutions, including the IMF @IMFNews," the Ministry of Finance added in another post. Discussing the global economy in 2024, Sitharaman praised its resilience but noted several persistent risks. While economic output in some major economies is approaching its potential and inflation is moving closer to central bank targets, she cautioned that downside risks--such as geopolitical tensions and weak medium-term global growth prospects--remain a concern. "There are several downside risks, including growing geo-political tensions and medium-term global growth prospects, are a concern due to their continued weakness," Sitharaman said. Sitharaman endorsed the IMF's current Global Policy Agenda, which emphasizes securing a "soft landing" for the global economy and breaking free from a cycle of low growth and high debt. She highlighted the IMF's vital role in providing policy guidance, especially for countries with debt vulnerabilities, and urged that the IMF's advice be applied fairly across member nations to ensure equity. Sitharaman also commended the IMF's efforts to build unity in a fragmented world and encouraged it to remain adaptable in areas such as surveillance, lending, and capacity development to better serve its members. (ANI)
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