The severe economic crisis ignited by the coronavirus pandemic requires the rapid deployment of every available financial lifeline to help countries survive, IMF chief Kristalina Georgieva said Thursday.
The uncertainty about the health emergency and the extent of the economic damage have driven governments and development lenders to roll out new and accelerated aid vehicles, in the hopes of preventing an even more dire impact.
“Everything has to be on the table. We simply don’t know yet how the crisis would evolve,” Georgieva said.
With over two million cases worldwide, the overall death toll exceeding 142,000, and nearly 4.4 billion people subject to some degree of lockdown, Covid-19 has brought much of the global economy to a standstill.
The International Monetary Fund projects the world economy will shrink by 3% this year, or $9 trillion, but many private forecasters are even more pessimistic.
The IMF and World Bank have rushed out billions in financing, ramping up and streamlining aid programs in recent weeks, and winning agreement to provide a one-year debt payment standstill on loans to the poorest countries.
Governments are calling on private lenders to do the same, and the Institute of International Finance, the global banking association, has endorsed forbearance for the 76 poorest nations in the world.
Georgieva, who acknowledged continuing debate among some of the fund’s members over what additional steps would work best, said the critical thing is to act now with the resources available.
Building a bridge
“What we do know is that we have strong financial capacity to act now, and that speed of action is of [the] essence in the crisis that has moved so rapidly and is so deep,” she said at the conclusion of the virtual meeting of the IMF’s governing committee.
The fund is focused on “building a bridge” over the crisis.
The IMF has $1 trillion in lending capacity, and has doubled its fast-deploying crisis financing vehicles, many of which go to the least developed nations, and on Wednesday it approved a new short-term credit line for middle-income countries with strong policy track records.
More than 100 countries have asked for aid, and by the end of the month, 50 will have received it, Georgieva said.
The IMF is seeking additional funding from member governments for its concessional lending facilities, and has already received pledges for over 70% of the $17 billion needed to shore up one of those programs.
Japan, Britain, France, Australia and Canada made firm commitments Thursday, she said.
US Treasury Secretary Steven Mnuchin said earlier in the day that Washington was “currently exploring” a possible contribution to two of the emergency funds.
Mnuchin recognized that poor nations are especially vulnerable and called for more action from governments around the world to help ease the blow, noting that the “robust response by the IMF and World Bank Group would not be possible without the committed support of its shareholders.”
There is an “urgent need for all members to deploy extraordinary fiscal and monetary actions to contain the fallout of the outbreak and limit long-term damage to economies,” Mnuchin said in his statement to virtual meetings of the two lending organizations.
In addition, “we must all stand ready to accelerate and expand our policy actions if needed as circumstances evolve.”
Many of the countries eligible for the debt relief and emergency financing are in Africa, and Georgieva said the region is “a high priority” for the IMF and World Bank.
“We are mindful of the risks for the parts of Africa that had problems, even before Covid-19, and will mobilize very strongly” to “save lives, save jobs, save hope, protect the future,” she said.