IMF sets aside $50bn for coronavirus-hit countries
Kristalina Georgieva, the managing director of the IMF, unveiled a $50bn package of emergency financing for countries stricken by the coronavirus, saying the multilateral lender wanted to ensure “that people are not going to die just because of lack of money”.
The IMF’s move came as it warned that the rapidly expanding outbreak would force it to cut its global economic growth forecast to below the 2.9 per cent rate recorded last year, although it was unclear by how much.
In an interview with the Financial Times, Ms Georgieva, the Bulgarian economist and former World Bank and EU official who took the reins of the IMF last year, said countries should not hesitate to seek financial assistance.
“The IMF is the lender of last resort, but we do not want to be last to signal readiness to help our members, we want to be the first,” she said. “What we want is to guarantee that money is not the issue, that people are not going to die just because of lack of money, since financing can be made available.”
Ms Georgieva had earlier said that the more “adverse” scenarios about the spread of the virus and how it would affect the global economy were starting to materialise and the fund would engage “country by country” to establish their financial needs.
“We are in an early stage of engagement but I can assure you we will act very quickly as requests come,” she added.
The IMF said $10bn in emergency funding would be available for low-income countries through a rapid disbursement programme for zero-interest loans that fell short of a full IMF rescue package. A further $40bn would be available to other middle-income members through a different rapid financing instrument.
Ms Georgieva said priority was being given to emerging markets with “limited fiscal space [with] no buffers, or because they are commodity exporters and therefore are already affected by dropping prices that can get more serious, or because they have health systems that need a beefing up”.
Although the new funding was conceived for emerging markets, rather than advanced economies hit by the virus — such as Italy, South Korea and Japan — Ms Georgieva said “any member can turn to the fund for financial resources should that become necessary”.
With regards to Italy, she said the country was “actually stepping up, they are doing the right thing. Their package of measures [is] well-targeted, well thought-through”, with the EU in a position to “mobilise . . . sufficient financial resources within its members”.
Although Iran is an IMF member that has been struggling with the virus, Ms Georgieva said Tehran had not approached the fund for help, “but of course we want to serve the membership to the extent that we can”.
The emergency funding would fall short of full IMF programmes with strict conditionality, but Ms Georgieva said the fund would engage with recipients “to make sure we give them useful recommendations on how best to deploy this money”.
The coronavirus outbreak has now infected more than 94,000 people and killed in excess of 3,000.
As recently as January, the IMF had calculated that global economic growth would rise to a rate of 3.3 per cent this year. But the combination of supply and demand shocks due to the outbreak would lead to a figure lower than the 2.9 per cent recorded last year, Ms Georgieva told reporters.
“How far it will fall and how long the impact will be is still difficult to predict,” she said.
A day after the US Federal Reserve made an emergency cut in its main policy rate for the first time since the 2008 financial crisis, the Bank of Canada cut its benchmark interest rate by half a percentage point. The ECB said it was ready to take “appropriate and targeted measures” if necessary but has not acted yet.
Ms Georgieva said she was comforted by the co-ordination among central banks.
“They are really synchronised in their analysis, they talk to each other constantly but they are in different places in terms of what they can and cannot do, so that is of course reflected in central bank action,” she said.
Ms Georgieva was speaking alongside David Malpass, World Bank president. The development lender previously pledged up to $12bn for countries to improve their health systems to tackle the crisis and mitigate the impact.