COVID 19 PANDEMIC: INTERNATIONAL MONETARY FUND (IMF) SEES $1 TRILLION NOT ENOUGH
The International Monetary Fund (IMF) has painted a grim economic scenario arising from the Covid 19 pandemic where even its lending capacity of $1 trillion is not enough to contain global fiscal and monetary problems.
This was the assessment of IMF managing director Kristalina Georgieva in a podcast as she lamented the fact that from a rosy projection three months ago of per capita growth, now, negative capita growth is foreseen.
“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year,” she said.
She said that even the marshalling of the Fund’s $1 trillion lending capacity will not be enough to contain the economic malaise that would hit much of the poor countries and the IMF is now looking at other funding options like the use of the Special Drawing Rights of member countries.
The IMF has already responded to emergency funding from 90 countries but even together with the additional funding options, funding remains critical especially for those countries whose debts are unsustainable.
This is why she is calling on the rich countries to possibly look at debt relief , especially for the poor countries that are at the tender mercy of the financial contagion that arose from the Covid 19 pandemic.
“Together with the World Bank, we are calling for a standstill of debt service to official bilateral creditors for the world’s poorest countries,” Georgieva said.
That option is set to be discussed during the virtual Spring Meeting of the Fund set next week.
And just as the health crisis hits vulnerable people hardest, the economic crisis is expected to hit vulnerable countries hardest.
The IMF head painted a grim economic scenario: “Emerging markets and low-income nations—across Africa, Latin America, and much of Asia—are at high risk.”
She said that “with weaker health systems to begin with, many (countries)face the dreadful challenge of fighting the virus in densely populated cities and poverty-stricken slums—where social distancing is hardly an option.
Thus, “with fewer resources to begin with, they are dangerously exposed to the ongoing demand and supply shocks, drastic tightening in financial conditions, and some may face an unsustainable debt burden.