WASHINGTON: The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said Friday.

“It is clear that we have entered a recession” that will be worse than in 2009 following the global financial crisis, she said in an online press briefing.

Over 80 countries, mostly of low incomes, have already have requested emergency aid from the International Monetary Fund, she said.

With the worldwide economic “sudden stop,” Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”

But she warned that estimate “is on the lower end.”

Governments in emerging markets, which have suffered an exodus of capital of more than $83 billion in recent weeks, can cover much of that, but “clearly the domestic resources are insufficient” and many already have high debt loads.

“We do know that their own reserves and domestic resources will not be sufficient,” Georgieva said, adding that the fund is aiming to beef up its response “to do more, do it better, do it faster than ever before.”

The IMF chief spoke to reporters following a virtual meeting with the Washington-based lender’s steering committee, when she officially requested a increase in the fund’s fast-deploying emergency facilities from their current level of around $50 billion.

She also welcomed the $2.2 trillion economic package approved by the US Senate, saying “it is absolutely necessary to cushion the world’s largest economy against an abrupt drop the economic activities.

Debt relief for poor countries

In direct response to the Covid-19 crisis the International Monetary Fund (IMF) Executive Board has adopted some immediate enhancements to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide debt service relief for its poorest and most vulnerable members.

The CCRT enables the IMF to deliver grants for debt relief benefitting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies.

The Covid-19 outbreak and the associated global economic turmoil creates a critical need to support the Fund’s membership, including exceptional balance of payments support for the poorest members especially impacted by the pandemic.

Well-targeted support will allow these countries to prioritise medical spending and health-related as well as other immediate needs in the challenging economic environment, characterised by sharp declines in income, lost revenue and higher expenses. In that context, the IMF Executive Board has approved changes to the CCRT that expand the qualification criteria to better cover the circumstances created by a global pandemic and to focus on delivering support for the most immediate needs.

Specifically, the decision will allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.

This would apply when a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale to warrant a concerted international effort to support the poorest and most vulnerable countries.

The IMF has also launched a fund-raising exercise that would enable the Trust to provide about $1bn for the current pandemic. Georgieva has called upon the Fund’s economically stronger member countries to help replenish the CCRT, which had only $200 million available for the world’s poorest countries.

The UK has responded with a pledge for £150m ($183m). Other donors, including Japan and China, are also coming forward with important contributions.

Published in Dawn, March 28th, 2020