By The Nation
IMF managing director Kristina Georgieva said on Thursday (Mach 5) that $10 billion is available at zero interest for the “poorest” of its 189 member states.
She was speaking at a press conference called in part, she said, “to concentrate on a framework for how to think about the shock and how we – the membership, the IMF and other global institutions – can support those affected by this crisis in an effective and coordinated way”.
“We know the disease is spreading quickly,” Georgieva said. “With over one-third of our membership affected directly, this is no longer a regional issue – it is a global problem calling for a global response.
“We know that this shock is somewhat unusual as it affects significant elements of both supply and demand. Supply will be disrupted due to morbidity and mortality, but also the containment efforts that restrict mobility and higher costs of doing business due to restricted supply chains and a tightening of credit.
“Demand will also fall due to higher uncertainty, increased precautionary behaviour, containment efforts and rising financial costs that reduce the ability to spend.”
Georgieva suggested that about one-third of the economic losses from the disease will be due directly to loss of life, workplace closures and quarantines.
“The remaining two-thirds will be indirect, reflecting a retrenchment in consumer confidence and business behaviour and a tightening in financial markets.
“The good news is that financial systems are more resilient than before the global financial crisis. However, our biggest challenge right now is handling uncertainty,” she said.
She said macro-financial policy actions may be required to tackle the supply and demand shocks.
“The aim should be to stress ‘no-regret’ actions that shorten and soften the economic impact. They should be timely and targeted to the sectors, businesses and households hardest hit.”
IMF staff is currently identifying vulnerable countries and estimating potential financing needs “should the situation deteriorate further”, Georgieva said.
“We have about $1 trillion in overall lending capacity. For low-income countries, we have rapid-disbursement emergency financing of up to $10 billion that can be accessed without a full-fledged IMF programme.
“Other members can access emergency financing through the Rapid Financing Instrument. This facility could provide about $40 billion for emerging markets that could potentially approach us for financial support.
“We also have the Catastrophe Containment and Relief Trust, which provides eligible countries with up-front grants for relief on IMF debt service falling due. The trust proved to be effective during the 2014 Ebola outbreak, but is now underfunded with just over $200 million available against possible needs of over $1 billion.”