IMF offers US$ 50 billion to help address Coronavirus
Header image: Kristalina Georgieva, managing director of the International Monetary Fund.
The International Monetary Fund (IMF) is making available about US$ 50 billion through its rapid-disbursing emergency financing facilities for low income and emerging market countries that could potentially seek support following the Coronavirus outbreak. Of this, US$ 10 billion is available at zero interest for the poorest members through its Rapid Credit Facility.
“Over one-third of our membership has been directly affected. This is no longer a regional issue – it is a global problem calling for a global response. We also know that it will eventually retreat, but we don’t know how fast this will happen. We know that this shock is somewhat unusual as it affects significant elements of both supply and demand,” commented Kristalina Georgieva, managing director of the International Monetary Fund.
“Supply will be disrupted due to morbidity and mortality, but also the containment efforts that restrict mobility and the 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. These effects will spill over across borders,” she added.
The IMF believes that about one-third of the economic losses from the disease will be direct costs: from 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, said Georgieva, is that ‘financial systems are more resilient than before the Global Financial Crisis. However, our biggest challenge right now is handling uncertainty’.
She added that, under any scenario, global growth in 2020 will drop below last year’s level. How far it will fall, and for how long, is difficult to predict, and would depend on the epidemic, but also on the timeliness and effectiveness of the IMF’s actions. This is particularly challenging for countries with weaker health systems and response capacity—calling for a global coordination mechanism to accelerate the recovery of demand and supply.