International Monetary Fund (IMF) Managing Director Kristalina Georgieva has said that they are seeking to expand resources for concessional financing. “This includes encouraging members with strong external positions to use their SDRs to help countries hard hit by the crisis. Several countries are already providing loan resources to the Poverty Reduction and Growth Trust using their SDR holdings and we continue to encourage other members to contribute resources.”
Compared to May, the economic picture is less bleak, the IMF Boss told a meeting of Heads of State and Government whilst talking on ‘Financing for Development in the Era of COVID-19 and Beyond’. The Fund she said will have to zero in on high debt levels. “The Debt Service Suspension Initiative is a good start, but we need to go further – and I urge the G20 to extend the DSSI. This would provide up to $12 billion of much needed debt service relief to participating countries.”
She continued that they are prioritizing supporting countries’ efforts on debt management and debt transparency. For some low-income and emerging market countries, unsustainable debt levels are such that a restructuring may be required.
From decisive and synchronized action by governments and central banks that put a floor under the world economy, including $12 trillion dollars of fiscal support, the Fund she said also saw a massive injection of liquidity by major central banks, and some emerging economies were able return to the markets to borrow. At the IMF they leaned forward, and have now provided close to 100 billion dollars to 81 countries to help them deal with this crisis. “We also see steps to control the pandemic through measures like wearing masks, and we are hopeful for vaccines, improved treatment, and more widely available testing.”
Where are we headed, she asked, “but we are not out of the woods, and while there are signs of recovery, it is partial, uneven and uncertain. The situation is grave in many low-income countries – they have been hit hard by domestic contractions coupled with falling exports, declining remittances and low commodity prices. And many small states are in difficulties due to the collapse of tourism” she explained.
Taken together, she said that they are very concerned that this crisis will reverse progress towards the Sustainable Development Goals and up to 90 million people could fall back into poverty.
The IMF Boss emphasised that it is paramount to maintain public support for people and businesses until a durable exit from the pandemic is secured everywhere. Low-income countries and emerging markets with weaker fundamentals will need international support. “We are keen to work with all parties to ensure any restructuring is done in an orderly fashion. We must use public support to build forward better and lay the foundations for the economy of tomorrow that is greener, smarter and more equitable. It is up to us all to build forward better” she concluded.
By Zainab Iyamide Joaque