The COVID-19 pandemic has brought the global economy to a standstill and plunged the world into a recession that will be ‘way worse’ than the global financial crisis a decade ago, according to International Monetary Fund managing director Kristalina Georgieva, who recently termed it ‘humanity’s darkest hour’. “This is a crisis like no other,” she said.
Georgieva, who addressed reporters last week in a joint video conference with the head of the World Health Organisation (WHO), called on advanced economies to step up their efforts to help emerging markets and developing countries survive the economic and health impact of the pandemic.
World Bank president David Malpass expressed similar sentiments in a post on LinkedIn, writing, “Beyond the health impacts from the COVID-19 pandemic, we are expecting a major global recession.” Georgieva said the IMF is working with the World Bank and WHO to advance their call for China and other official bilateral creditors to suspend debt collections from the poorest countries for at least a year until the pandemic subsides.
She said China has engaged ‘constructively’ on the issue, and the IMF would work on a specific proposal in coming weeks with the Paris Club of creditor nations, the Group of 20 major economies and the World Bank for review at the annual Spring Meetings, which will be held online in about two weeks.
In his post, Malpass said a debt standstill could begin on May 1, providing added liquidity for the poorest countries as they battle the disease. During the suspension period, he said, the World Bank and the IMF could evaluate the sustainability of those countries’ debt and the possible need for a debt reduction by official creditors and commercial creditors, according to global newswires.
Emerging markets and developing economies have been hard hit by the crisis, Georgieva said, noting that nearly $90 billion in investments had already flowed out of emerging markets, far more than during the financial crisis. Some countries are also suffering from sharp drops in commodity prices.
More than 90 countries—nearlyhalf the IMF’s 189 members—have asked for emergency funding from the IMF to respond to the pandemic, she said.
The IMF and WHO have called for emergency aid to be used mainly to strengthen health systems, pay doctors and nurses, and buy protective gear.
Georgieva said the IMF stood ready to use as much of its ‘war chest’ of $1 trillion in financing capability as needed.
The IMF has begun disbursing funds to requesting countries, including Rwanda, with requests from two additional African nations to be reviewed on Friday, she said.
IMF’s board would soon review a proposal to create a new short-term liquidity line to help provide funds to countries facing problems.
Georgieva also urged central banks, and particularly the US Federal Reserve, to continue offering swap lines to emerging economies.
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