global, multilateral and EU-related measures to tackle COVID-19 and its consequences
International Monetary Fund (IMF) & World bank’S RESPONSE TO THE COVID-19 PANDEMIC
LAST UPDATED 20 July
IMF | IMF Executive Board Approves US$7.6 Million Debt Relief to the Republic of Burundi Under the Catastrophe Containment and Relief Trust
The IMF Executive Board approved debt relief under the Catastrophe Containment and Relief Trust to provide US$ 7.63 million (SDR 5.48 million) over the next 3 months, and potentially up to US$ 24.97 million (SDR 17.96 million) over the next 21 months.
IMF debt relief will help free up resources for public sector health needs including other emergency spending and help mitigate the balance of payments shock posed by the COVID-19 pandemic.
Given the risks ahead, it will be important to ensure close cooperation with multilateral organizations and donors and ensure adequate budget allocations toward health and other priority spending.
IMF | IMF Managing Director Urges Further Action to Secure a Resilient Recover
Ms. Kristalina Georgieva, Managing Director of the International Monetary Fund: “The IMF has moved with unprecedented speed—providing emergency financing to 72 countries in four months—and we will continue to support our member countries relentlessly. We see especially pressing needs to assist low-income countries, and small and fragile states which have been hit very hard with the support of our membership, we continue to mobilize additional concessional resources to help them. In this context, we are stepping up action to make better use of existing—Special Drawing Rights (SDRs).”
IMF | Egypt Takes Proactive Approach to Limit the Pandemic’s Fallout
Egypt was one of the fastest-growing emerging markets prior to the pandemic. But significant domestic and global disruptions from the crisis have affected the outlook and shuffled policy priorities.
As part of Egypt’s two-step request for IMF financing to respond to COVID-19, $5.2 billion was approved under the 12-month Stand-by Arrangement (SBA). Financing under the SBA follows the $2.8 billion approved in May under the IMF’s Rapid Financing Instrument.
Egypt’s economy is being impacted both through virus containment measures as well as through the sudden stop in tourism, fall in exports, drop in remittances, and lower revenue from the Suez Canal.
[A]t the peak of the global risk aversion during March and April, Egypt experienced capital outflows of nearly $16 billion.
To manage the fallout from the pandemic, the authorities proactively sought IMF support in two steps.
First, they requested $2.8 billion in financing under the Rapid Financing Instrument, approved in May, allowing them to respond with health and social spending for the most vulnerable groups.
Second, they requested a 12-month Stand-By Arrangement (SBA) with access to $5.2 billion in financing to help the government preserve the economic gains of the past four years—while continuing to ensure adequate health and social spending—and further advance structural reforms to position Egypt for sustained recovery.
The government’s goal is to place Egypt on a strong footing for recovery. Fiscal policy is being eased to support the economy and address crisis needs, including increases in health spending (26 percent) and social protection (10 percent). The government is also introducing measures to partially offset the revenue shortfall, including to promote green recovery through a fee on the consumption of fuel products.
IMF | Digital Financial Inclusion in the Times of COVID - 19
The IMF is concerned that ‘low-income households and small firms can benefit greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic growth.’
‘Lockdowns and social distancing are accelerating the use of digital financial services’ . The IMF is following an example of China. In 2003 due to the SARS epidemic, China decided to rely on digital payment and e-commerce.
The IMF had introduced the ‘index of digital financial inclusion’, that measures progress in 52 emerging markets and developing economies. There are different implementations of digital financial services in various countries due to their economic development.
‘Extending traditional financial services to low-income households and small firms goes hand-in-hand with increasing economic growth and reducing income inequality.
‘Digital financial inclusion is also associated with higher GDP growth.’
‘During the COVID-19 lockdowns, digital financial services are enabling governments to provide quick and secure financial support to “hard-to-reach” people and businesses, as demonstrated in Namibia, Peru, Zambia, and Uganda. This will help mitigate the economic fallout and potentially strengthen the recovery.’
‘Finding the right balance between enabling financial innovation and addressing several risks: insufficient consumer protection, lack of financial and digital literacy, unequal access to digital infrastructure, and data biases that need action at the national level; as well as addressing money laundering and cyber risks through international agreements and information sharing, including on antitrust laws to ensure adequate competition.’
IMF | Financial Conditions Have Eased, but Insolvencies Loom Large
Amid the human tragedy and economic recession caused by the COVID-19 pandemic, the recent surge in risk appetite in financial markets has caught analysts’ attention. After sharp declines in February and March, equity markets have rallied back, in some cases to close to their January levels, while credit spreads have narrowed significantly, even for riskier investments. This has created an apparent disconnect between financial markets and economic prospects. Investors seem to be betting that lasting strong support from central banks will sustain a quick recovery even as economic data point to a deeper-than-expected downturn, as shown in the June 2020 World Economic Outlook Update.
In the newest Global Financial Stability Update, we analyze the tug of war between the real economy and financial markets and the risks involved. With huge uncertainties about economic outlook and investors highly sensitive to COVID-19 developments, pre-existing financial vulnerabilities are being exposed by the pandemic. Debt levels are rising, and potential credit losses resulting from insolvencies could test bank resilience in some countries. Some emerging market and frontier economies are facing refinancing risks, and lower-rated countries have started to regain access to markets only slowly.
The disconnect between financial markets and the real economy can be illustrated by the recent decoupling between the soaring U.S. equity markets and plunging consumer confidence (two indicators that have historically trended together), raising questions about the rally’s sustainability if not for the boost provided by central banks.
Countries need to strike the right balance between competing priorities in their response to the pandemic, being mindful of the trade-offs and implications of continuing to support the economy while preserving financial stability.
IMF | Reopening from the Great Lockdown: Uneven and Uncertain Recovery
Over 75 percent of countries are now reopening at the same time as the pandemic is intensifying in many emerging market and developing economies. Several countries have started to recover. However, in the absence of a medical solution, the strength of the recovery is highly uncertain and the impact on sectors and countries uneven.
Compared to our April World Economic Outlook forecast, we are now projecting a deeper recession in 2020 and a slower recovery in 2021. Global output is projected to decline by -4.9 percent in 2020, 1.9 percentage points below our April forecast, followed by a partial recovery, with growth at 5.4 percent in 2021.
Global cooperation is ever so important to deal with a truly global crisis. All efforts should be made to resolve trade and technology tensions, while improving the multilateral rules-based trading system. The IMF will continue to do all it can to ensure adequate international liquidity, provide emergency financing, support the G20 debt service suspension initiative, and provide advice and support to countries during this unprecedented crisis.
IMF | The Great Lockdown through a Global Lens
Aside from its unprecedented scale, the Global Lockdown is playing out in ways that are very different from past crises. These unusual characteristics are emerging all over the world, irrespective of the size, geographic region, or production structure of economies.
First, this crisis has dealt a uniquely large blow to the services sector. (...) In the peak months of the lockdown the contraction in services has been even larger than in manufacturing, and it is seen in advanced and emerging market economies alike. There are exceptions—like Sweden and Taiwan Province of China, which adopted a different approach to the health crisis, with limited government containment measures and a consequently proportionately smaller hit to services vis-à-vis manufacturing.
Second, despite the large supply shocks unique to this crisis, except for food inflation, we have thus far seen, if anything, a decline in inflation and inflation expectations pretty much across the board in both advanced and emerging market economies. Despite the considerable conventional and unconventional monetary and fiscal support across the globe, aggregate demand remains subdued and is weighing on inflation, alongside lower commodity prices. With high unemployment projected to stay for a while, countries with monetary policy credibility will likely see small risks of spiraling inflation.
Third, we see striking divergence of financial markets from the real economy, with financial indicators pointing to stronger prospects of a recovery than real activity suggests. Despite the recent correction, the S&P 500 has recouped most of its losses since the start of the crisis; the FTSE emerging market index and Africa index are substantially improved; the Bovespa rose significantly despite the recent surge in infection rates in Brazil; and portfolio flows to emerging and developing economies have stabilized.
The IMF, in coordination with other international organizations, will continue to do all it can to ensure adequate international liquidity, provide emergency financing, support the G20 debt service suspension initiative, and help countries maintain a manageable debt burden. The IMF will also provide advice and support through surveillance and capacity development, to help disseminate best practices, as countries learn from each other during this unprecedented crisis.
IMF | Combating COVID-19: How Should Banking Supervisors Respond?
The massive macro-financial shock caused by the pandemic continues to ravage the global economy and has put both banks and borrowers under severe strain. Supervisors find themselves confronted with unprecedented challenges which call for decisive action to ensure that banking systems support the real economy while preserving financial stability. This blog introduces nine joint IMF-World Bank recommendations to help supervisors navigate these uncharted waters and calls for vigilance regarding policy measures taken that are not consistent with international standards. This is critical to prevent the health and economic crisis morphing into a financial crisis.
Recommendations to guide bank supervisors in their response to the pandemic
Use the flexibility in the regulatory and supervisory framework while upholding minimum prudential standards and preserving consistency with international standards.
Facilitate well-designed public- and -private-support interventions that target affected borrowers and sectors.
Minimize opportunities for moral hazard and maintain adherence to sound credit risk management practices, while facilitating the effective allocation of new credit.
Provide guidance on asset classification and provisioning, building on the guidance from standard-setting bodies and refrain from relaxing the regulatory definition of nonperforming exposures.
Maintain transparency and provide additional guidance on risk disclosure.
Suspend the automaticity of corrective supervisory action triggers to deal with the extraordinary circumstances of the current pandemic.
Review supervisory priorities and maintain close dialogue with the industry.
Coordinate actively with supervisory colleagues, domestically and internationally.
Ensure the smooth functioning of critical market infrastructures.
IMF | Executive Board Approves $14.3 Million Debt Relief to the United Republic of Tanzania Under the Catastrophe Containment and Relief Trust
The IMF Executive Board approved debt relief under the Catastrophe Containment and Relief Trust to provide US$14.3 million over the next 4 months, and potentially up to US$25.7 million over the next 23 months.
IMF debt service relief will help free up resources for public sector health needs and other emergency spending, as well as mitigate the balance of payments shock resulting from the pandemic.
Given the risks ahead, it would be important to ensure close cooperation with multilateral organizations and donors and ensure sufficient budget allocations on health and other priority spending.
World Bank | Updated estimates of the impact of COVID-19 on global poverty
In April we estimated that COVID-19 is pushing between 40 and 60 million into extreme poverty. Since then, the epicenter of the pandemic has shifted from Europe and North America to the global south. This has increased the death toll in low- and middle-income countries, induced longer shutdowns, and increased the economic costs of the pandemic. As a result, our estimates of the impact of the virus on global poverty have shifted as well.
The new growth forecasts contain two scenarios—baseline and downside—allowing us to explore two different scenarios for how the pandemic may impact poverty.
The baseline scenario assumes that the outbreak remains at levels currently expected and that activity recovers later this year, while the downside scenario assumes that outbreaks persist longer than expected, forcing lockdown measures to be maintained or reintroduced.
Should the downside scenario materialize, vulnerable firms would exit markets, vulnerable households would sharply reduce consumption, and several low- and middle-income countries would see heightened financial stress.
The baseline scenario has global growth contracting by about 5% in 2020 while the downside scenario presents a global growth contraction of 8% in 2020.
The new Global Extreme Poverty (GEP) forecasts give a particularly sobering picture for India, which is home to many of the world’s poor. As a result, though the picture is broadly unchanged for Sub-Saharan Africa compared to our last update, South Asia may see a larger increase in the number of poor as a result of COVID-19.
World Bank | COVID-19 to Plunge Global Economy into Worst Recession since World War II
The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. According to World Bank forecasts, the global economy will shrink by 5.2% this year. That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870, the World Bank says in its June 2020 Global Economic Prospects.
The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing. While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.
[G]lobal growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
The pandemic highlights the urgent need for health and economic policy action, including global cooperation, to cushion its consequences, protect vulnerable populations, and strengthen countries’ capacities to prevent and deal with similar events in the future. It is critically important for emerging market and developing economies, which are particularly vulnerable, to strengthen public health systems, address challenges posed by informality and limited safety nets, and enact reforms to generate strong and sustainable growth once the crisis passes.
World Bank | Pandemic, Recession: The Global Economy in Crisis
Many countries have avoided more adverse outcomes through sizable fiscal and monetary policy support. Despite these measures, per capita incomes in all EMDE regions are expected to contract in 2020, likely causing many millions to fall back into poverty.
Each Asia and Pacific: Growth in the region is projected to fall to 0.5% in 2020, the lowest rate since 1967, reflecting disruptions caused by the pandemic. China is expected to slow to 1% this year and rebound to 6.9 percent in 2021 as activity gradually normalizes there and as lockdowns are lifted around the world. Economic activity in the rest of East Asia and Pacific is forecast to contract by 1.2 percent in 2020 before rebounding to 5.4 percent in 2021. Among major economies of the region, Malaysia (-3.1%), the Philippines (-1.9%), and Thailand (-5%) are forecast to experience the biggest contractions this year.
Europe and Central Asia: The regional economy is forecast to contract by 4.7%, with recessions in nearly all countries. The Russian Federation’s economy is forecast to contract by 6.0% this year, reflecting a jump in COVID-19 cases and the collapse in oil prices. Turkey’s economy is anticipated to shrink by 3.8% this year, subject to a drop in investment and shutdowns. Economic activity is expected to contract in every sub-region in 2020 as outbreaks of the virus constrain private consumption and investment: Central Europe by 5%; Western Balkans by 3.2%; South Caucasus by 3.1%; Eastern Europe by 3.6%; and Central Asia by 1.7%.
Latin America and the Caribbean: The shocks stemming from the pandemic will cause regional economic activity to plunge by 7.2% in 2020. Brazil’s economy is projected to shrink by 8% due to lockdowns, plunging investment, supply chain disruptions, and soft global commodity prices. Mexico’s economy, hit by tighter financing conditions, the plunge in oil prices, the halt in tourism, and mobility restrictions, is on track to contract by 7.5%. Economic activity in Argentina is forecast to decline by 7.3%, reflecting stringent mitigation measures, lower external demand, and the impacts of uncertainty related to ongoing debt negotiations. Central America’s economy is projected to shrink by 3.6% and the Caribbean is anticipated to contract by 1.8%, and by 3.1% excluding Guyana, where the offshore oil industry is developing rapidly.
Middle East and North Africa: Economic activity in the Middle East and North Africa is forecast to contract 4.2% as a result of the pandemic and oil market developments. Iran is expected to contract 5.3%, the third year of contraction in a row. In many oil exporters, growth will be significantly constrained by policy cuts in oil production. In Gulf Cooperation Council (GCC) countries (-4.1%), low oil prices and uncertainty related to outbreaks of the virus will further weigh on non-oil activity. Economic activity among oil importers is expected to contract by 0.8% in 2020, as tourism and exports decline.
South Asia: GDP in the region is projected to contract by 2.7% in 2020 as pandemic mitigation measures hinder consumption and services activity and uncertainty about the course of the pandemic chills private investment. In India, growth is estimated to have slowed to 4.2% in FY 2019/20, which ended in March 2020. Output is projected to contract by 3.2% in FY 2020/21, when the impact of the pandemic will largely hit. Pakistan (-2.6% in FY 2019/20) and Afghanistan (-5.5%) are both projected to experience contractions, as mitigation measures are anticipated to weigh heavily on activity. Growth in Bangladesh (1.6% in FY 2019/20) and Nepal (1.8% in FY 2019/20) is expected to decelerate markedly due to pandemic-related disruptions including mitigation measures and sharp falls in exports and remittance inflows.
Sub-Saharan Africa: Economic activity in the region is on course to contract by 2.8% in 2020, the deepest on record. The economy of Nigeria is expected to shrink by 3.2% this year, given the collapse in prices for oil. South Africa’s output is forecast to contract 7.1% this year, the deepest contraction in a century, as stringent but necessary containment measures curtail economic activity. Economic activity among commodity importing economies is anticipated to shrink this year despite lower oil prices, as international travel restrictions weigh on tourist visits. Industrial commodity exporters’ GDP is similarly anticipated to contract in 2020 as domestic disruptions are compounded by low prices for oil and metals. Agricultural commodity exporters are also expected to experience a collapse in economic activity this year as foreign direct investment and tighter financial conditions delay investment.
IMF | Courage under Fire: Policy Responses in Emerging Market and Developing Economies to the COVID-19 Pandemic
After the Covid - 19 the economy of many countries sharply declined. The unprecedented impact of the crisis was on the oil market, trade and capital flow. Therefore, the Fiscal Policy Tracker summarize some threads:
Fiscal policy to save lives and protect livelihoods: ‘Countries have provided loans, guarantees, and tax breaks to corporations and SMEs, and extended support to vulnerable households with higher unemployment benefits and subsidies on utility prices. Partly reflecting these constraints, the total discretionary fiscal response to the shock has been lower (although still sizeable) in both emerging market and low-income economies at 2.8 and 1.4 percent of GDP respectively in extra spending and tax reductions.’
Monetary and financial sector support - an anchor for stabilities: a relaxation of selected macroprudential measures can support the supply of credit to hardest-hit individuals and economic sectors.
Staying flexible: ‘Currencies of EMDEs (Emerging Market and Developing Economy) with flexible exchange rates have depreciated in response to outflow pressures and heightened risk aversion—over 25 percent in a few cases.’
Digitization—a lifeline to protect the vulnerable: ‘ importance of using digital technology to counteract the sudden economic distress on households and small and medium-sized enterprises, and to limit the spread of the disease by encouraging cashless payments. Digital solutions have helped target relief to the vulnerable and enhance the effectiveness of traditional macro policies.’
Managing supply disruption: ‘prolonged lockdown hampered the supply chain, however it is important to ensure food and medical supply and its security on a temporary basis.’
International solidarity—helping countries reach further: ‘In response to the COVID-19 shock, the global financial safety net has been activated and strengthened. The IMF has quickly provided emergency assistance to more than 60 countries. Further, as demand for liquidity increased, the IMF recently established a new Short-term Liquidity Line as part of its COVID-19 response to augment its lending toolkit. In addition, massive liquidity provision by major advanced economy central banks, while directed primarily at domestic financial conditions, has also alleviated pressures on emerging markets and developing economies.’
IMF | Courage under Fire: Policy Responses in Emerging Market and Developing Economies to the COVID-19 Pandemic
Speech of Kristalina Georgieva: ‘Our message to governments is clear: do whatever you can, but make sure you keep the receipts. We don’t want accountability and transparency to take a back seat. In practice, this means support for countries in adopting a range of public financial management, anti-corruption, and anti-money-laundering measures.’
‘From a position nearing economic stasis there is nonetheless an opportunity to use policies to reshape how we live and to build a world that is greener, smarter, and fairer':
Greener: The right policies will help allocate resources to investments that support public goods like clean air, flood defenses, resilient infrastructure, and renewable energy. Meanwhile, lower commodity prices can create the fiscal space to phase out regressive fuel subsidies that increase carbon emissions. The payoff would be considerable: in just the energy sector, a low-carbon transition could require $2.3 trillion in investment every year for a decade, bringing growth and jobs during the recovery phase.
Smarter: We are accelerating our work with members to broaden the digital transformation so that its benefits are shared even more widely. Well-managed fintech, for example, can help end financial exclusion for the 1.7 billion people in developing economies who have no access to banking.
Fairer: As governments ramp up spending to support individuals, businesses, and communities, there is an opportunity to build fairer societies and economies by investing in people. That means spending more and spending better on schools, training, and reskilling. It means expanding social programs that are well targeted to reach the most vulnerable. And it means empowering women by reducing labor market discrimination. Such investment will need to be funded by more equitable taxation, especially given enhanced public debt levels stemming from the crisis.
world bank | When and how to safely reopen the economy: How better data can help
‘The World Bank, in collaboration with the government of Colombia, is developing a prototype dashboard that helps policy makers on a near real-time basis monitor the interplay of virus spread’
From the health perspective infections should no longer be spread worldwide, local public health units should have enough capacity to test people, and the health care system should care and save medical workers at the frontline.
‘From an economic reactivation perspective, governments should consider the ability of different sectors to maintain physical distancing and operate safely, while maximizing the impact of their reactivation on economic output and employment.’
IMF: As part of the Fund’s response to help address the impact of the COVID-19 pandemic, the IMF Board recently approved immediate debt service relief to 29 member countries under the revamped Catastrophe Containment and Relief Trust (CCRT)
Emergency financing – The IMF is responding to an unprecedented number of calls for emergency financing – from more than 100 countries so far. The Fund has doubled the access to its emergency facilities—the Rapid Credit Facility and Rapid Financing Instrument —allowing it to meet the expected demand of about USD 100 billion in financing. These facilities allow the Fund to rapidly provide emergency assistance without the need to have a full-fledged program in place and without the more traditional IMF conditionality. Financing is being approved by the IMF’s Executive Board at record speed – for over 60 countries by end-May.
World Bank Group’s Operational Responses to Covid - 19 - Projects List
The World Bank had established the first set of supporting strategies for developing countries. The amount of the first set of the package is $1.9 billion. The help should be provided for 25 countries.
Over 15 months, the World Bank Group will be providing up to $160 billion in financing tailored to the health, economic and social shocks countries are facing, including $50 billion of IDA resources on grant and highly concessional terms.
The World Bank launches Inaugural Sustainable Development Bond Impact Report
World Bank bonds support the financing of sustainable development projects and programs in member countries. The WB is aiming to build strategic cooperation with investors for promoting the development and growth of the private sector.
“World Bank Sustainable Development Bonds help investors implement environmental, social, and governance investment strategies, while achieving development impact goals,” said Anshula Kant, Managing Director, and World Bank Group Chief Financial Officer.
The World Bank claims from the governments to use the three-pillar strategy to relieve the transition of workers’ back to work routine and support market labor recovery:
To prepare an exit strategy from current emergency measures
To get the timing right for tailored support to workers
To stimulate overall labor demand and livelihood
The COVID - 19 Pandemic: Shocks to Education and Policy Responses
The World Bank explains how to decrease the educational shock triggered by the Great Lockdown due to the COVID - 19. The policy responses to achieve this can be summarized in three overlapping phases:
Improving and Accelerating
The COVID - 19 made schools and universities to shut down. Many students had problems accessing the virtual learning environment, thus there is a high possibility of decreasing the educational functioning. Without relevant attention and financial reforms in the educational sphere, there is possibility of increasing dropouts, losing learning skills, higher inequality among students that led to economic shock that damaged the previous structure of education.
Broad, fast action to save lives and help countries rebuilt
The World Bank is stating the main possible ways to fast action to fight the COVID - 19:
Saving lives by the implementation of emergency health operations.
Protection of the poorest and the most vulnerable with new programs of social protection.
Saving jobs and businesses through the support of the private sector.
Building a more resilient sector with supporting policy reforms to make rebuilding actions faster and more productive.
Fiscal Policies for the Recovery from COVID - 19: IMF Blog
Benefits to the economy from governments were decided to implement by the IMF.
The International Monetary Fund encourages countries and its governments to take necessary and important steps to benefit the fiscal policies and make the economy to grow faster after the pandemia.
Attributes to safe social net:
First, provide broad coverage and adequate benefits to vulnerable groups in a progressive way—that is, more generous benefits to the poorest.
Second, preserve work incentives and help beneficiaries find jobs, obtain health care, and attend education and training.
Third, strive to avoid a fragmented, complex web of social protection programs that ends up being more costly to run and not benefiting people in a fair and consistent way.
Plan discretionary policies: claims government to reduce taxes for businesses so they will be able to hire employees back on favourable grounds for both.
Invest for the future: this step is made for prevention of next possible viruses and its spread, so the high quality of the investment into the public is required.
Managing higher government debt loads: made for the balancing between fiscal deficits and government debt ratios.
How the IMF is Promoting Transparent and Accountable Use of COVID - 19 Financial Assistance
To ensure that the financial aid received by countries was directed on the fighting with the covid - 19 consequences, the IMF decided to provide transparency and accountability by its emerging financial actions. They believe also that with this step they can fight corruption.
Managing Director’s Opening Remarks at the Petersberg Climate Dialogue XI
Opening Remarks by Kristalina Georgieva
AS PREPARED FOR DELIVERY
The Petersberg Climate Dialogue comes as we are fighting the COVID-19 pandemic. In the minds of some, the health crisis and the “great lockdown” needed to address it mean that we can push the pause button in the fight against the other existential crisis we face—our changing climate. Nothing is further from the truth. We are about to deploy a massive fiscal stimulus which can help us address both crises at the same time.
Governments around the world have deployed extraordinary policy measures to save lives and protect livelihoods in the worst economic downturn since the Great Depression. And given the gravity of this crisis, significant further efforts will be needed—especially during the recovery phase.
If this recovery is to be sustainable—if our world is to become more resilient—we must do everything in our power to promote a “green recovery.”
In other words, taking measures now to fight the climate crisis is not just a “nice-to-have.” It is a “must-have” if we are to leave a better world for our children.
So what can governments do?
Last week IMF Fiscal Affairs Department staff published broad guidance[i] on “greening the recovery.” Let me highlight three priorities:
First—use public support wisely. When governments provide financial lifelines to carbon-intensive companies, they should mandate commitments to reduce carbon emissions. We saw similar agreements during the global financial crisis, when some automakers committed to higher fuel efficiency standards. With oil prices at record-low levels, now is the time to phase out harmful subsidies. And governments need to prioritize investment in green technologies, clean transport, sustainable agriculture, and climate resilience. In the energy sector alone, the IMF estimates that a low-carbon transition would require $2.3 trillion in investment every year for a decade.[ii] These types of investments would boost growth and jobs during the recovery phase, and help steer the world in the right climate direction.
Second—promote green finance. We need to continue the emphasis on using green bonds and other forms of sustainable finance. In light of the extended use of government guarantees, part of them can be deployed to mobilize private finance for green investment. And financial firms have to be mandated to better disclose climate risks in their lending and investment portfolios. More broadly, we need to find better ways of pricing in climate risk. New IMF analysis[iii] shows that, over the past 50 years, climate-related disasters have had only a modest effect on equity markets. Clearly, many investors have yet to face up to the new climate reality.
Third—put the right price on carbon.
WTO and IMF heads call for lifting trade restrictions on medical supplies and food
As our members grapple with their response to the global health and economic crisis, we call for more attention to the role of open trade policies in defeating the virus, restoring jobs, and reinvigorating economic growth. In particular, we are concerned by supply disruptions from the growing use of export restrictions and other actions that limit trade of key medical supplies and food.
IMF COVID-19 Response—A New Short-Term Liquidity Line to Enhance The Adequacy Of The Global Financial Safety Net
The COVID-19 pandemic has created severe disruption in the global financial system, with many emerging market and developing countries (EMDCs) facing liquidity shortages. In the context of intensified demand for liquidity and heightened global uncertainty, staff has revisited the 2017 proposal for a new facility to provide liquidity support to the Fund’s membership. This paper proposes the establishment of a new Short-term Liquidity Line (SLL) as a special facility in the General Resources Account (GRA), based on the key features of the 2017 blueprint.
The Managing Director of the IMF and the Heads of the RFAs Emphasize their Readiness to Cooperate to Mitigate the Impact of COVID-19 on the Global Economy
Stressing the urgent need for combined, multilateral efforts to face the extraordinary human and economic crisis caused by the pandemic, the heads issue the following statement:
“The IMF and the world’s Regional Financing Arrangements stand united in addressing the global challenges related to the Coronavirus (COVID-19) pandemic and wish to extend our deepest sympathies to all those affected. We are following the situation very closely in order to contribute to the decisive actions needed globally to face these exceptional and uncertain circumstances. We are determined to provide the necessary support to mitigate the economic and financial impacts of the pandemic, especially on the most vulnerable people and countries.
IMF head [Georgieva] Dire economic forecasts may be too optimistiC
BBC interview with kristalina georgieva
(taken entirely from the BBC interview linked below)
In April, because of Covid-19, [Ms Georgieva] says: "We are projecting 170 countries to see income per capita shrinking during 2020" - 87% of the atlas of the world.
And yet this detail - which is part of a broader forecast that sees world GDP dive 3% in 2020, creating "a global recession we have not seen in our lifetimes" - may not be the end of it.
"I want to stress this may be actually a more optimistic picture than reality produces," Ms Georgieva told the BBC.
"Epidemiologists are now helping us making macroeconomic projections. Never in the history of the IMF have we had that. And what they're telling us is that the novel coronavirus is a big unknown, and we don't know whether it may return in 2021."
"It is the time that governments should spend as much as they can afford and more, but keep the receipts. We don't want to lose accountability and transparency during this crisis," Ms Georgieva says.
"We will see some countries being able to do more, and actually, the UK has already done quite a lot. And we will see some countries that will need more help because they have much more limited capacity to act. And this is where the IMF and other international financial institutions come into play."
"Saving lives and saving livelihoods go hand in hand with stopping the pandemic. We simply cannot restart the economy to the fullest, and without restarting the economy, finance ministers are not going to have the revenues they need, including for their health services," Ms Georgieva says.
"So we have to, of course, listen to the health professionals and design protocols that allow us over time to reopen segments of the economy and do that cautiously. We have to then carefully calibrate how we're doing this reopening."
She suggests that automated factories and rural areas might be easier to reopen, but there is still some "figuring out" to do around reopening busy cities and towns.
"It's a very simple message - you cannot beat the virus unless you beat it everywhere. When one country is suffering from an epidemic, then it makes sense to be protective and keep what the country needs domestically.
"But when we are all hit by an epidemic... we need to act together. And we would very much encourage countries to actually integrate their capabilities rather than trying to keep it each one for itself."
But her central message is to look beyond the understandable concern for what is happening in the world's advanced nations, to the problems facing poorer ones. The G20's decision to suspend debt repayments from the world's most deprived countries was a start, but she says we must remain mindful.
"Poor countries in the world are hit multiple times. They're hit by the pandemic. They're hit by the spillover from economic contraction elsewhere. They're hit by the flight to safety," Ms Georgieva says.
"$100bn has left emerging markets in developing countries just in two months, much more than during the global financial crisis. They're hit because remittances are drying up. And those that are commodity exporters are hit by prices of their exports dropping."
She says "lifelines" are needed now for such countries, such as the debt standstill which would free billions for health services. "We need each other. It is a moment testing our humanity and being together acting with solidarity. We will get to the other side of this."
World Bank Group and IMF mobilize partners in the fight against COVID-19 in AfricA
The World Bank Group and International Monetary Fund today convened African leaders, bilateral partners, and multilateral institutions to spur faster action on COVID-19 response in African countries. H.E. Cyril Ramaphosa of South Africa, United Nations Secretary General Antonio Guterres, Director General of the WHO Dr. Tedros Adhanom Ghebreyesus, Africa Union Commission Chairperson Moussa Faki Mahamat, and officials of individual countries outlined their policy plans for effective use of resources, multilateral organizations including the United Nations pledged their continued support, and bilateral partners reemphasized their commitment to a debt standstill beginning May 1, 2020. This comes in response to calls from the World Bank Group President Malpass, International Monetary Fund Managing Director Georgieva, and other partners for creditors to suspend debt repayments in order to provide much-needed support to the poorest countries.
Communiqué of the Forty First Meeting of the IMFC
Chaired by Mr. Lesetja Kganyago, Governor of the South African Reserve Bank
The Great Lockdown: Worst Economic Downturn Since the Great Depression
World Economic Outlook, April 2020: Chapter 1: The Great Lockdown
The world has changed dramatically in the three months since our last update of the World Economic Outlook in January. A rare disaster, a coronavirus pandemic, has resulted in a tragically large number of human lives being lost. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put in a Great Lockdown. The magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes.
World Economic Outlook, April 2020: Chapter 1
The Great Lockdown
The COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by –3 percent in 2020, much worse than during the 2008–09 financial crisis. In a baseline scenario--which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound—the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support. The risks for even more severe outcomes, however, are substantial. Effective policies are essential to forestall the possibility of worse outcomes, and the necessary measures to reduce contagion and protect lives are an important investment in long-term human and economic health. Because the economic fallout is acute in specific sectors, policymakers will need to implement substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses domestically. And internationally, strong multilateral cooperation is essential to overcome the effects of the pandemic, including to help financially constrained countries facing twin health and funding shocks, and for channeling aid to countries with weak health care systems.
World Bank Group Launches First Operations for COVID-19 (Coronavirus) Emergency Health Support, Strengthening Developing Country Response
Some say there is a trade-off: save lives or save jobs – this is a false dilemma
join statement IMF & WHO
The IMF for its part aims to help by doubling its emergency response capacity from $50 billion up to $100 billion – making it possible for countries to get twice as much money from the Fund as had been made available during emergencies. Its total lending capacity of $1 trillion is now secured thanks to the decisive actions of its membership.
The Fund is also increasing its capacity to ease debt service obligations of its poorest members through the Catastrophe Containment Relief Trust for which generous donors are providing grant resources. And together with the World Bank, it is advocating for a standstill of debt service from the poorest countries to official bilateral creditors for as long as the world economy is paralysed by the pandemic.
The course of the global health crisis and the fate of the global economy are inseparably intertwined. Fighting the pandemic is a necessity for the economy to rebound. That is why the WHO and IMF are cooperating closely with one another, and with other international organisations, to help address countries’ priority needs.
Europe’s COVID-19 Crisis and the Fund’s Response
The Fund is moving as fast as possible to support the membership at this time of extraordinary systemic challenges. We are dramatically streamlining our internal rules and procedures so as to be able to respond with the speed, agility, and scale called for by this unprecedented peacetime challenge. Our shareholders—189 countries worldwide—expect nothing less, and we stand ready to play our role in supporting Europe’s efforts to fight the pandemic.
The Great Lockdown: Worst Economic Downturn Since the Great Depression
International Monetary Fund Managing Director Kristalina Georgieva statement
International Monetary Fund Managing Director Kristalina Georgieva made the following statement today following a conference call of G20 Finance Ministers and Central Bank Governors:
“The human costs of the Coronavirus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage. This is a moment for solidarity—which was a major theme of the meeting today of the G20 Finance Ministers and Central Bank Governors.
“I emphasized three points in particular:
1 “First, the outlook for global growth: for 2020 it is negative—a recession at least as bad as during the global financial crisis or worse. But we expect recovery in 2021. To get there, it is paramount to prioritize containment and strengthen health systems—everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.
“We strongly support the extraordinary fiscal actions many countries have already taken to boost health systems and protect affected workers and firms. We welcome the moves of major central banks to ease monetary policy. These bold efforts are not only in the interest of each country, but of the global economy as a whole. Even more will be needed, especially on the fiscal front.
2 “Second, advanced economies are generally in a better position to respond to the crisis, but many emerging markets and low-income countries face significant challenges. They are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the epidemic. Investors have already removed US$83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. We are particularly concerned about low-income countries in debt distress—an issue on which we are working closely with the World Bank.
3 “Third, what can we, the IMF, do to support our members?
We are concentrating bilateral and multilateral surveillance on this crisis and policy actions to temper its impact.
We will massively step up emergency finance—nearly 80 countries are requesting our help—and we are working closely with the other international financial institutions to provide a strong coordinated response.
We are replenishing the Catastrophe Containment and Relief Trust to help the poorest countries. We welcome the pledges already made and call on others to join.
We stand ready to deploy all our US$1 trillion lending capacity.
And we are looking at other available options. Several low- and middle-income countries have asked the IMF to make an SDR allocation, as we did during the Global Financial Crisis, and we are exploring this option with our membership.
Major central banks have initiated bilateral swap lines with emerging market countries. As a global liquidity crunch takes hold, we need members to provide additional swap lines. Again, we will be exploring with our Executive Board and membership a possible proposal that would help facilitate a broader network of swap lines, including through an IMF-swap type facility.
“These are extraordinary circumstances. Many countries are already taking unprecedented measures. We at the IMF, working with all our member countries, will do the same. Let us stand together through this emergency to support all people across the world.”
Global Arena Research Institute launches the "Beyond" Initiative
The global COVID-19 emergency emphasizes local and nation-based responses and national
collectivism in general. In the short term, it is understandable. The multilateral institutions (including the EU) were not devised with such a scenario in mind.
However, in the long run, going national and going local is not the way forward. Nation-states cannot win the fight against COVID-19 (or similar threats in the future) by themselves. Moreover, there is a mounting risk that such a nationalist bias will endure and last beyond the COVID-19 crisis.
GARI believes, instead, that it is imperative to look "beyond" the local and national horizons
As of today, GARI launches the initiative "Beyond" to stress this point. We are starting by tracking and highlighting global, multilateral and EU-related measures to tackle COVID-19 and its consequences. We believe that the COVID-19 coverage in the (social) media favours reporting on national measures and national policies and politics, thus further prompts nationalism as such.
Our subsequent goal is to follow on implementation and impact of these measures in a coherent and continuous manner.
Any suggestions, inputs or comments welcome (via FB messenger, LinkedIn or email )