–Fund announces $1tr for member states amid COVID-19 pandemic
ISLAMABAD: The International Monetary Fund (IMF) Executive Board on Friday decided to allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.
According to a press statement, in direct response to the COVID-19 crisis, the IMF Board has adopted some immediate enhancements to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide debt service relief for its poorest and most vulnerable members.
The CCRT enables the IMF to deliver grants for debt relief benefitting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies, says the statement. The COVID-19 outbreak and the associated global economic turmoil creates a critical need to support the Fund’s membership, including exceptional balance of payments support for the poorest members especially impacted by the pandemic.
Well-targeted support will allow these countries to prioritize medical spending and health-related as well as other immediate needs in the challenging economic environment, characterized by sharp declines in income, lost revenue and higher expenses.
In that context, the IMF Executive Board has approved changes to the CCRT that expand the qualification criteria to better cover the circumstances created by a global pandemic and to focus on delivering support for the most immediate needs.
IMF has also said that it stands ready to use its $1trillion financial capacity to support its member countries.
International Monetary and Financial Committee (IMFC) Chair Lesetja Kganyago and IMF Managing Director Kristalina Georgieva said this in a joint statement issued here following Friday’s conference call of the IMFC.
“We are in an unprecedented situation where a global health pandemic has turned into an economic and financial crisis. With a sudden stop in economic activity, global output will contract in 2020. Member countries have already taken extraordinary actions to save lives and safeguard economic activity. But more is needed. Priority should be afforded to targeted fiscal support to vulnerable households and businesses to accelerate and strengthen the recovery in 2021,” said the statement.
Although the greatest health impact has been in advanced economies, emerging market and developing countries, especially low-income countries, will be particularly hard hit by a combination of a health crisis, a sudden reversal of capital flows and, for some, a sharp drop in commodity prices, said the statement.
Many of these countries need help to strengthen their crisis response and restore jobs and growth, given foreign exchange liquidity shortages in emerging market economies and high debt burdens in many low-income countries, it added.
Strong and coordinated policy actions, including at the multilateral level, are key to effectively resolve this global crisis. To this end, IMFC members welcomed the IMF’s expeditious efforts to support an exceptionally high number of countries requiring IMF emergency financing at the same time, as well as its close cooperation with other international financial institutions, especially the World Bank Group. The IMF stands ready to use its US$1 trillion financial capacity to support its member countries.