IMF (International Monetary Fund) : Financing to address the pandemic crisis.

 

The IMF has recognized the heavy burden this crisis has been to low income countries in particular and has offered financial assistance in order to protect the most vulnerable and set the stage for inclusive and sustainable recovery.

As IMF Managing Director Kristalina Georgieva noted ahead of the April 2021 IMF/World Bank Annual Meetings: “The global economy is on firmer footing as millions of people benefit from vaccines. But while the recovery is underway, too many countries are falling behind and economic inequality is worsening. Strong policy action is needed to give everyone a fair shot—a shot in the arm to end the pandemic everywhere, and a shot at a better future for vulnerable people and countries.” The Fund’s actions are focused on the following tracks:

1. Emergency financing– The IMF is responding to an unprecedented number of requests for emergency financing. The Fund has temporarily doubled the access to its emergency facilities—the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) —allowing it to meet increased demand for financial assistance from member counties during the crisis. These facilities allow the Fund to provide emergency assistance without the need to have a full-fledged program in place. Emergency financing has been approved by the IMF’s Executive Board at record speed – to 80 countries. From June, the IMF has been also approving financial assistance under its other lending arrangements, bringing the total number of countries to 85 (for the most recent detailed data, please see the IMF’s COVID-19 Financial Assistance and Debt Service Relief Tracker).

2. Grants for debt relief – The IMF has extended debt service relief through the Catastrophe Containment and Relief Trust (CCRT) to 29 of its poorest and most vulnerable member countries on their IMF obligations, covering these countries’ eligible debt falling due to the IMF for the period between April 2020 and mid-October 2021. This debt relief helps the benefiting countries channel more of their scarce financial resources towards vital emergency medical and other relief efforts while these members combat the impact of the COVID-19 pandemic. IMF staff are working with donors to increase funds for further debt relief through this trust, so that the duration of grant-based debt relief to our most vulnerable members can be extended to up to a two year period, ending April 2022.

3. Calls for bilateral debt relief – The IMF Managing Director and the President of the World Bank on March 25, 2020, called on bilateral creditors to suspend debt service payments from the poorest countries. The G20 responded to this call on April 15, 2020, by agreeing to suspend repayment of official bilateral credit from the poorest countries until the end of 2020, was extended until end 2021. The Debt Service Suspension Initiative (DSSI) means that G20 bilateral official creditors will, during this period, suspend debt service payments from the poorest countries (73 low- and lower middle-income countries) that request the suspension. It is a way to temporarily ease the financing constraints for these countries and free up scarce resources to mitigate the human and economic impact of the COVID-19 crisis.

4. Calls for a new Special Drawing Rights (SDR) allocation of $650 billion – In April 2021, the International Monetary and Finance Committee (IMFC) called on the IMF to make a comprehensive proposal on a new SDR general allocation of US$650 billion to help meet the long-term global need to supplement reserves, while enhancing transparency and accountability in the reporting and the use of SDRs. The IMFC called on the IMF to work with its members to continue exploring ways for voluntary post-allocation channeling of SDRs to support members’ recovery efforts.

5. Enhancing liquidity– The IMF has approved the establishment of a Short-term Liquidity Line (SLL) to further strengthen the global financial safety net. The facility is a revolving and renewable backstop for member countries with very strong policies and fundamentals in need of short-term moderate balance of payments support.

6. Adjusting existing lending arrangements– The IMF is augmenting existing lending programs to accommodate urgent new needs arising from the corona virus, thereby enabling existing resources to be channeled to the necessary spending on medical supplies and equipment and for containment of the outbreak.

7. Policy advice – As the IMF monitors economic developments and the impact of the pandemic at the global, regional, and country levels, it recommends policies needed to overcome the crisis, protect the most vulnerable and set the stage for economic recovery.

8. Capacity Development– In response to the pandemic, the IMF is providing real-time policy advice and capacity development to over 160 countries to address urgent issues such as cash management, financial supervision, cyber security and economic governance. In particular, the Fund has been working with tax administrations and budget offices in many countries to help them restore operations and strengthen support to businesses and individuals, without compromising safeguards and accountability. IMF technical experts are also working with countries to revise and update their debt management strategies.

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