The International Monetary Fund (IMF) has provided 86 countries across the world with $108 billion in loans through all its finance instruments and programmes since March to address the economic challenges caused by the COVID-19 pandemic outbreak, according to the IMF.
The figures were included in the IMF’s managing director global policy agenda 2021, that was announced on Wednesday amid the IMF and World Bank’s spring meeting events.
According to the policy agenda, 28 countries are expected to receive debt service relief from the third tranche the IMF’s executive board approved recently.
On 1 April, the IMF’s executive board approved a third tranche of grants for debt service relief for 28 eligible member countries under the Catastrophe Containment and Relief Trust (CCRT) worth $238 million.
The IMF also approved new loan resources worth $24 billion for the poverty reduction and growth trust (PRGT) instruments as well as pledging $773 billion as extra grants to the CCRT instrument, according to the policy agenda.
The total current agreements under the stand-by agreement (SBA) programme, the rapid finance instrument (FRI), and the Precautionary Liquidity Line amount to about $108.9 billion, according to the policy agenda.
“An unprecedented policy response and rapid progress in vaccine development have helped pull the global economy from a deep recession. After a severe contraction in 2020, marked by heavy human losses and economic hardship, global activity is on a firmer footing thanks to extraordinary fiscal, monetary, and financial measures, and the remarkable adaptability shown by countries and people. After the initial crisis impact, global financial conditions eased significantly, supporting the flow of credit to households and firms. Industrial production has returned to pre-pandemic levels, as have international goods trade volumes”, says Kristalina Georgieva, the managing director of the IMF.
However, she pointed out that the global outlook is marked by high uncertainty and great divergence in light of the resurgent waves and variants of the pandemic that pose risks of renewed lockdowns, which will push countries to face a protracted period of start-stop activity.
While recovery from the pandemic is expected to be faster in advanced economies, it will lag in many emerging markets and developing economies (EMDEs) owing to the uneven access to vaccines, limited policy space, pre-existing vulnerabilities, and structural rigidities, according to Georgieva.
“In EMDEs, excluding China, we project cumulative per capita income losses by 2022 as high as 20 percent, relative to pre-crisis projections, versus 11 percent in advanced economies. Divergence within countries is also growing, with youth, women, low-skilled workers, and contact-intensive sectors disproportionately impacted. Unequal setbacks to schooling could further amplify divergent recovery paths.”
“We also need to be increasingly mindful that the exceptional policy measures may be spurring unintended consequences, such as stretched valuations and rising financial vulnerabilities. Meanwhile, efforts to address the climate change emergency need to be accelerated urgently,” Georgieva explained.
Dealing with the ongoing challenges, Georgieva noted that countries need to adopt transformative policies that aim to converge toward a green, digital, and inclusive future fast.
She added that such policies should place countries on a robust recovery path by raising potential output, hastening the transition to a low-carbon and digital economy, and promoting growth that benefits all.
Georgieva also highlighted the role higher carbon prices and green investments can play in enhancing reliance on renewables, increasing energy conservation, and creating jobs.
Also, she noted that digitalisation and the widespread use of digital money are expected to reshape the international monetary system; whether the system will ultimately be safer and more efficient depends on how countries seize the new opportunities while managing rising risks.
Digitalisation can boost countries’ productivity, complementing gains from investment in education, healthcare, and infrastructure; broaden access to finance and other services; and make public institutions more effective and transparent, according to Georgieva.
Georgieva also called for tackling weaknesses in domestic and international tax systems, addressing illicit and tax-avoiding financial flows, strengthening social safety nets, and improving governance for the sake of achieving inclusive growth.
“Comprehensive multilateral and bilateral policy action for vulnerable countries, including grants, concessional loans, and debt relief where needed, is critical to achieve a rapid convergence path for all. Efforts to strengthen debt transparency and sustainability and implement reforms will help address both debt and development challenges,” Georgieva urged.