The IMF's Response to COVID-19

Last Updated: May 20, 2020

As IMF Managing Director Kristalina Georgieva said during her speech going into the IMF’s 2020 Spring Meetings, the Fund is working 24/7 to support our member countries—with policy advice, technical assistance and financial resources. In this FAQ you will find the Fund's response to COVID-19 in more detail.

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What is the Fund doing to help countries during the coronavirus crisis?

The IMF is responding to the coronavirus crisis with unprecedented speed and magnitude of financial assistance to help countries protect the lives and livelihoods of people, especially the most vulnerable. The Fund is at the center of the global financial safety net – and is deploying its entire lending capacity of USD 1 trillion at the service of its membership.

In addition to providing policy advice and technical assistance, the Fund’s actions are focused on five tracks:

1. Emergency financing – The IMF is responding to an unprecedented number of calls for emergency financing – from 102 countries so far. The Fund has doubled the access to its emergency facilities—the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) —allowing it to meet the expected demand of about $100 billion in financing. These facilities allow the Fund to provide emergency assistance without the need to have a full-fledged program in place. Financing has already been approved by the IMF’s Executive Board at record speed for nearly 60 countries. Please see the COVID-19 Emergency Financial Assistance tracker where you can find all approved emergency financing.

2. Grants for debt relief – The IMF Executive Board recently approved immediate debt service relief to 27 countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the COVID-19 pandemic. This provides grants to the Fund’s poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts. The Fund is working to almost triple the CCRT from about USD 500 million to USD 1.4 billion to extend the duration of relief.

3. Calls for bilateral debt relief – The IMF Managing Director and the President of the World Bank recognized the heavy burden this crisis is having on Low Income Countries and, on March 25, called on bilateral creditors to suspend debt service payments from the poorest countries. The G20 responded to this call on April 15 by suspending repayment of official bilateral credit from the poorest countries. This will serve as a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people. The International Institute for Finance, too, responded to this call urging private-sector creditors to forgo debt payments until the end of the year without declaring borrowers in default.

4. Enhancing liquidity – The Fund has also approved the establishment of a Short-term Liquidity Line (SLL) to further strengthen the global financial safety. 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.

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

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What economic policy actions have countries already taken to address this crisis?

 The IMF welcomes the decisive actions countries have already taken to address this health crisis and to cushion its impact on the economy. On fiscal policy, we estimate that discretionary fiscal policy actions that countries have taken to contain the pandemic and its damage to the economy amount to about $9 trillion, or $1 trillion more than the estimates just over a month ago. This consists of direct budget support—currently estimated at $4.4 trillion globally—and additional public sector loans and equity injections, guarantees, and other quasi-fiscal operations (such as non-commercial activity of public corporations)—estimated at another $4.6 trillion. 

The G20 advanced and emerging economies are at the forefront with actions totaling $7 trillion. Fiscal support is also provided by automatic stabilizers—features of the tax and benefit system that stabilize incomes and consumption, such as progressive taxation and unemployment benefits.

At the same time, to preserve the stability of the global financial system and support the global economy, central banks across the globe have also taken significant actions. As noted in Fund’s latest Global Financial Stability Report, these measures include the following. First, they have significantly eased monetary policy by cutting policy rates—in the case of advanced economies to historic lows. And half of the central banks in emerging markets and lower income countries have also cut policy rates. The effects of rate cuts will be reinforced through central banks’ guidance about the future path of monetary policy and expanded asset purchase programs.

Second, central banks have provided additional liquidity to the financial system, including through open market operations. Third, a number of central banks have agreed to enhance the provision of U.S. dollar liquidity through swap line arrangements. And finally, central banks have reactivated programs used during the global financial crisis as well as launched a range of new broad-based programs, including to purchase riskier assets such as corporate bonds. By effectively stepping in as “buyers of last resort” in these markets and helping contain upward pressures on the cost of credit, central banks are ensuring that households and firms continue to have access to credit at an affordable price.

To date, central banks have announced plans to expand their provision of liquidity — including through loans and asset purchases — by at least $6 trillion and have indicated a readiness to do more if conditions warrant. As a result of these actions aimed at containing the fallout from the pandemic, investor sentiment has stabilized in recent weeks. Strains in some markets have abated somewhat and risk asset prices have recovered a portion of their earlier declines. Financial conditions have eased somewhat, especially in Advanced Economies, boosted by a rebound in risk appetite and corporate valuations on the back unprecedented monetary policy accommodation. 

To support information exchange and international cooperation, the Fund has launched a policy actions tracker that provides updates on fiscal, monetary and financial policy actions taken by countries around the world in recent weeks.

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What more can countries do?

As the IMF Managing Director noted recently, exceptional times require exceptional action. Countries should focus on three priorities: first, protect lives. That means countries should place health expenditures at the top of the priority list. This includes funding health systems—getting resources to doctors, nurses and hospitals, the purchase of medical equipment, and to help the most vulnerable people. It also means refraining from restrictions of export of medical supplies so everybody can have access to them, including poor countries.

Second, protect livelihoods. This means ensuring that the lifelines for households and businesses are available during this period of economic standstill. This includes cash transfers, wage subsidies and tax relief, helping people to meet their needs and businesses to stay afloat. For those laid off, unemployment insurance could be temporarily enhanced, by extending its duration, increasing benefits, or relaxing eligibility. Where paid sick and family leave is not among standard benefits, governments should consider funding it to allow unwell workers or their caregivers to stay home without fear of losing their jobs during the epidemic.

On monetary policy, providing ample liquidity to banks and nonbank finance companies—particularly to those lending to small- and medium-sized enterprises, which may be less prepared to withstand a sharp disruption—is critical at this stage. Governments could also offer temporary and targeted credit guarantees for the near-term liquidity needs of these firms. Similarly, financial market regulators and supervisors could also encourage, on a temporary and time-bound basis, extensions of loan maturities.

Finally, prepare for recovery. Countries should work with health professionals on planning the reopening. Countries should also be ready for fiscal stimulus to lift demand and help the economy to come back. Once the current crisis abates, countries will face elevated debt levels, bankruptcies, unemployment and rising inequality – so they must begin to put measures in place now to protect us against those challenges.

The pace of economic recovery will depend on policies undertaken during this crisis. If policies ensure that workers do not lose their jobs, renters and homeowners are not evicted, companies avoid bankruptcy, and business and trade networks are preserved, the recovery will occur sooner and more smoothly. For countries that do not have the fiscal space to undertake these measures, the IMF stands ready to support these countries through its lending facilities.

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What is the impact of coronavirus on the global economy?

As the Fund noted in its latest World Economic Outlook report, this is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods. A lot depends on the epidemiology of the virus, the effectiveness of containment measures, and the development of therapeutics and vaccines, all of which are hard to predict. In addition, many countries now face multiple crises—a health crisis, a financial crisis, and a collapse in commodity prices, which interact in complex ways. Policymakers are providing unprecedented support to households, firms, and financial markets, and, while this is crucial for a strong recovery, there is considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown.

Under the assumption that the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year, the IMF projects global growth in 2020 to fall to -3 percent. This makes the Great Lockdown the worst recession since the Great Depression, and far worse than the Global Financial Crisis.

Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, the Fund projects global growth in 2021 to rebound to 5.8 percent. This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit. The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the economies of Japan and Germany, combined.

The latest Global Financial Stability Report shows that the financial system too has felt a dramatic impact, and a further intensification of the crisis could affect global financial stability. Since the pandemic’s outbreak, prices of risk assets have fallen sharply. At the worst point of the recent selloff, risk assets suffered half or more of the declines they experienced in 2008 and 2009. For example, many equity markets—in economies large and small—have endured declines of 30 percent or more at the trough. Credit spreads have jumped, especially for lower-rated firms. Signs of stress have also emerged in major short-term funding markets, including the global market for U.S. dollars.

Many countries have taken extraordinary steps and far-reaching measures to save lives and safeguard economies, and to set the stage for recovery. This includes fiscal actions amounting to about $9 trillion to contain the pandemic and its damage to the economy, as well as central bank actions to expand provision of liquidity by at least $6 trillion.

Supporting emerging market and developing countries is an urgent priority. They are already more economically vulnerable that the advanced economies—and now particularly hard hit by a lack of medical supplies, a sudden stop of the world economy, capital flight and, for some, a sharp drop in commodity prices.

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How many countries have requested assistance?

The IMF is responding to an unprecedented number of calls for emergency financing – from 100 countries so far. The Fund has doubled the access to its emergency facilities—the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) —allowing it to meet the expected demand of about $100 billion in financing. These facilities allow the Fund to provide emergency assistance without the need to have a full-fledged program in place. Financing has already been approved by the IMF’s Executive Board at record speed for nearly 60 countries. Please see the COVID-19 Emergency Financial Assistance tracker where you can find all approved emergency financing.

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How fast can you provide emergency financing?

After a country has formally requested support, staff assesses qualification requirements, work with the authorities to prepare a letter of intent, and prepare a staff report for the IMF Executive Board. We have streamlined our internal review processes and expect to be able in many cases to make financing available within weeks after a request for emergency financing.

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What do countries need to do to qualify for emergency assistance?

Any IMF member may apply for emergency assistance. There are some requirements for support under the Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI), including that the county’s debt is sustainable or on track to be sustainable, that it has urgent balance of payments needs, and that it is pursuing appropriate policies to address the crisis. We also take into account any debt restructuring operation underway and its prospects for success, which underscores the importance of every stakeholder making an effort to support countries in distress.

For countries that have existing Fund arrangements in place, it may be appropriate to augment and/or rephase access under the arrangements, or in cases where that may not be feasible to do on a timely basis, they may request support under the RCF or RFI.

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How is the IMF helping low-income countries struggling to service their debt?

The IMF Managing Director and the President of the World Bank recognized the heavy burden this crisis is having on Low Income Countries and, on March 25, called on bilateral creditors to suspend debt service payments from the poorest countries. The G20 responded to this call on April 15 by suspending repayment of official bilateral credit from the poorest countries. This will serve as a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people. The International Institute for Finance, too, responded to this call urging private-sector creditors to forgo debt payments until the end of the year without declaring borrowers in default.

At the IMF itself, the Executive Board recently approved immediate debt service relief to 27 countries under the IMF’s revamped Catastrophe Containment and Relief Trust (CCRT) as part of the Fund’s response to help address the impact of the COVID-19 pandemic. This provides grants to the Fund’s poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts. The Fund is working to almost triple the CCRT from about USD 500 million to USD 1.4 billion to extend the duration of relief.

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What is the IMF’s total lending capacity? Is it sufficient?

The Fund remains adequately resourced with a lending capacity of US$ 1 trillion to support members in managing the economic and social fallout of COVID-19. So far only 1/5th of the Fund’s capacity has been committed.