How the IMF Can Help Countries Address the Economic Impact of Coronavirus

September 30, 2020

Exceptional times call for exceptional actions. 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 ready to deploy its entire lending capacity of around USD 1 trillion at the service of its membership 

  1. 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 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 76 countries totaling around $31 billion by end-September.  

    The Fund is also working to increase its capacity to provide concessional financing at zero-interest to low-income poorest countries under the Poverty Reduction and Growth Trust (PRGT) facility. The IMF is aiming to raise USD 17 billion in new PRGT resources and—thanks to donor pledges, including from Japan, UK, France, China, Spain, Australia and Canada—is very close to meeting its target.

  2. Grants for debt relief – The IMF Executive Board has offered immediate debt service relief to 29 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 increase the CCRT to USD 1.4 billion to provide two years of grant-based debt relief.

  3. Calls for suspension of debt service – The IMF Managing Director and the President of the World Bank on March 25 called on official bilateral creditors to suspend debt service payments from the poorest countries. This is a powerful, fast-acting initiative that frees up scarce money that can instead be used to safeguard lives and livelihoods. The G20 responded to this call by agreeing to a suspension of debt service on official bilateral credit under the Debt Service Suspension Initiative (DSSI).At end-September, 2020, 60 percent of eligible countries (44 of 73 countries) had already applied for suspension of official bilateral debt payments, and requests continue to come in.  According to G20 creditor data, as of September 8, 2020, the requests received under the DSSI amount to a deferral of around $5 billion of debt service for 2020.

    The Fund, the World Bank and the G20 have also called for private sector creditors to participate in similar debt relief on comparable terms, which could add a further $7 billion of relief.

  4. Flexible Credit Line – three countriesPeru, Colombia and Chilehave new arrangements under the Flexible Credit Line with facilities totaling around $46bn. This recognizes the very strong economic fundamentals of the se countries

  5. Enhancing liquidity – The Fund has also approved the establishment of a Short-term Liquidity Line (SLL) to further strengthen economic stability and confidence. 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 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.