Transcript of Press Briefing by Kristalina Georgieva following a Conference Call of the International Monetary and Financial Committee
IMF News, March 27, 2020
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- Published: March 27, 2020
Global economic outlook and recession
- The IMFC represents our 189 members and met virtually to discuss the challenge posed by Covid -19.
- The IMF has reassessed prospects for growth for 2020 and 2021 and states: "It is now clear that we have entered a recession as bad or worse than in 2009."
- Recovery is projected in 2021, potentially a "sizeable rebound," conditional on:
- containing the virus everywhere, and
- preventing liquidity problems from becoming a solvency issue.
- The G-20 reported fiscal measures totaling some five trillion dollars or over 6 percent of global GDP.
- Timeline: the IMF aims to have a concrete package of proposals for IMFC consideration at the spring meetings on April 16.
IMF demand, operational response, and capacity proposals
- Policy tracker: IMF launched a policy actions tracker for 186 countries.
- Surge in financing requests:
- "Over 80 countries have placed requests."
- Executive board approved the first of those requests for the Kyrgyz republic in a record first disbursement.
- Later specified as 81 requests received: three-quarters are requests and one quarter are inquiries.
- Of the 81 requests: 50 are from low-income countries and 31 from middle-income countries.
- Proposed IMF actions:
- "Proposing to double our emergency financial capacity, simplify our processes, fill the gap in our concessional financing."
- Reviewing lending instruments (expand use of precautionary credit lines; bring forward short term liquidity provisions).
- Urgent need to secure the borrowing capacity of the fund through new arrangements to borrow and bilateral borrowing arrangements.
- The IMF notes it has a one trillion dollars lending capacity provided by shareholders and seeks to make full use of it.
- Encourages countries to approach the Fund early: "The sooner they do it, the sooner they obtain necessary financing, the sooner they implement good policy."
Emerging markets, financing needs, and debt relief
- IMF estimate: "Our current estimate for the overall financial needs of emerging markets is 2.5 trillion dollars." (described as "on the lower end")
- Capital flows and commodity shock:
- "Some 83 billion dollars had left emerging markets."
- Commodity exporters suffer additional price shock and reduced global demand for exports including tourism and manufactured goods.
- Debt and concessional financing:
- Board approved changes in the application of the Catastrophic Containment and Relief Trust (CCRT) to provide some debt relief to the poorest members.
- IMF is seeking support from membership to increase capacity of the CCRT; pledges have been received from UK, Japan and China.
- On IDA (World Bank low-income) countries: official annual debt service is "just around $11 billion dollars, slightly less than 11 billion dollars."
- Approximately half of this is debt of countries already at high debt distress.
- The IMF will coordinate with official creditors, the G-20, and the Paris Club; private creditor involvement has not yet been decided but is anticipated to be part of a comprehensive approach.
Country-specific actions and G-20 coordination
- G-20 role:
- G-20 leaders representing 85 percent of the world economy focused on containing the health crisis, mobilizing collective medical capacity, keeping trade in medical supplies unconstrained, and coordinating fiscal and monetary measures.
- Finance ministers of the G-20 tasked to develop an action plan rapidly; international organizations (including the IMF) are drawn into the collective response.
- Examples of IMF financing decisions:
- Approved package for Jordan: 1.3 billion dollars.
- Operational modality:
- IMF staff have been working virtually for more than 10 days to adjust operations and step up response.
United States: recession, stimulus, and policy implications
- On U.S. economic status: "As Chairman Powell said... The U.S. is in recession, as is the rest of the advanced...economies."
- IMF is finalizing projections for 2020 to be released prior to the Spring Meetings; will report unemployment and contraction estimates when data allow.
- On the U.S. 2 trillion dollar stimulus package:
- Viewed as "very welcome" for cushioning the U.S. economy and for its global importance.
- Noted targeted components:
- "A hundred and seventeen billion dollars for hospitals."
- Measures to help workers and families, protect firms including SMEs, and protect the financial system.
- Sufficiency depends on "how long it takes to contain the pandemic."
Key operational and policy priorities emphasized
- Contain the health crisis aggressively to shorten the economic standstill.
- Use well-targeted fiscal measures focused on health systems, people, businesses, and the financial system.
- Rapidly mobilize IMF financing, simplify access, and expand concessional support for low-income countries.
- Coordinate with the World Bank, G-20, Paris Club, and potentially private creditors on debt relief and liquidity provision.
- Secure the full borrowing and lending capacity of the IMF (including the one trillion dollars capacity) through completion of domestic procedures and borrowing arrangements.
Transcript of Press Briefing by Kristalina Georgieva following a Conference Call of the International Monetary and Financial Committee, March 27, 2020.