## Coronavirus Economic Planning: Hoping for the Best, Prepared for the Worst

_IMF Blog, March 12, 2020_

## Source details

**Canonical URL:** [Coronavirus Economic Planning: Hoping for the Best, Prepared for the Worst](https://www.imf.org/en/blogs/articles/2020/03/12/blog031220-coronavirus-economic-planning)

## Other formats

- [Markdown version](/en/blogs/articles/2020/03/12/blog031220-coronavirus-economic-planning/index.md)
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## Bibliographic details
- Authors: Martin Mhleisen
- Published: March 12, 2020

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### Economic risks and transmission channels
- Individuals infected by the coronavirus potentially face a blow to their health and personal and economic well-being.
- Countries hit by a sudden and unexpected public health emergency can see:
  - slowed economic activity and squeezed budgets as they spend more to counter the impact of the virus;
  - drops in revenue from falling economic activity;
  - lower export revenues due to falling tourism receipts or a decline in commodity prices;
  - an urgent balance-of-payments need if foreign exchange inflows and outflows mismatch.
- Even countries that avoid widespread contagion may experience faltering economic activity from spillovers via global developments or broken supply chains.

### Role of the IMF and timely financial assistance
- The IMF provides policy and technical advice and can mitigate economic fallout through timely financial assistance.
- Emergency financial assistance, on average, accounts for 20 percent of IMF members’ requests for support.
- Swift financing can be essential to:
  - replenish international reserves;
  - obtain critical imports;
  - boost budgets.

### Past precedent: Ebola response
- When the Ebola virus devastated parts of Africa, the IMF provided concessional emergency assistance of US$378 million to Guinea, Liberia, and Sierra Leone, a total of 2.3 percent of their combined GDP.
- The IMF also provided debt-relief using funds from the IMF’s Catastrophic Containment and Relief Trust, which is being boosted by a £150 million contribution from the United Kingdom.

### Emergency financing instruments
- The IMF has two emergency financing instruments for shocks, including large natural and health disasters:
  - Rapid Credit Facility (RCF)
  - Rapid Financing Instrument (RFI)
- Key features of these instruments:
  - size, speed, and flexibility;
  - disbursements are one-off payments meant to cover an urgent balance-of-payments need;
  - not subject to traditional IMF conditions (contrast with multi-period Fund programs);
  - the country must demonstrate that its debt is sustainable and commit to policies to overcome the emergency.
- Example: After Cyclone Idai swept through Mozambique, the Fund responded quickly to provide emergency support.

### Quantified IMF response capacity and options
- In the event of a severe downturn triggered by the coronavirus, the IMF estimates it could provide up to US$50 billion in emergency financing to fund emerging and developing countries’ initial response.
- Low-income countries could benefit from about US$10 billion of this amount, largely on concessional terms.
- Beyond immediate emergency financing:
  - members can request a new loan drawing on the IMF’s war chest of around US$1 trillion in quota and borrowed resources;
  - current borrowers can top up their ongoing lending arrangements.

### Policy message
- The IMF is supporting members by “hoping for the best” regarding the health emergency while being “prepared for the worst” through emergency financing and policy support.

*Source: IMF blog by Martin Mühleisen, March 12, 2020.*

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## References

- [عربي](https://blogs.imf.org/2020/03/12/coronavirus-economic-planning-hoping-for-the-best-prepared-for-the-worst/)
- [日本語](https://www.imf.org/ja/News/Articles/2020/03/12/blog031220-coronavirus-economic-planning)
- [Português](http://www.imf.org/pt/News/Articles/2020/03/12/blog031220-coronavirus-economic-planning?sc_mode=1)
- [economic fallout](https://blogs.imf.org/2020/03/09/limiting-the-economic-fallout-of-the-coronavirus-with-large-targeted-policies/)
- [Catastrophic Containment and Relief Trust](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/16/49/Catastrophe-Containment-and-Relief-Trust)
- [contribution from the United Kingdom](https://www.imf.org/en/News/Articles/2020/03/11/pr2084-united-kingdom-boosts-imfs-catastrophe-relief-fund-with-gbp150-million)
- [Rapid Credit Facility](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/08/Rapid-Credit-Facility)
- [Rapid Financing Instrument](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/19/55/Rapid-Financing-Instrument)
- [quota](https://www.imf.org/en/About/Factsheets/Sheets/2016/07/14/12/21/IMF-Quotas)
- [Monetary and Financial Stability During the Coronavirus Outbreak](https://blogs.imf.org/2020/03/11/monetary-and-financial-stability-during-the-coronavirus-outbreak/)
- [Fiscal Policies to Protect People During the Coronavirus Outbreak](https://blogs.imf.org/2020/03/05/fiscal-policies-to-protect-people-during-the-coronavirus-outbreak/)
- [Potential Impact of the Coronavirus Epidemic: What We Know and What We Can Do](https://blogs.imf.org/2020/03/04/potential-impact-of-the-coronavirus-epidemic-what-we-know-and-what-we-can-do/)
- [Questions and Answers on the IMF’s $50 billion Rapid-disbursing Emergency Financing Facilities](https://www.imf.org/en/About/FAQ/50-billion-rapid-disbursing-emergency-financing-facilities/)
- [IMF Factsheet: How the IMF Can Help Countries Address the Economic Impact of Coronavirus](https://www.imf.org/en/About/Factsheets/Sheets/2020/02/28/how-the-imf-can-help-countries-address-the-economic-impact-of-coronavirus/)

_Source: https://www.imf.org/en/blogs/articles/2020/03/12/blog031220-coronavirus-economic-planning_