{
  "title": "Policy Action for a Healthy Global Economy",
  "publication": "IMF Blog, March 16, 2020",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy",
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  "summary": "Quarantining and social distancing are the right prescription for public health, while the opposite—constant contact and close coordination—is needed to secure the global economy.",
  "sections": [
    {
      "heading": "Overview and key message",
      "content": "- Quarantining and social distancing are the right prescription for public health, while the opposite—constant contact and close coordination—is needed to secure the global economy.\n- Increased coordinated action is key to boosting confidence and providing stability to the global economy as COVID-19 spreads.\n- The IMF published a set of policy recommendations to guide countries in the difficult days ahead."
    },
    {
      "heading": "Three action areas for the global economy",
      "content": "- Fiscal\n  - Additional fiscal stimulus will be necessary to prevent long-lasting economic damage.\n  - Fiscal measures already announced prioritize health spending and those in need, including increased paid sick leave and targeted tax relief.\n  - The case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour.\n  - Example from the Global Financial Crisis (GFC): fiscal stimulus by the G20 amounted to about 2 percent of GDP, or over $900 billion in today’s money, in 2009 alone.\n\n- Monetary policy\n  - In advanced economies, central banks should support demand and boost confidence by easing financial conditions and ensuring the flow of credit to the real economy.\n  - The U.S. Federal Reserve announced further interest rate cuts, asset purchases, forward guidance and a drop in reserve requirements.\n  - Major central banks took decisive coordinated action to ease swap lines and thus lessen global financial market stresses.\n  - Going forward, there may be a need for swap lines to emerging market economies.\n  - Investors have removed nearly $42 billion from emerging markets since the beginning of the crisis—the largest outflow they have ever recorded.\n  - Central banks in emerging-market and developing economies will need to balance addressing capital flow reversals and commodity shocks; foreign exchange interventions and capital flow management measures can complement interest rate and other monetary policy actions.\n\n- Regulatory response\n  - Financial supervisors should preserve financial stability, maintain banking system soundness and sustain economic activity.\n  - The crisis will stress test whether post-financial-crisis reforms serve their purpose.\n  - Banks should be encouraged to use flexibility in existing regulations, for example by using their capital and liquidity buffers, and undertake renegotiation of loan terms for stressed borrowers.\n  - Risk disclosure and clear communication of supervisory expectations will be essential for proper market functioning.\n  - IMF staff research shows that changes in spending have a multiplier effect when countries act together."
    },
    {
      "heading": "What the IMF can do (financial support and instruments)",
      "content": "- The IMF stands ready to mobilize its $1 trillion lending capacity to help our membership.\n- As a first line of defense, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs.\n- These instruments could provide in the order of $50 billion to emerging and developing economies.\n- Up to $10 billion could be made available to our low-income members through our concessional financing facilities, which carry zero interest rates.\n- The Fund already has 40 ongoing arrangements—both disbursing and precautionary—with combined commitments of about $200 billion; in many cases these arrangements can provide another vehicle for rapid disbursement of crisis financing.\n- The Fund has received interest from about 20 countries and will be following up with them in the coming days.\n- The Catastrophe Containment and Relief Trust (CCRT) can help the poorest countries with immediate debt relief to free up resources for health spending, containment, and mitigation.\n  - United Kingdom’s recent pledge of $195 million means the CCRT now has about $400 million available for potential debt relief.\n  - The aim, with the help of other donors, is to boost it to $1 billion."
    },
    {
      "heading": "Policy implications and recommendations (summary)",
      "content": "- Scale up fiscal stimulus, both domestically targeted and coordinated internationally, to prevent long-lasting economic damage.\n- Continue and expand health-focused spending and targeted support for affected people and businesses (e.g., paid sick leave, tax relief).\n- Central banks should ease financial conditions, ensure credit flows, and coordinate swap lines where needed, including potentially to emerging markets.\n- Use foreign exchange interventions and capital flow management tools in emerging-market and developing economies to complement monetary policy.\n- Regulators should encourage banks to deploy capital and liquidity buffers and to renegotiate loan terms for stressed borrowers, while ensuring clear risk disclosure and supervisory communication.\n- International cooperation across fiscal, monetary, and regulatory domains amplifies policy effectiveness and helps stabilize the global economy.\n\nKristalina Georgieva, March 16, 2020 — Policy Action for a Healthy Global Economy (IMF blog)\n\n---\n\n\n References\n\n- عربي\n- 日本語\n- Português\n- IMF published a set of policy recommendations\n\nSource: https://www.imf.org/en/blogs/articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy"
    }
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    "[Markdown version](/en/blogs/articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy/index.md)",
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    "Authors: Kristalina Georgieva",
    "Published: March 16, 2020",
    "Quarantining and social distancing are the right prescription for public health, while the opposite—constant contact and close coordination—is needed to secure the global economy.",
    "Increased coordinated action is key to boosting confidence and providing stability to the global economy as COVID-19 spreads.",
    "The IMF published a set of policy recommendations to guide countries in the difficult days ahead.",
    "Fiscal",
    "Monetary policy",
    "Regulatory response",
    "The IMF stands ready to mobilize its $1 trillion lending capacity to help our membership.",
    "As a first line of defense, the Fund can deploy its flexible and rapid-disbursing emergency response toolkit to help countries with urgent balance-of-payment needs.",
    "These instruments could provide in the order of $50 billion to emerging and developing economies.",
    "Up to $10 billion could be made available to our low-income members through our concessional financing facilities, which carry zero interest rates.",
    "The Fund already has 40 ongoing arrangements—both disbursing and precautionary—with combined commitments of about $200 billion; in many cases these arrangements can provide another vehicle for rapid disbursement of crisis financing.",
    "The Fund has received interest from about 20 countries and will be following up with them in the coming days.",
    "The Catastrophe Containment and Relief Trust (CCRT) can help the poorest countries with immediate debt relief to free up resources for health spending, containment, and mitigation.",
    "Scale up fiscal stimulus, both domestically targeted and coordinated internationally, to prevent long-lasting economic damage.",
    "Continue and expand health-focused spending and targeted support for affected people and businesses (e.g., paid sick leave, tax relief).",
    "Central banks should ease financial conditions, ensure credit flows, and coordinate swap lines where needed, including potentially to emerging markets.",
    "Use foreign exchange interventions and capital flow management tools in emerging-market and developing economies to complement monetary policy.",
    "Regulators should encourage banks to deploy capital and liquidity buffers and to renegotiate loan terms for stressed borrowers, while ensuring clear risk disclosure and supervisory communication.",
    "International cooperation across fiscal, monetary, and regulatory domains amplifies policy effectiveness and helps stabilize the global economy.",
    "[عربي](https://www.imf.org/ar/News/Articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy)",
    "[日本語](https://www.imf.org/ja/News/Articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy)",
    "[Português](http://www.imf.org/pt/News/Articles/2020/03/16/blog031620-policy-action-for-a-healthy-global-economy?sc_mode=1)",
    "[IMF published a set of policy recommendations](https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/03/16/Policy-Steps-to-Address-the-Corona-Crisis-49262)"
  ],
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