IMF steering committee to consider doubling emergency pandemic aid

By Andrea Shalal
FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks during a conference hosted by the Vatican on economic solidarity

By Andrea Shalal

WASHINGTON (Reuters) - The International Monetary Fund's steering committee on Friday will consider doubling $50 billion (41 billion pounds) in emergency financing made available to help poor and middle-income countries deal with the coronavirus, a source familiar with the plans said on Thursday.

IMF Managing Director Kristalina Georgieva called for the extraordinary meeting after telling leaders of the world's 20 largest economies (G20) that the pandemic would plunge the global economy into recession in 2020.

In a statement to the G20 leaders, Georgieva said the depth of the economic contraction and the speed of recovery depended on containment of the pandemic and "how strong and coordinated our monetary and fiscal policy actions are."

Georgieva asked G20 leaders to back a doubling of the $50 billion in emergency financing announced by the Fund in early March.

To boost liquidity, she urged G20 leaders to support a "sizeable" SDR (Special Drawing Right) allocation, as was done during the 2008-2009 financial crisis, as well as expanded use of swap-type facilities at the Fund.

Georgieva gave no specific SDR number in her statement, but observers to the G20 meeting said an allocation of up to $500 billion could be needed - twice the amount added a decade ago.

The IMF's board of governors would have to approve the SDR allocation, which could be used by all members, not just poor and low-income countries, but such a meeting could be convened virtually in relatively short order.

Special Drawing Rights are the IMF's monetary unit and are derived from a basket of euro, yen, sterling, yuan and dollars. Each country’s SDR allocation is based on the size of its IMF quota, or shareholding.

G20 leaders did not explicitly address the issue, but in their joint statement said they supported IMF and World Bank efforts to help countries in need by "using all instruments to their fullest extent."

Georgieva told G20 leaders it was paramount to support emerging markets and developing economies, which were particularly hard hit by the crisis, sudden economic stops, capital flight and, for some, sharp drops in commodity prices.

She said G20 leaders had already undertaken extraordinary steps to save lives and safeguard their economies, but it was critical to target fiscal support to vulnerable households and businesses so they could quickly get back to work.

"Otherwise it will take years to overcome the effects of widespread bankruptcies and layoffs," she said.

The Fund has some $1 trillion in financial resources in place to respond, working closely with the World Bank and other international financial institutions, but the challenges were "enormous," Georgieva said.

She said an exceptionally large number of countries was asking for emergency aid at the same time, emerging markets had been hard hit by record capital outflows and there was a severe shortage of foreign exchange liquidity. In addition, many low-income countries were already saddled with a high debt burden.

She also asked G20 leaders to back a joint call by the Fund and the Bank urging official bilateral creditors to ease the debt burden of their poorest members.

(Reporting by Andrea Shalal in Washington; Editing by Lisa Shumaker and Matthew Lewis)