IMF managing director urges policymakers to commit more money to recovery efforts.

Georgieva, who spoke at a Front Page event with Atlantic Council President and CEO Frederick Kempe, explained that the coronavirus pandemic has triggered a “truly global crisis” for the economy as “it is hitting us simultaneously everywhere,” forcing policymakers to effectively “stop the global economy.”

According to her, the IMF now projects that 170 countries could experience negative per capita income growth this year, a stark contrast to the Fund’s initial projections for this year which showed likely growth in 160 countries.

IMF managing director further warned that it can get worse if in the second half of the year there is still a significant lingering impact of the pandemic that forces either a return to lockdowns or a very slow reopening of economies, not to mention the possibility of a larger second wave of infection. 

Emerging markets are a particular area of concern, according to Georgieva, as “on top of being hit by the pandemic itself and having to join the great lockdown, they are faced with additional very serious problems.”  The drop in oil and commodity prices have cut off vital income sources for many of these countries, she explained, while countries “that depend on the injection of capital—and practically everyone in this group depends on that—are seeing flight to safety of gigantic proportions,” by investors that she argued is “much bigger than in the global financial crisis.”

Georgieva said that the IMF estimates that US$100 billion have left emerging markets because of the uncertainty around the crisis, while remittances to these countries have fallen by 20 to 30 percent already. 

According to her, the Fund has already received over one hundred requests for support.  Georgieva said emerging markets could need as much as $2.5 trillion in assistance, but that she has heard from Fund ministers that “all options are on the table and if more needs to be done we will be able to step up and do it.”  The Fund reportedly has four times more money today than before the global financial crisis. 

The Fund is also looking into expanded Special Drawing Rights (SDRs), which were used in the global financial crisis to provide emergency liquidity for all IMF member countries. 

Georgieva also praised the significant actions governments have taken to provide stimulus for their own countries during this crisis.  As a new tracker from the Global Business and Economics Program—which Georgieva described as an “important contribution”—shows, Group of Twenty (G20) countries have implemented massive stimulus measures, but have varied widely in their size, especially when compared to their response to the global financial crisis. 

Mounting debt from these fiscal actions will certainly continue to be a concern, but Georgieva argued that “interest rates are likely to remain low for a long time,” and “in 2021, we could see debt stabilizing but still in relatively not dramatic conditions in terms of how much you pay to service this debt.”  She commended an agreement to place a moratorium on bilateral debt payments that could come into force by May 31, and reported that “good progress is being made with private creditors so they can join voluntarily on a basis of standardized approach…so there is no risk of moral hazard from others winning [because] some [are] doing the right thing.”