WASHINGTON (Reuters) – The IMF may need to step outside its comfort zone and consider “exceptional measures” to help countries deal with the coronavirus pandemic and mitigate its economic impact, Managing Director Kristalina Georgieva said on Monday.
FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks during a conference hosted by the Vatican on economic solidarity, at the Vatican, February 5, 2020. REUTERS/Remo Casilli
Georgieva, in a blog published on the International Monetary Fund’s website, said the Fund had already taken extraordinary steps to free up resources, especially for emerging markets and developing economies that have seen an outflow of $100 billion in recent months – the highest on record.
But more resources might be needed if market pressures continued to mount, and lending – even on easy terms – was not always the best solution, given already high debt burdens faced by many countries, she said.
“The IMF, like our member countries, may need to venture even further outside our comfort zone to consider whether exceptional measures might be needed in this exceptional crisis,” she said, suggesting solutions could include increased collaboration with other international institutions and the private sector.
Georgieva gave no details, but her remarks come after a joint IMF-World Bank paper published on Friday said a broader group of countries – beyond the 77 poorest countries that have already been promised a suspension in debt payments on official bilateral loans – may need debt relief.
Georgieva also revived her call for a possible allocation of Special Drawing Rights (SDRs), its currency, a step that has been opposed by the United States. An SDR allocation is akin to a central bank “printing” new money.
The IMF last forecast the global economy would contract by 3% in 2020 due to the pandemic, marking the steepest downturn since the Great Depression of the 1930s.
“We stand ready to deploy our full lending capacity and to mobilize all layers of the global financial safety net, including whether the use of SDRs could be more helpful, Georgieva wrote in the blog.
U.S. Treasury Secretary Steven Mnuchin last week rejected an SDR allocation, arguing that 70% of the funds created through an SDR allocation would go to G20 countries, most of whom did not need it, while only 3% would go to low-income countries.
SDRs USDXDR=R, based on dollars, euro, yen, sterling and yuan, are the IMF’s official unit of exchange. Member countries hold them at the Fund in proportion to their shareholdings.
Reuters last week reported that the United States, the IMF’s dominant shareholder, is blocking an allocation because it would give new avenues of funding for Iran and China.
Mnuchin has called for advanced economies to contribute instead to two IMF facilities that provide funds to the poorest countries, and said the U.S. government was exploring such a contribution, although he gave no details.
In her blog, Georgieva lauded the generosity of Britain, Japan, Germany, the Netherlands, Singapore and China in boosting the resources available in the Catastrophe Containment and Relief Trust, which helps the IMF’s poorest members by providing grants to cover their debt service payments to the IMF.
She also recognized Japan, France, Britain, Canada and Australia for pledges to expand the IMF’s Poverty Reduction and Growth Trust to $11.7 billion, taking the Fund to about 70% of its $17 billion goal.
Reporting by Andrea Shalal; editing by Jonathan Oatis