IMF urges help for poorer countries as outlook dims

The International Monetary Fund (IMF) today called on multilateral organisations and international financial institutions to extend greater assistance to developing countries including debt relief.

IMF Chief Economist Gita Gopinath issued the call as she predicted that the global economy would decline by about three per cent this year before rebounding to 5.8 per cent in 2021.

Describing the COVID-19 pandemic as “a crisis like no other”, Gopinath said in a world economic outlook press conference that the lockdown was worse than the great depression “and far worse than the global financial crisis”.

She said the three per cent decline predicted by the IMF for the world economy this year was a downgrade from 6.3 percentage points in its New Year forecast.

Should the pandemic continue into the second half of the year, Gopinath painted a worst-case scenario of more job losses, a longer containment period, worsening financial conditions and further breakdown in global supply chains.

Global GDP would fall “by an additional three per cent in 2020 and if the health crisis rolls over in 2021 it could reduce GDP by an additional eight per cent”, she added.

The IMF economist said she was expecting debt levels to rise “quite significantly” over the next 12 months, adding that there will be some countries that will require external aid or debt restructuring.

She said: “For low income countries that have high levels of debt burden it is very important for creditors around the world to step up and provide debt relief to these countries.”

Gopinath said as soon as containment measures were over, countries should shift their policies swiftly to supporting demand, incentivising hiring and repairing balance sheets on private and public sectors to aid the recovery.

Moratoria on debt payments and debt restructuring may need to be continued during the recovery phase, she suggested.

At the same time, she said multilateral cooperation would be vital to the health of the global recovery.

Gopinath said: “To support needed spending in developing countries bilateral creditors and international financial institutions should provide concessional financing, grants and debt relief.

“Collaborative effort is needed to ensure that the world does not deglobalized, so that the recovery is not damaged by further losses to productivity.”

She said the IMF was playing its part by “actively deploying” its US$1 trillion lending capacity to support vulnerable countries including through debt servicing relief and rapid dispersing emergency financing.

“We are calling on official creditors to do the same,” said Gopinath.

Barbados has requested an extension of $200 million (US$100 million) under its existing Barbados Economic Recovery and Transformation (BERT) programme as it seeks to put emergency response to the crisis in place.

Gopinath said that despite some hope that the pandemic would end due to progress in containment measures and the work being done to develop treatment and vaccine, there was still tremendous uncertainty.

She said: “Commensurate with the scale and speed of the crisis domestic and international responses need to be largely rapidly deployed and speedily recalibrated as new data becomes available.”

She urged countries to continue to support their health systems, carry out widespread testing and refrain from trade restrictions on medical supplies.

“A global effort must ensure that when therapies and vaccines are developed both rich and poor nations have immediate access,” she said.

Gopinath also advised that while countries are in lockdown, policymakers should ensure that people are able to meet their basic needs and businesses are able to pick up “once the acute phases of the pandemic pass”.

She also called on countries to continue their “large, timely and targeted fiscal, monetary and financial policies throughout the containment phases to minimize persistent scars that could emerge from subdued investment and job losses during this deep recession”. marlonmadden@barbadostoday.bb