Washington: IMF Managing Director Kristalina Georgieva on Monday said over 20 additional countries have asked about receiving aid from the global lender as the coronavirus pandemic halts economic activity, and she called for strong, coordinated fiscal stimulus to limit the damage.
In a blog post on the International Monetary Fund's website, Georgieva said the IMF was ready to mobilize its full $1 trillion lending capacity to help member countries deal with the crisis.
"As the virus spreads, the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour," Georgieva said.
Some of the countries expressing an interest in IMF financing to deal with the crisis already have IMF loan programs, while others do not, an IMF spokesman said, adding that these inquiries do not necessarily constitute formal requests.
The spokesman declined to identify any of the countries, but said the most logical options for many of them would be several emergency financing facilities under which Georgieva said $50 billion would be rapidly available to ease the economic blow from the coronavirus outbreak.
Iran, hit hard by the outbreak, last week said it was seeking a $5 billion emergency loan from the IMF. The fund currently has loan and financial backstop programs with about 40 countries valued at about $200 billion.
The IMF chief issued her message shortly before a call with leaders of the G7 wealthy democracies, several of which are battling severe coronavirus outbreaks. The leaders pledged to "do whatever is necessary" to battle the pandemic and protect public health, jobs and growth.
Spending Like It's 2009
Georgieva, in her blog, suggested that coordinated fiscal action on the scale of the 2008-2009 financial crisis may be necessary. In 2009 alone, she said, Group of 20 countries deployed about 2% of their gross domestic product in stimulus, or about $900 billion in today's money, "so there is a lot more work to do."
She said governments should continue to prioritize health spending and provide support to the most affected people and businesses with policies such as paid sick leave and targeted tax relief.
On the monetary policy front, she said central banks "should continue to support demand and boost confidence by easing financial conditions and ensuring the flow of credit to the real economy," citing emergency actions by the U.S. Federal Reserve and other central banks on Sunday as an example.
Emerging Market Risks
Georgieva applauded the opening of swap lines between major central banks, adding that such swap lines may need to be extended to emerging market countries, which have suffered large capital outflows, in the future.
"In times of crisis such as at present, foreign exchange interventions and capital flow management measures can usefully complement interest rate and other monetary policy actions," Georgieva said.
She said financial system supervisors should aim to preserve stability, ensuring banking system soundness while sustaining economic activity.
"This crisis will test whether the change made in the wake of the financial crisis will serve their purpose," she said, referring to increased capital requirements and other policies put in place over the past decade to rein in financial market excesses.
Georgieva said banks should be encouraged to use their capital and liquidity buffers and renegotiate loan terms for stressed borrowers.
Georgieva said all of the fiscal, monetary and regulatory actions would be "most effective when done cooperatively." She said IMF research shows that spending increases have a multiplier effect when countries act together.