ISLAMABAD: The International Monetary Fund (IMF) Executive Board decided on Friday to allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.
According to a press statement, in direct response to the COVID-19 crisis the IMF Board has adopted some immediate enhancements to its Catastrophe Containment and Relief Trust (CCRT) to enable the Fund to provide debt service relief for its poorest and most vulnerable members.
The CCRT enables the IMF to deliver grants for debt relief benefitting eligible low-income countries in the wake of catastrophic natural disasters and major, fast-spreading public health emergencies, says the statement issued to TLTP at late night. The COVID-19 outbreak and the associated global economic turmoil creates a critical need to support the Fund’s membership, including exceptional balance of payments support for the poorest members especially impacted by the pandemic.
Well-targeted support will allow these countries to prioritize medical spending and health-related as well as other immediate needs in the challenging economic environment, characterized by sharp declines in income, lost revenue and higher expenses.
In that context, the IMF Executive Board has approved changes to the CCRT that expand the qualification criteria to better cover the circumstances created by a global pandemic and to focus on delivering support for the most immediate needs. Specifically, the decision will allow all member countries with per capita income below the World Bank’s operational threshold for concessional support to qualify for debt service relief for up to two years.
This would apply when a life-threatening global pandemic is inflicting severe economic disruption across the Fund’s membership and is creating balance of payments needs on such a scale to warrant a concerted international effort to support the poorest and most vulnerable countries.
The IMF has also launched a fund-raising exercise that would enable the Trust to provide about $1 billion for the current pandemic. Ms. Georgieva has called upon the Fund’s economically stronger member countries to help replenish the CCRT, which had only $200 million available for the world’s poorest countries.
The U.K. has responded with a pledge for £150 million ($183 million). Other donors, including Japan and China, are also coming forward with important contributions. “The IMF’s revamped Catastrophe Containment and Relief Trust can now provide rapid debt service relief on IMF debt obligations to more of our poorest and most vulnerable members.
This will help them to channel more of their scarce financial resources to their vital emergency medical and other relief efforts,” IMF Managing Director Kristalina Georgieva said. “Furthermore, we are calling on donor countries to replenish the Trust’s resources to help boost our ability to provide additional debt service relief to our poorest member countries.”
Meanwhile, International Monetary and Financial Committee (IMFC) Chair Lesetja Kganyago and IMF Managing Director Kristalina Georgieva said this in a joint statement issued here following Friday’s conference call of the IMFC that IMF stands ready to use its US $1 trillion financial capacity to support its member countries to cope with the economic and financial crisis amid COVID-19 pandemic.
“We are in an unprecedented situation where a global health pandemic has turned into an economic and financial crisis. With a sudden stop in economic activity, global output will contract in 2020. Member countries have already taken extraordinary actions to save lives and safeguard economic activity. But more is needed. Priority should be afforded to targeted fiscal support to vulnerable households and businesses to accelerate and strengthen the recovery in 2021,” said the statement.
Although the greatest health impact has been in advanced economies, emerging market and developing countries, especially low-income countries, will be particularly hard hit by a combination of a health crisis, a sudden reversal of capital flows and, for some, a sharp drop in commodity prices, said the statement.
Many of these countries need help to strengthen their crisis response and restore jobs and growth, given foreign exchange liquidity shortages in emerging market economies and high debt burdens in many low-income countries, it added.
Strong and coordinated policy actions, including at the multilateral level, are key to effectively resolve this global crisis. To this end, IMFC members welcomed the IMF’s expeditious efforts to support an exceptionally high number of countries requiring IMF emergency financing at the same time, as well as its close cooperation with other international financial institutions, especially the World Bank Group. The IMF stands ready to use its US$1 trillion financial capacity to support its member countries.
Meanwhile, International Monetary Fund (IMF) Managing Director Kristalina Georgieva on Thursday lauded Pakistan government led by Prime Minister Imran Khan’s efforts to address economic challenges.
In a statement issued to media, the IMF Managing Director said that the authorities in Pakistan have continued their reform efforts to address Pakistan’s economic challenges, but progress is being threatened by the devastating effects of the COVID-19 outbreak and the deterioration in global economic and financial conditions.
She said that PM Khan and his government have swiftly approved an economic stimulus package aimed at containing the spread of the virus and providing support to affected families and businesses. Similarly, the State Bank of Pakistan has adopted a timely set of measures,
including a lowering of the policy rate, new refinancing facilities to support the flow of credit, and temporary regulatory relief measures.
Kristalina Georgieva further said that to support these efforts and ensure prompt and adequate relief to the people and the economy, Pakistan government has requested financial assistance under the Fund’s Rapid Financing Instrument (RFI).
“This emergency financing will allow the government to address additional and urgent balance of payments needs and support policies that would make it possible to direct funds swiftly to Pakistan’s most affected sectors, including social protection, daily wage earners, and the healthcare system,” she said and added our team is working expeditiously to respond to this request so that a proposal can be considered by the IMF’s Executive Board as soon as possible.
The IMF chief said: “In parallel, the authorities have reaffirmed their commitment to the reform policies included in the current arrangement under the Extended Fund Facility (EFF). These reforms are crucial to boost Pakistan’s growth potential to deliver broad based benefits for all Pakistanis, especially the most vulnerable segments of the population.”
“The Fund stands ready to continue to support the authorities’ efforts to implement much-needed economic and structural reforms aimed at fostering strong and sustainable growth,” she added. – TLTP, NNI