As coronavirus cases continue to rise, the IMF is making a $50 billion aid package available to low-income and emerging market countries, with $10 billion of that available through rapid-disbursement financing and at zero interest rates for the IMF’s poorest members.
“There are many members at risk, including those with weak health systems, inadequate policy space, commodity exporters exposed to terms-of-trade shocks, and others that are particularly vulnerable to spillovers,” said IMF managing director Kristalina Georgieva at a press conference on 4 March.
“I am particularly concerned about our low-income and more vulnerable members – these countries may see financing needs rise rapidly as the economic and human cost of the virus escalates.”
The other $40 billion will be made available to emerging markets through the Rapid Financing Instrument.
Ms Georgieva stressed supply will be disrupted due to morbidity, but also the containment efforts that restrict mobility and higher costs of doing business due to restricted supply chains. Demand will also fall due to higher uncertainty and increased precautionary behaviour.
“Macro-financial policy actions may be required to tackle the supply and demand shocks… The aim should be to stress ‘no regret’ actions that shorten and soften the economic impact,” Ms Georgieva said.
“They should be timely and targeted to the sectors, businesses and households hardest hit. A generalised weakening in demand through confidence and spillover channels – including trade and tourism, commodity prices, and tighter financial conditions – would call for an additional policy response to support demand and ensure an adequate supply of credit.”
Adequate liquidity will also be needed to offset financial stability risks, Ms Georgieva said.
The announcement comes as the Australian government prepares its own multibillion-dollar virus stimulus.
“We want Australian businesses to get the support through this economic shock,” Treasurer Josh Frydenberg told reporters on 4 March.
“But when we are over this economic shock, we want the Australian economy to be stronger.”
