The 189-nation International Monetary Fund and its sister lending agency, the World Bank, on Friday pledged to step up their efforts to cushion the blow to the global economy from the coronavirus pandemic.
The two agencies’ assurance came at the end of their spring meeting where they heard calls for them to provide more debt relief to poorer nations being battered by the health crisis.
IMF Managing Director Kristalina Georgieva and World Bank President David Malpass both stressed that their agencies are well aware of the rising threat from a health crisis that is expected to plunge the global economy into the deepest recession since the Great Depression of the 1930s.
“A large global contraction in the first half of 2020 is inevitable,” Georgieva said in remarks Friday to the Development Committee, a top policy panel that guides operations at both the IMF and the World Bank. “Uncertainty surrounding the severity and length of the crisis is exceptionally high.”
The IMF is forecasting that the global economy will shrink by 3% this year, the worst downturn since the 1930s and far more severe than the 2008 financial crisis.
Both the IMF and the World Bank received backing this week from the Group of 20 major industrial countries for a moratorium on debt repayments for the rest of the year by the world’s poorest nations — countries such as Afghanistan, Ethiopia and many nations in sub-Saharan Africa. About 77 nations are in covered by the debt suspension that would run from May 1 through the end of this year.
In a closing communique Friday, the Development Committee, composed of finance officials from around the world — directed both the World Bank and the IMF to review the debt burdens of middle-income countries and to “explore expeditiously a range of solutions to fiscal and debt stress in those countries on a case by case basis.”
Nations classified as middle income include countries such as Indonesia, Peru, Lebanon and Iraq.
IMF and World Bank officials did not offer any timetable for when they might have plans ready for this larger group of debtor nations.
But U.N. Secretary-General Antonio Guterres, addressing the virtual meetings in Washington, said the debt moratorium for the poorest nations was a start but more needed to be done given the severity of the current crisis.
“Many other developing countries are highly vulnerable and already in debt distress — or will become distressed with the global recession,” Guterres said.
He called for an across-the-board debt standstill on repayments for all developing countries that have no access to financial markets and cannot service their debt. He said that the economic support needed for countries in Africa would total more than $200 billion.
Global anti-poverty groups praised the World Bank and IMF for agreeing to explore expanding the number of nations that could get debt-relief. But Nadia Daar, head of Oxfam International’s Washington office, said that the World Bank in particular needs to do more given all the debt of low-income countries that it holds.
“The world’s poorest countries owe roughly $12.4 billion in debt payments this year to multilateral institutions — a major portion of it to the World Bank,” she said. “Development banks should not hide behind excuses of credit rating drops. They must urgently cancel all development countries debt payments for 2020.”
In his remarks to Friday’s virtual meetings, Malpass said the World Bank needs to maintain its credit rating that allows it to obtain funds at low costs.
Eric LeCompte, executive director of Jubilee USA, a religious development organization, said it is still a good signal that the closing communique directed the lending organizations to explore providing debt relief to a larger group of nations.
Both the IMF and World Bank over the past two months have assembled a number of support programs, with the IMF processing requests for emergency loans from almost half of its 189 member-countries.
Malpass said Friday that the World Bank hoped to have support programs under way for 100 countries by the end of this month with a goal of providing $160 billion in financing over the next 15 months to deal with the pandemic.
This week’s annual spring meetings of the IMF, the World Bank and the Group of 20 countries were all conducted by teleconference with finance ministers from around the world dialing in to the discussions.
The governing bodies for the IMF and the World Bank are scheduled to hold their fall meetings in October in Washington but those sessions might also be converted into virtual meetings.