(Yicai Global) March 5 -- The International Monetary Fund (IMF) and the World Bank Group have pledged to provide billions of dollars of emergency financing for member countries that could seek support in light of the COVID-19 outbreak, stressing the need to help the most vulnerable.
"We know that the disease is spreading quickly. With over one-third of our membership affected directly, this is no longer a regional issue -- it is a global problem calling for a global response," IMF Managing Director Kristalina Georgieva said yesterday at a joint press conference with World Bank Group President David Malpass.
The IMF is making available about USD50 billion through its rapid-disbursing emergency financing facilities for low-income and emerging market countries, Georgieva said, noting that USD10 billion of that is intended to support the poorest members at zero interest.
The World Bank, meanwhile, has announced that it will provide an initial package of up to USD12 billion in "immediate support" to assist countries coping with the health and economic impacts of the COVID-19 outbreak.
"What the World Bank is doing is working to provide a fast, flexible response based on developing country needs," Malpass said at the press conference. The support would include emergency financing, policy advice, and technical assistance, he said, adding that it will prioritize the poorest countries and those at high risk with low capacity.
"Our biggest challenge right now is handling uncertainty," Georgieva told reporters. "We also know that it (outbreak) will eventually retreat, but we don't know how fast this will happen."
"Under any scenario, global growth in 2020 will drop below last year's level," she said. In February, the IMF already revised down 2020 global growth to 3.2 percent, 0.1 percentage point lower from its January projection. Dropping below last year's level (2.9 percent) means further downgrading of global growth forecast.
The growth projection for China this year will also be lower than the latest forecast, the IMF chief said, while noting that she is encouraged that roughly 60 percent of production has restarted in China, and more progress is expected in the next few weeks.
Georgieva said the current situation is "particularly challenging for countries with weaker health systems and response capacity -- calling for a global coordination mechanism to accelerate the recovery of demand and supply."
The number one priority in terms of fiscal response, she said, is ensuring "front-line health-related spending" to protect people's well-being, take care of the sick, and slow the spread of the virus. Second, macro-financial policy actions may be required to tackle the supply and demand shocks.
Noting that adequate liquidity will also be needed to offset financial stability risks, the IMF chief welcomed the statement of the Group of Seven (G7) industrialized nations that finance ministers and central bank governors are "ready to cooperate further on timely and effective measures."
In a joint statement issued after an emergency conference call on March 3, the G7 finance ministers and central bank governors said that "given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
"The situation is evolving rapidly and we should stand ready to provide a more forceful, coordinated response if conditions require it," Georgieva said.