International Monetary Fund (IMF) chief Kristalina Georgieva says the global economy has already been thrust into a recession because of the coronavirus pandemic and she urged countries to respond with “very massive” spending programs to avoid a flood of bankruptcies and debt defaults in emerging markets.
Georgieva, a Bulgarian economist, told a news conference on March 27 that emerging-market countries will need at least $2.5 trillion in financial resources to get through the crisis created by the COVID-19 pandemic that has killed some 27,000 people worldwide.
Georgieva spoke to reporters following a phone conference with officials from 24 nations that make up the policy-setting panel of the Washington-based IMF, which is considered the world’s lender of last resort.
"It is now clear that we have entered a recession as bad or worse than in 2009," Georgieva said, adding that it will be "quite deep."
“A key concern about a long-lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery but erode the fabric of our societies,” she said.
She added, though, that a "sizable rebound" was possible in 2021 -- "but only if we succeed with containing the virus everywhere and prevent liquidity problems from becoming a solvency issue."
Georgieva warned that the worst is yet to come for many emerging economies, which she said have not yet felt the full brunt of the virus but are suffering outflows of capital and reduced prices for energy and commodity exports.
The IMF has received requests or inquiries about emergency financing from 81 nations, made up of 50 low-income countries and 31 middle-income countries, including Pakistan, Ghana, Iran, and Kyrgyzstan, she said.
The IMF board on March 26 approved a $120.9 million emergency disbursement for Kyrgyzstan to help the Central Asian nation deal with the COVID-19 pandemic, in what could be the first in a series of such moves.
“We have seen an extraordinary spike in requests for IMF emergency financing,” Georgieva said. “We are being asked by our members to do more, do it better, and do it faster than ever before.”
The Group of 20 (G20) leading economies on March 26 vowed to provide more than the $5 trillion in rescue funds.
Asked in an interview with Reuters whether it was enough, Georgieva said, "Our advice is: Go big.’"
"This is a very big crisis and it's not going to be sorted out without a very massive deployment of resources," she said.
Georgieva also said she welcomed a $2.2 trillion coronavirus relief package signed into law by U.S. President Donald Trump to help mitigate the damage caused by the crisis on American consumers and businesses.
The bill includes $78 billion to help toward the IMF goal of doubling its crisis lending fund to $500 billion.
"The U.S. decision to speed up approval of its substantial new contributions to the IMF is a powerful message to the international community and helps solidify the IMF's [overall] $1 trillion lending capacity," Georgieva said.
With reporting by Reuters, AP, and AFP