IMF chief calls for more fiscal stimulus to limit damage

WASHINGTON: International Monetary Fund Managing Director Kristalina Georgieva yesterday called on governments to take coordinated fiscal and monetary stimulus measures to stop the coronavirus from causing long-term economic damage.

In a blog message posted on the IMF website, Georgieva said the global lender has received interest from about 20 additional countries for financing programs and will follow up with them in the coming days. She did not identify any of them.

The IMF stands ready to mobilize its $1 trillion in lending capacity to aid its 189 member countries, she said. “As the virus spreads, the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour,” Georgieva said.

The IMF chief suggested that coordinated fiscal action on the scale of the 2008-2009 financial crisis may be necessary. She said that in 2009 alone, Group of 20 countries deployed about 2% of their GDP in stimulus, or about $900 billion in today’s money, “so there is a lot more work to do.”

She said that governments should continue to prioritize health spending and provide support to the most affected people and businesses with policies such as paid sick leave and targeted tax relief.

On the monetary policy front, she said central banks “should continue to support demand and boost confidence by easing financial conditions and ensuring the flow of credit to the real economy,” citing emergency actions by the US Federal Reserve and other central banks on Sunday as an example. She applauded the opening of swap lines between major central banks, adding that such swap lines may need to be extended to emerging market countries in the future. She said central banks’ policy actions will need to balance the difficult challenge of addressing capital outflows from emerging markets and commodity price shocks, citing recent record outflows of $42 billion reported by the Institute of International Finance last week.—Reuters