The problem is even more acute in the poorest nations, where many denizens can’t easily practice the social distancing and regular hand washing that has become de rigueur in rich countries.
Such an environment leaves the IMF reckoning that emerging market and developing countries will need trillions of dollars in external financing to fight the virus, only part of which they can cover on their own, leaving gaps of hundreds of billions of dollars. Half of the international lending organization’s 189 members are already looking to it for aid.
Georgieva is trying to rally the world into a unified display of support at the Fund’s semi-annual meeting, which starts Tuesday as a virtual gathering after the typical spring gathering in Washington was re-imagined.
“Today we are confronted with a crisis like no other,” Georgieva said in an April 9 speech. “The actions we take now will determine the speed and strength of our recovery.”
There are questions, though, about whether the Fund has enough to counter the crisis, especially if it proves protracted.
While the IMF says it has a $1 trillion war chest, Ted Truman of the Peterson Institute for International Economics calculates that the maximum amount available for new lending is $787 billion, after taking into account existing commitments and other factors. “The IMF will need more” from the U.S. and the rest of the G-20, he said.
And it’s not just the amount of resources that are at issue. It’s what kind they are.
The crisis has exposed a gaping hole at the center of the global economy. There’s no ultimate lender of last resort who can provide the liquidity that’s demanded in a financial emergency.
Funds Pulled
Some $62 billion was yanked out of emerging markets in the first quarter in a global dash for cash by investors, twice the size of outflows at the peak of the world financial crisis, according to the Institute of International Finance.
While there are signs that pressure is easing -- Indonesia, for example, sold $4.3 billion of dollar bonds last week to help finance virus relief measures -- there are risks the outflows could resume as the hit to emerging market growth becomes more evident, IIF analysts said.