Tackling the pandemic and its economic implications as the world faces a global fallout has brought the G20 countries together in an extraordinary way.
The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, addressed the Extraordinary G20 Leaders’ Summit held virtually on March 26, 2020, upon the call of the Saudi Presidency.
Within the framework of the aid packages that various governments are announcing to their respective economies, one may wish to note the stress of the IMF, particularly on the coordination of monetary and fiscal policies. Such policies are already coordinated between the EU Member States through the Treaties’ provisions and various Regulations and Directives which form part of the EU’s economic governance.
Georgieva explained that the IMF is projecting a contraction of global output in 2020, and recovery in 2021, stating that “How deep the contraction and how fast the recovery depends on the speed of containment of the pandemic and on how strong and coordinated our monetary and fiscal policy actions are.”
Georgieva emphasised the crucial importance of “targeted fiscal support to vulnerable households and to large and small businesses, so they can stay afloat and get quickly back to work. Otherwise it will take years to overcome the effects of widespread bankruptcies and layoffs. Such support will accelerate the eventual recovery and put us in a better condition to tackle challenges such as debt overhangs and disrupted trade flows.”
The development aspect, which characterise both the International Monetary Fund and the World Trade Organisation, has also been stressed, namely the $1 trillion strong, financial capacity to be placed by the IMF for the defence of emerging markets and developing countries to deal with and overcome the trade, economic and financial crisis created by the COVID-19 pandemic. These countries are the main focus of attention of the IMF, with the latter working in close collaboration with the World Bank and other financial institutions.
Given the high burden of debt of many low-income countries, the IMF intends to double its emergency financing capacity and boost global liquidity through a sizeable Special Drawing Right allocation. It is also expanding the use of swap type facilities at the Fund Support action of official bilateral creditors to ease the debt burden of the poorest IMF members.
This development element echoes the opening remarks of King Salman of Saudi Arabia, which currently presides over the presidency of the G20, who observed that “On the trade front, the G20 must send a strong signal to restore confidence in the global economy by resuming, as soon as possible, the normal flow of goods and services, especially vital medical supplies. In addition, it is our responsibility to extend a helping hand to developing countries and least developed countries to enable them to build their capacities and improve their infrastructure to overcome this crisis and its repercussions.”