IMF chief urges increased coordinated action as COVID-19 grips global economy

0 Comment(s)Print E-mail Xinhua, March 17, 2020
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As the novel coronavirus disease (COVID-19) spreads, "increased coordinated action" will be key to boosting confidence and providing stability to the global economy, the International Monetary Fund (IMF) chief Kristalina Georgieva said Monday.

"While quarantining and social distancing is the right prescription to combat COVID-19's public health impact, the exact opposite is needed when it comes to securing the global economy," the managing director wrote in a blog, which is part of a special IMF series on the response to the coronavirus.

"Constant contact and close coordination are the best medicine to ensure that the economic pain inflicted by the virus is relatively short-lived," she said.

Noting that many governments have already taken significant steps, including Sunday's "bold, coordinated moves" on monetary policy, the IMF chief said, however, "even more needs to be done."

Georgieva laid out three action areas for the global economy, i.e., fiscal stimulus, monetary policy and the regulatory response. All this work is most effective when done cooperatively, she said.

The IMF managing director said additional fiscal stimulus will be "necessary" to prevent long-lasting economic damage, calling on governments to continue and expand their efforts to reach the most-affected people and businesses -- with policies including increased paid sick leave and targeted tax relief.

Beyond these positive individual country actions, she said, as the virus spreads, "the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour."

In terms of monetary policy, the IMF chief noted that major central banks "took decisive coordinated action" to ease swap lines and thus lessen global financial market stresses. "Going forward, there may be a need for swap lines to emerging market economies," she said.

In times of crisis such as at present, foreign exchange interventions and capital flow management measures can usefully complement interest rate and other monetary policy actions, she said.

Georgieva noted that this crisis will stress test whether the changes made in the financial systems in the wake of the financial crisis will serve their purpose, urging banks to use flexibility in existing regulations, for example by using their capital and liquidity buffers, and undertake renegotiation of loan terms for stressed borrowers.

"Risk disclosure and clear communication of supervisory expectations will also be essential for markets to function properly in the period ahead," she said.

The IMF chief also reiterated that the multilateral lender stands ready to help its membership, noting that it could mobilize 1 trillion dollars lending capacity to provide necessary support.

"In the end, our answers to this crisis will not come from one method, one region, or one country in isolation," said Georgieva. "Only through sharing, coordination, and cooperation will we be able to stabilize the global economy and return it to full health." 

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