IMF could allocate SDRs for coronavirus response
April 6, 2020 |
Fund needs to think "beyond" what it has to get short-term liquidity to emerging markets, managing director says
The International Monetary Fund (IMF) could allocate additional special drawing rights (SDRs) to emerging markets to provide short-term funding to combat the coronavirus, the head of the fund said on Friday.
"Many of our members are saying we should look into this again," Kristalina Georgieva, managing director of the IMF, said at a press conference, referring to when the fund allocated additional SDRs to emerging markets in 2009.
"At this point, however, our shareholders are saying, 'use everything you can use right now, fast," she added.
The IMF has doubled its emergency financing to $100 billion and it is ready to lend up to $1 trillion "as the crisis continues to evolve," Georgieva said. "But we do need to think beyond what we have."
Right now, the IMF lacks the instrument to provide short-term liquidity to stable economies that "may find themselves in a tight place," Georgieva said.
"In that context, what we have done is, on one side, to encourage central banks in advanced economies to do more for liquidity in the emerging markets," she said. "We have seen a bold stepping up of swap operations with emerging markets by the Fed. We have seen repo operations that are directed towards this stabilization of emerging markets."
Those markets, however, have been hit particularly hard. Their healthcare systems were already weak, and now the economies are floundering as nearly $90 billion in capital has fled to safer investments during the coronavirus outbreak, Georgieva said. For some emerging markets that are highly dependent on commodity exports, the drop in prices has delivered another blow, she added.
"This is a crisis like no other," Georgieva said. "We are now in recession. It is way worse than the global financial crisis."