IMF says debt suspension fast-acting response to coronavirus crisis

WASHINGTON: Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said on Thursday that debt service suspension was a fast-acting measure to help developing economies deal with the Covid-19 crisis.

In a post mailed to media outlets, the IMF chief warned that the Covid-19 crisis could lead to a sharp rise in inequality, pushing millions of people into extreme poverty.

“The IMF and the World Bank have championed debt service suspension as a fast-acting measure for countries that lack the financial resources to adequately respond to the crisis.”

She noted that the G20 countries had agreed to suspend repayment of official bilateral credit for the poorest countries, from May 1 through the end of 2020 but Georgieva stressed the need for more. “We must do everything in our power to promote a more inclusive recovery,” she said.

In April, the IMF forecast that business closures and lockdowns to slow the spread of the virus would throw the world into the deepest recession since the 1930s Great Depression. But data reported since then points to “more bad news”, Georgieva said last month.

In her latest post, Georgieva noted that so far governments had channelised about $10 trillion in food aid and cash transfers, but she argued that providing more equitable access to opportunities could lead to stronger and more sustainable growth and higher income gains for the poor.

“The reality is that low-income households face higher health risks from the virus. They bear the brunt of record-high unemployment and are less likely to benefit from distance learning,” she said, “children’s nutrition may also be harmed by the disruption to school-provided meals.”

According to UN estimates, more than half a billion children worldwide have lost their access to education as a result of coronavirus lockdowns. Many will not return to the classrooms after the pandemic, with girls more likely than boys to drop out.

Given the severity of the crisis, Georgieva suggested several immediate steps, which include protection against job losses and higher inequality, increasing access to opportunities and avoiding persistent increases in inequality.