COVID-19: IMF warns of looming global financial crisis

. Africa needs $100bn economic stimulus, says Finance ministers

Managing Director of International Monetary Fund (IMF), Kristalina Georgieva, has said that a global recession as bad as the 2008 financial crisis is in the offing.

In a statement to the G20 Finance Ministers, she said that the human costs of the Coronavirus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage.

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According to her, this is a moment for solidarity—which was a major theme of the meeting of the G20 Finance Ministers and Central Bank Governors.

She said: “I emphasised three points in particular: First, the outlook for global growth: for 2020 it is negative—a recession at least as bad as during the global financial crisis or worse.

“But we expect recovery in 2021. To get there, it is paramount to prioritise containment and strengthen health systems—everywhere. The economic impact is and will be severe, but the faster the virus stops, the quicker and stronger the recovery will be.

“We strongly support the extraordinary fiscal actions many countries have already taken to boost health systems and protect affected workers and firms. We welcome the moves of major central banks to ease monetary policy. These bold efforts are not only in the interest of each country but of the global economy as a whole. Even more will be needed, especially on the fiscal front.

Second, advanced economies are generally in a better position to respond to the crisis, but many emerging markets and low-income countries face significant challenges. They are badly affected by outward capital flows, and domestic activity will be severely impacted as countries respond to the epidemic. Investors have already removed US$83 billion from emerging markets since the beginning of the crisis, the largest capital outflow ever recorded. We are particularly concerned about low-income countries in debt distress—an issue on which we are working closely with the World Bank.

“Third, what can we, the IMF, do to support our members? We are concentrating bilateral and multilateral surveillance on this crisis and policy actions to temper its impact. We will massively step up emergency finance—nearly 80 countries are requesting our help—and we are working closely with the other international financial institutions to provide a strong coordinated response. We are replenishing the Catastrophe Containment and Relief Trust to help the poorest countries. We welcome the pledges already made and call on others to join. We stand ready to deploy all our US$1 trillion lending capacity. And we are looking at other available options.

“Several low- and middle-income countries have asked the IMF to make an SDR allocation, as we did during the Global Financial Crisis, and we are exploring this option with our membership. Major central banks have initiated bilateral swap lines with emerging market countries. As a global liquidity crunch takes hold, we need members to provide additional swap lines.

“Again, we will be exploring with our Executive Board and membership a possible proposal that would help facilitate a broader network of swap lines, including through an IMF-swap type facility. These are extraordinary circumstances. Many countries are already taking unprecedented measures. We at the IMF, working with all our member countries, will do the same. Let us stand together through this emergency to support all people across the world.”

Meanwhile, the African Finance Ministers have said Africa needs an immediate emergency economic stimulus to the tune of 100 billion dollars, owing to the COVID-19 outbreak.

This is contained in a statement by Communication and Media Relations Department of the group, which was made available to News Agency of Nigeria (NAN).

It explained that it was part of decision of the African Finance Ministers who met on March 19, in a virtual conference to exchange ideas on the efforts of their respective governments in dealing with the social and economic impacts of COVID-19.

The ministers said as such, the waiver of all interest payments, estimated at 44 billion dollars for 2020, and the possible extension of the waiver to the medium term, would provide immediate fiscal space and liquidity to the Governments in their efforts to respond to the COVID-19 pandemic.

According to them, the interest payments waiver should include not only interest payments on public debt, but also on sovereign bonds.

The ministers agreed on the need to consider waiving principal and interest and encourage the use of existing facilities in the World Bank, International Monetary Fund (IMF), African Development Bank (AfDB) and other regional institutions for the fragile states.

They underscored the need to support the private sector and protect about 30 million jobs at risk, particularly in the tourism and airline sectors across the continent.

In other critical sectors including agriculture, imports and exports, pharmaceuticals and in banking, the finance ministers agreed that all interest and principal payments on corporate debt, leases, extended credit facilities, refinancing schemes and guarantee facilities should be used to waive, restructure and provide additional liquidity in 2020.

They further said that a liquidity line should also be made available to the private sector to ensure the continuity of essential purchases and all SMEs that were dependent on trade could continue to function.

According to them, these measures, must accompany a policy of opening borders for trade and that Europe and the United States, in particular, can build this in as part of their stimulus to their private and financial systems.

Daily Times recalls that Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, at the weekend said the apex bank in collaboration with Bankers Committee are set to revamp the nation’s economy with N3.5 trillion intervention funds.

Also, the CBN and the Banks chiefs have identified 12 Nigeria based pharmaceutical companies that will be supported to produce local drugs and other medical needs to tackle the dreaded COVID-19.

A communique issued after the Bankers Committee meeting in Lagos, stated that the CBN governor said that the combination measures put together amounts to over N3.5 trillion in stimulus to the nation’s economy to ameliorate the pains arising from the Coronavirus (COVID-19) health and economic crisis.

He highlighted that measures to include, Interest rate reduction on intervention facilities from nine per cent to five per cent; Creation of N50billion targeted credit facility for affected households & SMEs; Granting regulatory forbearance to banks to restructure terms of facilities in affected sectors and strengthening the LDR policy, which is encouraging significant extra lending from banks.

Other includes improving FX supply to the CBN by directing all Oil companies ( international and domestic) and all related companies ( oil services ) to sell FX to CBN and no long NNPC;  Activation of the N1.5 trillion infraCo projects for building critical infrastructure; additional N100billion intervention in healthcare loans to pharmaceutical companies, healthcare practitioners intending to expand/build capacity and N1 trillion in loans to boost local manufacturing and production across critical sectors.

He expressed further that, “Given that this crisis is first and foremost a public health crisis, we are paying particular attention to our health industry.

“As aforementioned, global supply chains have been disrupted including dominate drug supply channels from China and India.

“In fact, many countries have or are planning to ban the export of drugs and medical supplies from their countries. Clearly, we have no choice but to produce these items locally.

“Thus, the committee has identified a few key local pharmaceutical companies who shall be granted naira and FX funding facilities to support the procurement of raw materials and equipment required to exponentially increase local drug production in Nigeria.

“These include but are not limited to Emzor, Fidson, GSK, May & Baker, Unique Pharma, Swiss Pharma, Neimeth, Sagar, Orange Drugs, Dana Pharma, among others”, he said.