Washington – The heads of the International Monetary Fund, European Stability Mechanism (ESM) and other regional financing arrangements on Tuesday agreed to work together to mitigate the economic and financial impacts of the coronavirus pandemic.
In a joint statement issued after a teleconference, the officials said they agreed to cooperate to facilitate cofinancing operations to address the needs of their members.
“We are determined to provide the necessary support to mitigate the economic and financial impacts of the pandemic, especially on the most vulnerable people and countries,” they said in the statement. “These unprecedented circumstances require unprecedented actions.”
In addition to exchanging information on members’ needs, the institutions said they would seek to coordinate assistance across different regions of the world.
No further details on potential cofinancing projects were released, but the effort would likely be modeled on the IMF’s work with the European Union and the European Central Bank during the Greek debt crisis, which led to creation of the ESM.
No specific countries had been discussed as candidates for such assistance, said one source familiar with the issue, but the IMF and the regional groups are monitoring events closely.
“Recognizing the sheer size of this crisis, we emphasize that looking ahead, the most effective way to support the global economies is a comprehensive response and mobilization of the resources and expertise available at all layers of the Global Financial Safety Net,” they said in the joint statement.
Regional financing arrangements are mechanisms or agreements through which groups of countries mutually pledge financial support to countries experiencing financial problems in their regions. The ESM, created in 2012, offers that support for the euro area, while other regions have their own RFAs.
IMF Managing Director Kristalina Georgieva and ESM Managing Director Klaus Regling convened the extraordinary meeting on the heels of last week’s virtual IMF-World Bank spring meetings to discuss all of the institutions’ responses to the crisis.
The IMF last week forecast the pandemic would cause the global economy to shrink by 3 percent in 2020, the worst downturn since the Great Depression of the 1930s, and warned emerging markets and developing economies would be hardest hit.
In response, the IMF has doubled access to its emergency facilities, approved debt service relief for 25 low-income countries through its Catastrophe Containment and Relief Trust, and established a new short-term liquidity line for countries with strong economic policies.
IMF member countries have also pledged $11.7 billion (¥1.26 trillion) in funding to allow the global lender to triple its ability to offer member countries loans with low or zero interest.
In addition, the Group of 20 and the Paris Club, backed by the IMF and World Bank, have agreed to temporarily suspend payments of official bilateral debt by the poorest countries that request it, a measure backed by the private sector on a voluntary basis.
The RFAs include an arm of the Association of Southeast Asian Nations plus China, Japan and South Korea; the Arab Monetary Fund; the Eurasian Fund for Stabilization and Development; and the Latin American Reserve Fund.
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