IMF Chief: Current Fallout Worse Than 2008 Financial Crisis

EghtesadOnline: The coronavirus pandemic has created an economic crisis “like no other” — one that is “way worse” than the 2008 global financial crisis, the International Monetary Fund’s top official said on Friday.

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05 April 2020

“Never in the history of IMF have we witnessed the world economy come to a standstill,” Kristalina Georgieva, managing director of IMF, said at a news conference, CNBC reported.

Speaking at the World Health Organization’s headquarters in Geneva, Switzerland, Georgieva said this was “humanity’s darkest hour, a big threat to the whole world and it requires from us to stand tall, be united and protect the most vulnerable of our citizens”.

According to Financial Tribune, she said IMF is working with the World Bank and other international financial institutions to alleviate the economic fallout from the outbreak, which has infected more than 1 million people in almost every country across the world, and killed more than 55,000 people.

Georgieva said IMF is encouraging central banks in developed countries to support emerging markets and developing countries.

“Our main preoccupation in this crisis is to rapidly step up financing for countries, especially emerging markets, developing countries that are faced with very significant and growing needs,” Georgieva said.

IMF has a $1 trillion war chest, she said, adding that “we are determined to use as much of it as necessary”.

The IMF chief said more than 90 countries so far have applied for assistance from those funds.

“We have never seen ever such a growing demand for emergency financing,” she said.

Georgieva urged countries that tap that financing to use it to pay doctors, nurses and other healthcare workers as well as for other medical needs.

Profound Consequences

At the same news conference, WHO Director General Tedros Adhanom Ghebreyesus warned that countries lifting quarantine restrictions designed to contain the coronavirus too quickly risk seeing an “even more severe and prolonged” economic downturn.

“We are all aware of the profound social and economic consequences of the pandemic,” Tedros said.

“Ultimately, the best way for countries to end restrictions and ease their economic effects is to attack the virus.”

Georgieva said that developing economies have been hardest hit by the outbreak and often have fewer resources to protect themselves from the economic fallout.

“We know that in many countries, health systems are weak,” she said.

Compounding the harm, she said, is “a flight to safety” by investors who are pulling their money out of vulnerable countries as the outbreak spreads.

Nearly $90 billion in investments have “flown out” of emerging economies during the outbreak, she said.

Georgieva noted that, “This is way more than during the global financial crisis, and some countries are highly dependent on commodities exports. With prices collapsing, they are hit yet again.”

“The same way that the virus hits vulnerable people with medical preconditions hardest, the economic crisis hits vulnerable economies the hardest,” she said.

At the end of the news conference, Georgieva said, “My closing message is we will get through this, but how fast and how effectively will depend a lot upon the actions we take.”

Dr. Mike Ryan, executive director of WHO’s health emergencies program, said world leaders need to build up their public health systems “if we’re going to get out of an interminable cycle of economically punishing lockdowns and shutdowns”.