Over 90 countries have applied for financial assistance from the International Monetary Fund (IMF), while at least 60 countries are seeking support from the World Bank (WB). Together, the two institutions have promised to allocate up to $1.2 trillion to combat the economic impact of the coronavirus pandemic, but it is still unclear whether they can take action quickly enough to reverse the growing damage to the economy, The Wall Street Journal writes.
About $96 billion has been withdrawn from emerging markets since January this year, according to the Institute of International Finance (IIF). This is more than three times more than during the global financial crisis of 2008-2009, which amounted to $26 billion, according to the Institute of International Finance (IIF).
Two of IIF’s lending programs created in the wake of the global financial crisis provide countries with concessional financing. The Rapid Credit Facility provides interest-free loans to low-income countries, previously used during natural disasters and the Ebola epidemic. The loan rate under the second program, the Rapid Financing Instrument, is about 1.5%.
Countries have already made requests for about $20 billion of the $50 billion envisaged under these programs, according to the IMF senior staff. Thus, $120 million has already been sent to Kyrgyzstan, $166 million to Madagascar, $109 million to Rwanda and $143 million to Honduras.
The World Bank has considered 27 requests for loans to combat the effects of coronavirus in an accelerated mode. These included funding for Ethiopia to purchase medical equipment, Mongolia to train additional medical personnel, and Cambodia to set up laboratories and isolation and treatment centers in 25 provincial hospitals.
India will receive $1 million from the World Bank for screening, patient tracking, laboratory diagnostics, personal protective equipment and isolation facilities, the largest program already announced.
According to IMF Chief Economist Gita Gopinath, the global recession in 2020 will be much more significant than the previous one.
The NGO Oxfam International estimates that over half a billion people around the world could end up in poverty, earning less than $5.50 a day.
“As the financing needs of these countries increase, the availability of domestic and international finance is decreasing,” said former IMF economist Esvar Prasad. “This is a real test of whether the global support system will work for these economically vulnerable countries,” he added.
According to David Dollar, former employee of the World Bank and the U.S. Treasury Department, if the Coronavirus pandemic can be controlled in the medium term, the financial capacity of the IMF and the World Bank should be enough to help developing economies. “I think they have the resources for 2020. The key question is to what extent this whole public health crisis will continue in 2021,” he said.