SEATTLE, Washington — The International Monetary Fund (IMF) is an international organization that works to facilitate trade and better the global economy while reducing poverty. Due to the novel coronavirus, numerous global economies have come to a halt. The IMF’s World Economic Outlook originally predicted that more than 160 countries would see positive per capita income growth. However, as of April 2020, 170 countries were projected to see negative per capita income growth. From February to March, the Dow Jones Industrial Average, a composition of more than 30 large companies’ stock performance in the U.S. stock market, fell around 37%. From then, the U.S. and the global economy entered an unprecedented recession.
The IMF is playing a key role in helping impoverished countries deal with this global recession. Here is how it and the steps it is taking to assist developing countries worldwide.
4 Primary Functions of the IMF
- Economic Surveillance. The IMF monitors economic developments around the world and tracks the impacts of new economic policies on other economies. One of the IMF’s primary objectives is to promote economic stability and global growth by encouraging companies to implement efficient and sound policies. Monitoring developments globally also allows the IMF to provide assistance or critiques of certain policies.
- Lending. Like the World Bank, the IMF provides countries with loans to allow them to correct the balance of payment problems. Continued financial support is dependent on whether a country can successfully implement the plan devised by the IMF and the country’s leaders initiatives to fix the country’s economic issues. This dependency is known as conditionality.
- Technical Assistance and Training. The IMF offers technical assistance and training to member countries in numerous areas to further their abilities to develop sound financial policies. Training areas include fiscal and monetary policy, banking and financial system regulations and statistics.
- Research and Development. Using data from its economic surveillance, the International Monetary Fund develops policies or solutions that it deems applicable to certain economies or situations.
How the IMF is Helping Impoverished Countries
The IMF currently has $1 trillion in lending capacity to loan to countries that request funding. The organization has recently doubled its emergency facilities to about $100 billion for countries that need immediate financing. Numerous countries, particularly impoverished countries, are struggling to cope with the economic effects of the COVID-19 pandemic.
For example, Kyrgyzstan, the first country to receive emergency funding from the IMF, has suffered heavily economically. Kyrgyzstan President Sooronbay Jeenbekov forecasted that Kyrgyz GDP growth could be less than 2% in 2020 and noted that the pandemic could cost Kyrgyzstan $450 million. Kyrgyzstan received $121.1 million from the IMF. This loan is crucial in funding the health sector to combat COVID-19 and the agricultural sector, which comprises a significant portion of Kyrgyzstan’s GDP. The IMF has already provided loans to Rwanda, Madagascar and Togo, and will continue to assist other countries. The international organization has also received more than 100 calls for emergency financing from countries around the world.
As part of its Poverty Reduction and Growth Trust (PRGT) facility, the IMF is working to provide emergency funding to low-income countries at zero interest. The organization is hoping to raise $17 billion as part of the PRGT initiative and is close to reaching that goal thanks to donations from countries like Japan, the United Kingdom and China.
Moreover, the IMF has offered to cancel debt for 29 countries under the Catastrophe Containment and Relief Trust (CCRT). The goal of canceling debt is to allow the IMF’s most impoverished members to direct their scarce financial resources toward combating COVID-19. The IMF will cover these nations’ debt for the next six months while they work to finance medical care and services. The IMF is hoping to raise $1.4 billion to two years of grant-based debt relief for these countries.
The IMF has taken numerous measures to help the world’s impoverished countries combat the health and economic effects of the COVID-19 pandemic. Through its loans and cancellation of debt, countries will be able to finance critical medical resources while providing a stimulus for their economies. The IMF, the World Bank and other NGOs are playing vital roles in combating the effects of the COVID-19 pandemic. Hopefully, countries will continue to cooperate with these organizations to revive the global economy post-pandemic.