COVID-19
A second Great Depression was averted, thanks to an unprecedented global policy response.
A year into the global COVID-19 pandemic, a recovery is finally underway. After a severe contraction in 2020, global activity is on a firmer footing as economies continue to adapt to new ways of working and as vaccines are administered. Swift policy action worldwide, including extraordinary monetary measures and $16 trillion in fiscal support, helped prevent another Great Depression (see Figure 1.1). Without these measures, the global contraction last year would have been three times worse.
The IMF acted swiftly to provide financial assistance to an unprecedented number of countries facing urgent balance of payments needs in the wake of the pandemic. To meet demand, access limits for emergency financing and the IMF’s lending facilities were temporarily increased through the end of 2021. In total, loans to 86 countries of more than $110 billion have been approved since the onset of the crisis, bringing the IMF’s total lending commitments to more than $110 billion, with more than one-third approved since late March 2020 (see Figure 1.2).
To further support the recovery, a proposal for a general allocation of special drawing rights of $650 billion (about SDR 453 billion) has been circulated to the IMF’s Executive Board for consideration. The allocation will be the largest in IMF history, providing a substantial liquidity boost to countries, without adding to debt burdens, by supplementing existing reserve assets. This will free resources for much-needed health and recovery efforts. The IMF is also working on options to channel SDR holdings voluntarily to help vulnerable countries recover.
To provide up-to-date, ongoing information on the policies governments implemented to limit the impact of the COVID-19 pandemic, the IMF has created a policy tracker that summarizes governments’ key economic responses to the pandemic. The tracker includes data for 197 economies and is updated regularly.
IMF Financial Support
(by year of approval; billions of SDRs)
The IMF received an unprecedented number of requests for emergency financing.
Sources: IMF, Monitoring of Fund Arrangements database; IMF Finance Department; and IMF, Strategy, Policy, and Review Department.
Note: Data for 2021 are for January–April only and do not cover a full calendar year. ECF = Extended Credit Facility; EFF = Extended Fund Facility; FCL = Flexible Credit Line; PLL = Precautionary and Liquidity Line; RCF = Rapid Credit Facility; RFI = Rapid Financing Instrument; SBA = Stand-By Arrangement; SCF = Standby Credit Facility.
¹PLL/FCL and RFI/RCF figures include predecessor instruments.
Debt relief
Low-income countries have been hit by a confluence of external shocks: a sharp contraction in real exports, lower export prices, and reduced remittances and tourism receipts. They entered the crisis with limited resources and high debt, significantly constraining their capacity to respond (see Figure 1.3).
Support from the international community is critical for enabling these countries to recover from the pandemic. This includes support for debt relief, which the IMF has provided to 29 of its poorest members through its Catastrophe Containment and Relief Trust (CCRT). Additional resources are being sought to provide debt relief for a full two-year period through April 2022, to cover the debt relief from October 2021 to April 2022 and to ensure that adequate grant resources are in place to address the needs of members under other CCRT-qualifying shocks in the future. Thus far, contributions totaling $785 million have come from donors including Bulgaria, China, the European Union, France, Germany, Japan, Luxembourg, Malta, Mexico, Netherlands, Norway, the Philippines, Singapore, Sweden, Switzerland, and the United Kingdom.
Debt relief has also been made available through the Group of Twenty (G20) Debt Service Suspension Initiative (DSSI), which the IMF, together with the World Bank, has helped support. After taking effect in May 2020, the initiative delivered $5.7 billion in debt relief to 43 countries by the end of 2020. Two six-month extensions of the initiative until the end of 2021 will provide considerable debt service relief.
Promoting good governance
Governments around the world are playing a bigger role in their economies, expediting spending and delivery of services to combat the pandemic. This expanded role is crucial, but it may also increase opportunities for corruption. Recognizing these risks, the IMF has called for enhanced transparency and accountability measures. Its advice is clear: “Do what it takes, but keep the receipts.”
The IMF has sought specific governance measures for countries receiving emergency financing. These measures include commitments to publish COVID-19 spending reports and audit results, as well as crisis-related procurement contracts, including the companies awarded the contracts and their benefiting owners. This information is key to preventing conflicts of interest and tax evasion and allowing the public to track who benefits from public contracts. In addition, countries receiving assistance commit to undertaking a Safeguards Assessment: a diagnostic review of a central bank’s governance and control framework.
Longer-term governance and corruption vulnerabilities continue to be addressed under the IMF’s broader 2018 Framework for Enhanced Fund Engagement on Governance, with a focus on multiyear IMF lending arrangements and surveillance, including in the context of voluntary assessments of transnational aspects of corruption. The IMF is also stepping up its technical assistance and training in areas such as public financial management, anticorruption and anti–money laundering frameworks, fiscal transparency, and tax administration, including through deep-dive governance diagnostic missions. Thus far, more than a dozen of these missions have been completed or are underway. Collaboration with other international institutions, including the World Bank, the G20 Anti-Corruption Working Group, the Organisation for Economic Co-operation and Development Working Group on Bribery in International Business Transactions, and the Financial Action Task Force, has also ramped up, as well as cooperation with civil society organizations.
Going virtual
Like other organizations, the IMF had to quickly adjust to new ways of working as a result of the pandemic. Board meetings, surveillance missions, program reviews, and CD all went virtual.
Immediate and real-time policy advice and CD were provided virtually to 160 countries during FY 2020/2021 on topics ranging from debt management to governance. Despite connectivity limitations, most of these virtual engagements were with fragile and conflict-affected states, low-income countries, and small states. A new Regional Capacity Development Center opened in February 2021 for the Caucasus, Central Asia, and Mongolia. Online learning, webinars, and training curricula were also expanded during the year.
Both the 2020 Annual and 2021 Spring Meetings were held online, with thousands of delegates participating online from countries all over the world in hundreds of events. The success of these meetings is indicative of the remarkable adaptability the IMF community has shown.
