The IMF has dubbed the “Great Lockout” the economic crisis
Unemployment, as expected by all multilateral lenders as well as IMF independent economists, would raise the pressure on the budgetary side to start reducing social security net funding. The G20 finance ministers and central bankers approved “a time-bound suspension of debt service payments for the poorest countries,” and in the communique following their virtual meeting, said, “All bilateral official creditors will engage in this initiative.” The plan would “provide immediate resources to the north of $20 billion” for developing countries to use “for their health care system and to finance their COVID-19”
In a joint statement released by World Bank Group President David Malpass and IMF Managing Director Kristalina Georgieva said, “We very much welcome the G20’s decision to respond to our call to allow the world’s poorest countries to suspend official bilateral loan repayment on May 1.”
The announcement was welcomed by IMF and World Bank leaders, calling it “a strong, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable. ” The Washington-based lenders raced to carry out emergency funding and received requests from 100 countries for assistance. The G20 called on private creditors to participate in the initiative which extends to the 76 poorest countries in the world, working through the Institute of International Finance.
The IMF has dubbed the “Great Lockout” the economic crisis, warning it would cut $9 trillion off global growth as the world economy contracts by three quarters this year, the worst contraction since the 1930 Great Depression. If the pandemic lingers into the second half of the year or resurges, the situation could get even worse.
The G20 officials have expressed their determination to use “appropriate resources” to tackle the health and economic crisis that COVID-19 has triggered. “Our efforts need to continue and be stepped up,” the communique said. The IMF reports that the 20 governments have now pledged about $7 trillion to fight the epidemic and provide economic lifelines for households and companies struggling to survive the crisis. Yet, after the pandemic passes, more will be required to revive the global economies.