Marshal of the IMF and the World Bank is forced to press for aid for the poorest

WASHINGTON, Oct. 14, 2020 (AFP) – The world’s two dominant emergency lenders opened their annual meetings on Wednesday with a renewed call for the rich to help the poorest cope with the ravages of the coronavirus pandemic, within from national borders and globally.

IMF and World Bank leaders have been beating the drum on the need for governments to keep spending amid the crisis to help support unemployed workers and businesses, to prevent the emergency from worsening.

But with national and corporate debt levels soaring amid historically low interest rates, the crisis presents a puzzle for Washington-based institutions that have always called for caution in spending.

Calls to spend have so far been heeded, but IMF Director Kristalina Georgieva and World Bank President David Malpass are sounding the alarm so they don’t get too complacent with initial success and urging creditors. China and private lenders in particular, to do more to alleviate debt. burden on the most vulnerable countries.

”Nine months after the pandemic, we are still grappling with the darkness of a crisis that has claimed more than a million lives and reversed the economy, leading to much higher unemployment, increased poverty and risk. of ‘a lost generation’ in low-income countries, ”Georgieva told reporters.

“What worries me most is withdrawing support for workers and companies prematurely, because it could cause a wave of bankruptcies and a massive increase in unemployment,” he warned.

The fund projects a 4.4 percent drop in global GDP this year, a smaller decline than was forecast in June due to the staggering $ 12 trillion in resources that governments injected into their economies around the world.

But despite a 5.2 percent recovery forecast for 2021, the world economy is expected to lose $ 28 trillion in output over the next five years.

And with signs that the virus is re-emerging in many countries and there is still no vaccine available despite the global momentum, Georgieva warns that “all countries are now facing a ‘long climb'” to get out of the crisis, “a a journey that will be difficult, uneven and uncertain. and prone to setbacks.

In keeping with its tongue-in-cheek nickname “It’s Mostly Tax,” the fund is again recommending that lawmakers consider raising taxes, but now it said those increases should target wealthy individuals and businesses, especially those that may have benefited during the pandemic.

That revenue could then be used to provide healthcare, job training and other support to citizens in need, the fund said.

Meanwhile, Malpass has been particularly strident in his calls for governments and corporations to provide more debt relief to poor nations.

The Group of 20 major economies earlier this year agreed to a suspension of debt service for the 43 poorest countries, releasing up to $ 5 billion through the end of the year, less than the expected $ 8-11 billion.

The G20 on Wednesday approved a six-month extension of the Debt Service Suspension Initiative (DSSI), but Malpass has continued to raise concerns about a lack of transparency in lending, especially, but not only, from China.

China is the largest of the creditors, as its share of debt owed to all G20 countries rose to 63 percent at the end of last year from 45 percent in 2013, often through massive infrastructure projects in developing countries.

Georgieva said China will need to “mature at the national level in terms of how they handle their own lenders (and) the coordination between them.”

But the World Bank director said the challenge remains to turn this process into a “significant reduction” of debt “that will allow lasting growth in the future.”

At an event later Wednesday, Georgieva agreed on the need for “more subsidies and much more concessional financing for poor countries.”

Officials are also concerned that private participation in the debt initiative has been largely absent, with only three of the 43 nations reaching out to their private creditors.

Covid-19 remains the main problem, and the IMF leader said that rapid success in medical solutions could add $ 9 trillion to the global economy by 2025.

“A lasting economic recovery is only possible if we overcome the pandemic everywhere,” he said.