Updated: February 28, 2021
The International Monetary Fund (IMF) on Thursday again urged countries that are receiving emergency financing to combat COVID-19 economic fallout, many of them in Sub-Saharan Africa, to spend the money but “keep the receipts” for accountability and transparency, especially because the money would be paid back.
“You might have heard the Managing Director, Kristalina Georgieva, and others at the IMF say we are urging countries to “keep the receipts”. Spend the money, but keep the receipts, and that means, you know, ensuring that the resources are properly used,” Mr. Gerry Rice of the Communication Department at the IMF said.
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Speaking at a press briefing from Washington D.C. to provide an update on the state of the global economy, Mr. Rice said at least 59 countries had received approval for emergency financing to combat COVID-19 economic fallout as of Wednesday May 20, 2020.
“I can tell you, that as of today, that number is now very close to 60, it was 59 as of yesterday. And our board, our Executive Board is really moving at record speed here at approving this financing. So 59 countries approved as of yesterday, and I can tell you that consideration of 29 more are expected soon,” Mr. Rice said during the virtual press briefing.
Rice said the IMF is using two financial instruments – The Rapid Credit Facility (RFC), and the Rapid Financing Instrument (RFI) – to facilitate rapid borrowings by countries in need of liquidity.
“It’s those instruments that will enable us to meet demand up to $100 billion in terms of emergency financing,” he said.
“And as I said the last time, it’s an important point that these facilities enable the Fund to provide emergency assistance without the need for a full-fledged program being in place.
“They do not entail program-based conditionality or reviews. That’s an important point that I think has been picked up in some of the coverage, but I want to highlight that point again. So this means this emergency financing can be dispersed very quickly, deployed where it is needed most, so that means, in very practical terms, supporting countries to do things like pay for doctors and nurses, and to protect the most vulnerable people, and safeguard vulnerable livelihoods,” he added.
“So no conditionality, no traditional IMF conditionality attached to this emergency financing. However, and I also want to stress, as I did the last time, that we are seeking very strongly, appropriate accountability and transparency to ensure that these financial resources actually do what they are supposed to do, which is to reach those most in need.”
Read full update by Mr. Rice below
Since the last time that I briefed here, which was two weeks ago, the IMF has continued to respond to the crisis, this unprecedented crisis, in an unprecedented way. We are responding to calls for our emergency financing from 102 countries so far. Two weeks ago, I mentioned to you that we had actually approved emergency financing for some 50 countries, some 50 of those 102 who have expressed an interest.
I can tell you, that as of today, that number is now very close to 60, it was 59 as of yesterday. And our board, our Executive Board is really moving at record speed here at approving this financing. So 59 countries approved as of yesterday, and I can tell you that consideration of 29 more are expected soon.
To meet this demand I think you know we have doubled ‑- again, our Executive Board has approved the doubling of access to our emergency financing, that is through the Rapid Credit Facility and the Rapid Financing Instrument. You’ll hear me talk a little bit more about those as we go through the questions that are being asked, the RCF and the RFI. It’s those instruments that will enable us to meet demand up to $100 billion in terms of emergency financing.
And as I said the last time, it’s an important point that these facilities enable the Fund to provide emergency assistance without the need for a full-fledged program being in place. They do not entail program-based conditionality or reviews. That’s an important point that I think has been picked up in some of the coverage, but I want to highlight that point again. So this means this emergency financing can be dispersed very quickly, deployed where it is needed most, so that means, in very practical terms, supporting countries to do things like pay for doctors and nurses, and to protect the most vulnerable people, and safeguard vulnerable livelihoods.
So no conditionality, no traditional IMF conditionality attached to this emergency financing. However, and I also want to stress, as I did the last time, that we are seeking very strongly, appropriate accountability and transparency to ensure that these financial resources actually do what they are supposed to do, which is to reach those most in need.
So you might have heard the Managing Director, Kristalina Georgieva, and others at the IMF say we are urging countries to “keep the receipts”. Spend the money, but keep the receipts, and that means, you know, ensuring that the resources are properly used.
And we are doing this via reporting and specific commitments in the Letters of Intent around this emergency financing, and in the publishing of how expenditures are being used. And in mechanisms such as, independent audits of the emergency financing. I know this is an issue of great concern to many, and that’s why I am dwelling on it just a bit.
Another issue that is of concern to many and will come up in the questions, but let me touch on it here, is the issue of debt relief. You will recall that Kristalina Georgieva and the president of the World Bank, David Malpass, led the call for a suspension of debt service payments from the poorest countries, the so-called IDA eligible countries, from official bilateral sources. This call was picked up by the G20, supported by the G20. That initiative, the debt service suspension initiative, is making good progress, I am pleased to report.
Specifically, and again, this DSSI, this debt service suspension initiative, is freeing up vital resources to help deal with the pandemic. But I can report progress in terms of over 20 countries so far have made formal requests for support under this debt relief initiative. And of these 73 countries that could be eligible for this initiative, I can tell you more than half have indicated interest to participate. So over 20 already formally requesting participation; more than half of the 73 eligible indicating interest to participate. So again, progress being made under this debt service initiative.
Look — finally, let me just mention some housekeeping things. There is a ton of information on IMF.org. I urge you to just go there, scan it, take a look. It’s very easy to find. There’s a single, what we call landing page, everything is there. We actually put up a new ‑- just published today, a new one page — it’s just one page, where you’ll find reference to everything that the IMF is doing on the response to the crisis.
This includes, for example, our action on debt relief by the IMF under the revamped Catastrophe Containment and Relief Trust, the CCRT, under which so-far 27 countries have received immediate relief on their obligations — payment obligations to the IMF. And, in fact, we’re looking to triple that debt relief from the IMF. These are grants. This debt service relief, these are grants to these very poor countries and you’ll also find information on the aim to triple our concessional resources under the poverty reduction and growth trust facility; that’s the PRGT.
Sorry about all these acronyms. There’s the CCRT on debt relief. There’s the PRGT on concessional resources and under the PRGT those resources are given at zero interest rate. You’ll also find, of course, we introduced the short-term liquidity line as part of our response to the pandemic for eligible countries to help stability and help confidence in economies.
You’ll find all that on this IMF.org page that I’m talking about. You’ll find new estimates of fiscal support, 9 trillion we estimate now in direct fiscal support. That’s a trillion more than when I stood here a couple of weeks ago. You’ll find analysis, warnings of the risks of inequality in the wake — rising inequality in the wake of the pandemic. You’ll find comparisons around reopening, what different countries and regions are doing, Asia, Europe, for example. We are tracking trade, a very important issue under the pandemic. You’ll find that information there.
This morning Kristalina Georgieva published an op-ed in the Financial Times on the important issue of banks and urging banks to consider retaining earnings to strengthen their capital and liquidity during the pandemic. And we continue to publish other information. You’ll find the analytical chapters of the World Economic Outlook; you’ll find the analytical chapters of the Global Financial Stability Report.
And let me mention that just tomorrow we will be publishing several of those chapters from the Global Financial Stability Report, and the head of our Monetary capital markets department, Tobias Adrian, many of you know Tobias, will be interviewed by CNBC, Elizabeth Schultz discussing the findings of those chapters. That’s tomorrow, available on all our social media platforms.
Our deputy managing directors continue to be active. Tao Zhang, for example, will participate in a parliamentary web dialogue. That’s going to be tomorrow as well. And you can find that via Facebook, and it is open to the press.
Finally, in terms of this, you know, logistical and housekeeping items, finally, and importantly, mark your calendars. On June 24th, Gita Gopinath, our economic counsellor and chief economist and her team, will launch the update on our World Economic Outlook, June 24th. I know that for many of you this is a very important item on your calendar so I’m highlighting it.
In addition, and unusually, we will also have from Tobias Adrian and the MCM team, monetary capital markets team at the Fund, an update on that Global Financial Stability Report that I just mentioned. That will be on the following day, June 25th. So two very important updates coming your way in short order. I may be able to say a bit more about this when I see you in a couple of weeks, but you can mark your calendars now.
I really do appreciate your patience letting me walk through those items. I hope it’s helpful. And things are moving fast, and it’s difficult sometimes to keep up. I can speak personally on that, so I thought it was useful just to step back and give you an update.
Let me turn to your questions. Thanks again, you’ve given us many. I’ll try to respond to as many as I can starting with Reuters asking several questions. Looking for an update on the Managing Director’s meeting with Chancellor Merkel yesterday, and asking about the status of private sector participation in the debt service initiative.
And a question that’s just come in now from — also from Reuters, so I’ll take it. David Lawder, thank you David, asking. “Good morning Gerry, can you update us on the debt relief initiative?” Okay. “Some countries have shied away from this for fear of damaging their credit rating. David Malpass says these worries are overblown, what’s the IMF’s view and does it need to be extended.”
So let me take those questions. On the meeting with Chancellor Merkel yesterday, yes Kristalina Georgieva did meet with Chancellor Merkel virtually yesterday, along with the heads of the international organizations, and she said, and I quote, coming out of the meeting Kristalina said that, I quote, “This pandemic will not end until the virus is contained in all countries. We are determined to strengthen our joint efforts to make that happen.”
That’s a quote. I would characterize the meeting as another one more important element in the international cooperation that we are seeing on many fronts in response to this pandemic. That’s the way I would characterize it.
On the question of private sector participation in the debt initiative. Very important question. As you may recall, the IMF and that the World Bank called on the private sector to participate in the debt service initiative on comparable terms to the official sector. So our position is very clear on that. Private sector participation could add substantial, additional level of debt relief to this initiative.
Where we stand, the Institute for International Finance, the IIF, has taken the lead on promoting private sector participation. They’ve been working on terms of reference with over 100 leading private sector firms that are active in the countries eligible for the debt service initiative. They are facing some challenges as the president of the IIF, Tim Adams, explained in a recent letter to Kristalina Georgieva and David Malpass.
There is plenty of goodwill at the IIF, and among many private creditors. At the same time, as I just said, achieving broad private sector participation is not an easy process. We want participation, private sector participation, to be voluntary as we do not want to put beneficiary countries in a position where applying for the initiative would, in some way, undermine their standing in credit markets. At the same time, private sector participation must take place on terms that will help countries in need.
We think the IIF is well-positioned to come up with terms of reference to achieve that. And these countries certainly need the support of the private sector, as well as the official sector. Just adding, you know, I think that covers a bit of David Lawder’s question, but let me give David a bit more detail. You know, his update on progress ‑- I’m characterizing today progress — the status of the initiative as good progress being made.
Again, over 20 countries officially requesting participation. More than half of the 73 countries that are eligible for the initiative expressing interest. So encouraging progress there. The IMF and World Bank certainly pushing as hard as we can including providing data, information, and so on.
In terms of, you know, some countries not expressing interest, David’s question. A few countries have linked their lack of interest to concerns about credit rating downgrades. But again, the majority of eligible countries have already expressed interest and we expect formal requests to continue to rise.
The IMF together with the World Bank will report to the G20 in due course. As you know, there’s a meeting of the G20 coming up this summer. And whether there’s a need to extend the debt initiative beyond the end of 2020, which is the timeline at the moment, and I can tell you that the IMF, for its part, stands ready to help support the potential extension of the debt service suspension initiative should that be deemed appropriate by the G20.
So let me leave the debt question there. Thanks to Reuters. Let me turn to other questions coming in, more country specific. I’ll try and get through these quickly. It’s a bit of around the world trip.
Argentina. Many questions. Thank you Rafael Mathus Ruiz of La Nacion. Thank you Maria Iglesia of El Cronista. Thank you Eric Martin of Bloomberg. Thank you Liliana Franco of Ambito Financiero and Paula Lugones of Clarin.
The questions are clutched around as follows. What would be the IMF’s position in case of a possible default by Argentina? On that I would like to say the Argentine authorities are in active negotiations with private bondholders to restructure the country’s sovereign debt. As we have said before in line with our long-standing practice for all countries, not just Argentina, these negotiations are a bilateral matter for Argentina and its creditors, and do not involve the IMF directly in that process. Again, that’s true in every country, not just Argentina.
I don’t want to speculate here on the outcome of those negotiations between the Argentine authorities and creditors, but what I would say is that we are encouraged by the willingness of both sides to continue discussions to reach an agreement. We continue to hope that an agreement can be found to set the stage for a sustainable path for the Argentine economy going forward.
Another set of questions on Argentina revolves around, can you give us a status of the update on talks over a new program between the IMF and Argentina? When and how would this begin? What would be the sequencing? Article IV program, and so on, to which I would say the following.
As we’ve said before, and as the Argentine authorities have publicly stated, they would first like to conduct an Article IV consultation and then they would eventually seek a Fund supported program. That’s been in the position of the Argentine authorities which we fully respect. We have an active and constructive dialogue with the authorities, but at this stage just to be clear, we have not started discussions on a Fund supported program.
And I do not today have a timeline on possible next steps at this point. I hope that’s helpful.
I’m turning to the Middle East and a couple of questions on Egypt from Ahram online, Doa’a Abdel Moneam asking about, again, status of the IMF’s financing arrangements with Egypt, and about the RFI loan, that was recently approved. So, I’m talking about that rapid financing instrument, that I mentioned at the beginning.
So, let me — let me just say this quickly, on Egypt. Clearly, COVID-19, as in many countries in Egypt, has caused significant disruption to the near-term outlook. The government and the Central Bank of Egypt have responded quickly, with a comprehensive packaging tackling the health emergency and supporting economic activities, and to support these efforts, the authorities requested financial assistance from the IMF, under that rapid financing instrument, the RFI, as well as a more traditional standby arrangement from the IMF.
So, on the RFI, the IMF’s Board approved the — Egypt’s request for emergency financial assistance, on the order of about $2.8 billion. That has been already approved, and turning back, then, to the question of the more traditional standby arrangement, for Egypt, I can tell you we are working with the Egyptian authorities on this request, so, this is on the standby request, to design a strong set of policies to support a strong economic recovery. The modalities of the SBA, its length, its size, the policy package, et cetera, et cetera, will be considered in the context of a discussion with the authorities, and then, as always, a discussion with our Executive Board and final approval, as always, by our Executive Board. So, that’s where we stand.
There was a further question on Egypt about the details of the RFI, its terms and conditions, and on that, I can say that it carries an interest rate of about one percent. It’s a very low interest rate, and repaid over a, roughly, three and a quarter to five-year period, so significant grace period included there.
Staying with the Middle East, I’m turning to Lebanon. Great deal of interest in Lebanon. I don’t have a great deal more to add from what I said last time, but Caroline Mangez, of Paris-Match and Laura Gardner, of Debtwire are all asking. So, I will give you an update, as much as I can. How do you assess the progress of the discussions between the Fund and the Lebanese authorities?
I would characterize the talks, thus far, as constructive. The IMF staff has been meeting with the Lebanese authorities, trying to better understand their views and their plans to go forward. As I said before, we would characterize the government’s economic plan as a good starting point for these discussions. It diagnoses the many economic issues facing Lebanon and proposes a comprehensive set of policies to address them. So, the discussions are ongoing. They are taking place virtually. That’s Lebanon.
I’m turning to Africa, very important what’s happening there, across the continent. Laura Gardner Cuesta, of Debtwire, asking about South Africa, any further updates, since two weeks ago? Just to remind, South Africa requested an RFI, a rapid financing instrument, emergency financing from the IMF, at the end of April. We are in discussion with the South African authorities, and we will be presenting this request to our management and to our Board. I don’t have a lot more information on that. The access limit, as you may know, is 100 percent of quota for all countries.
So, in South Africa’s case, this would amount to about $4.2 billion U.S. dollars, but let me stress that amount is subject to our Executive Board’s discussion and decision. So, I am not announcing that approval today. I am merely trying to give you as best information as I can on the parameters. It’s subject to our Executive Board’s discussion and approval.
Lots and lots of questions about Zambia. Matt Hills, of Bloomberg, who is in Maputo — hi, Matt. Matthew Lee, our friend in New York, Laura Gardner Cuesta, again, questions as follows: broadly, on Zambia’s — the state of the status of discussions with the IMF, Zambia’s debt, how can it be made sustainable? Matt Hill, of Bloomberg, asking about, again, Zambia’s debt, as unsustainable, how can we deal with that? Matthew Lee, status of the talks, the sustainability of Zambia’s debt, is it likely to receive IMF help? Can you confirm? Zambia’s Finance Minister says it has applied to the IMF for an RCF, or rapid credit facility. So, oh, and by — Eric Martin, of Bloomberg, too. Lots of questions on Zambia today. Let me try and get to those.
Yes, I can confirm the Zambian authorities have requested emergency assistance from its international partners, including the Fund. This comes in addition to an earlier request from Zambia for fund support for their economic reform program, more broadly. Any IMF financial support, including emergency financing, is contingent on steps to restore debt sustainability. So, I’m coming to answer the questions. As indicated in last year’s Article IV consultation with Zambia, and as published in the report, there, for you to look at, Zambia’s public debt is on an unsustainable path, under current policies, as the Minister said in February, and we note the government’s commitment to restore debt sustainability through fiscal policy adjustment and debt management. So, that’s where it stands.
Let me also say this to try and help and explain the context. It’s the Fund’s role to help countries address their medium-term viability, economic viability, and we are always and everywhere prepared to perform this role. That’s what we do. Our rules are there to help us keep a laser-like focus on designing programs that will work to help the country escape its problems, and they reflect decades of experience, really, of what works and what does not. So, I say that because particular care must be taken in unsustainable debt situations. Why? Because a poorly designed program can make matters worse for a country and its citizens. So, it’s important to get that right, and with strong commitments and actions, by a country and its creditors, a way forward can be found, which we can support, and, again, we always try to make that happen as soon as possible. You know, I won’t speak for other international institutions, but I know they are as dedicated as we are to resolving problems, and, again, more recently, in the case of Zambia, the authorities have expressed their intention to restructure Zambia’s debt, and, in this context, to hire debt advisors.
So, the bottom line is, on all of that, is we continue to have active discussions with the Zambian authorities on their economic response to the pandemic, as well as their medium-term macroeconomic objectives and policies. I did go into a little bit of detail on Zambia. There were lots of questions on Zambia, and that’s why I did that.
I’m turning to Asia. There are questions on China, from Maoling Xiong, Xinhua. Thank you, Maoling, and Matthew Lee, also, on China. Xinhua, first, how do you view China’s efforts to strike a balance between containing the outbreak and promoting economic and social development, as the Chinese economy gradually recovers from the outbreak? What’s the impact for the world?
And, you know, on that, I would say that, you know, China, clearly, has been taking very strong actions to combat the pandemic. China was first into this crisis, first to take very strong actions, and though is, in many ways, the first to be exiting the crisis, so, a lot of valuable lessons to be learned from China’s experience, what they’ve done broadly on the monetary and the fiscal front, of course, which many other countries have taken strong measures in those areas, the way that China is letting the economy adjust to these new and difficult circumstances, which, again, is something all countries need to do. We’re seeing China moving ahead in some areas that, again, I think, can carry lessons for others; for example, in electronic payment systems, ecommerce, linking very small firms to markets and consumers. So, all in all, to say I think China — China’s experience is very important to look at, as this global crisis evolves, and, you know, again, it has an important role to play in helping the world and the poorer countries, in particular, to shoulder the burden that the virus is placing on us all.
Matthew Lee, in that context, Matthew Lee was asking — thank you, Matthew. What’s the IMF’s prognosis and advice on large debts to China and whether China can or should collect them at this time? To which I would say we welcome China’s support for the CCRT, I mentioned it at the top of the meeting, the Catastrophe Containment and Relief Trust; China, along with a number of countries, making very generous contribution to the CCRT, and I would note China’s pledge to support the G20 Debt Relief Initiative for low income countries. So, I would leave that there, and turn to Pakistan.
Ashraf Malkhalm, GEO News TV, Pakistan, Ishfaq Mughal, AAJ TV, Pakistan. Thank you, both. What’s the update on Pakistan’s EFF program? What are the conditions set by the IMF for the resumption of the program? Will the IMF consider or recommend to G20 to write off loans to developing countries, including Pakistan, and so on?
So, quickly, on Pakistan, on the status of their extended fund facility, which was in place before the crisis hit, it remains in effect. Discussions were paused, due to the outbreak of the pandemic, and there was a focus on the rapid financing instrument, to help Pakistan combat COVID-19, and, again, that has been approved; $1.4 billion, our Executive Board has approved for Pakistan. That was almost a month ago, now. So, technical discussions continue with the authorities on the EFF. That’s the extended fund facility. That’s the other instrument through which we’re supporting Pakistan. This would be the second review. We hope to bring it to a positive conclusion as soon as possible.
What else can I say, on the G20 Initiative and developing countries, including Pakistan? Again, you know, going back to what I said earlier, on this Debt Relief Initiative, you know, it’s important to recognize that developing countries include some very poor and indebted nations, but they also include many countries that have been developing successfully. So, it’s a broad spectrum, and I know many of you know that, but it’s important to keep that in mind. So, for many of these countries, you know, that have been developing successfully, for many of them, attaining creditworthiness, the ability and the willingness to repay their debts, constitutes a hard-fought success.
So, that’s why I said earlier that a few developing countries have said, publicly, that they’re not inclined to take up the G20 Debt Suspension Initiative, you know, partly, because of that reason. What they want is a level playing field, in the form of stable access to finance on affordable terms, and, so, for this reason, the Fund’s priority is to ensure that these countries continue to have that access to appropriate external financing, as they go forward, and we try to contribute to that through our own lending and through initiatives, such as the G20 Debt Service Suspension, but let me be clear. As I said earlier, we also support all developing countries whose debts are unsustainable. We support those countries in fighting for debt relief. Importantly, debt relief to countries whose debts are unsustainable should encompass not only official bilateral debt, but also debt to the private sector.
So, I am repeating, in many ways, what I said earlier, that we will support our member countries, even whose debts are unsustainable in fighting for appropriate debt relief, and, again, whilst a few countries have indicated that they would not be participating in the initiative, the vast majority have either expressed a formal request to participate, or expressed interest, and we expect many more official requests in the coming days. So, just to place all that, again, in context.
I’m coming toward the end, here, and I’m going to turn to Europe, and there is a question on — two questions on Ukraine, Yaroslav Dovgopol, Ukraine, UKRINFORM, Laura Gardner Cuesta, Debtwire. On Wednesday, the President of the Ukraine said he’s about to sign a banking bill, calling it the last prior action for Ukraine to get a new agreement with the IMF. How do you assess the prospects in Kiev to get the new IMF lending arrangement? And Laura asking, essentially, the same kind of question, the status, and so on.
So, what I would say on Ukraine, we welcome the passage of the bank resolution bill, which strengthens the bank resolution process and provides safeguards for the use of public resources in the context of resolution decisions. This is an important step, given the very high cost to the Ukrainian state and taxpayers of resolving failed banks in the past. After adoption by parliament last week, the bank resolution legislation is now awaiting enactment by the President’s signature. That’s where we stand.
A virtual mission, IMF mission, staff team has been discussing the parameters of a new standby arrangement that would help Ukraine effectively manage the economic and health impact of the Coronavirus crisis. That arrangement would provide balance of payments and budget support within a policy framework that, again, will help Ukraine address the crisis, and then, as I said last time, here, once an economic recovery is more firmly in place, the policy focus should shift back to addressing Ukraine’s longer term structural reform needs to foster strong and inclusive growth. My team will be able to update you further on Ukraine, should there be further developments on the signing of the bank resolution bills, okay? So, you can be in touch with us on that if you have a further question.
On Belarus, Dmitriy Zayats, of BelaPAN, Belarus, is asking: Belarus asked the IMF to provide rapid financing, what’s the status? So, Dmitriy, I can confirm that we have received the Belarus request for a disbursement, under the IMF’s rapid financing instrument, and I can tell you IMF staff is in discussions with the authorities and evaluating the situation and the policies.
I’m going to take the final question, which is on Spain. It’s from Edurne Martinez, from Vocento Colpisa. Edurne is asking: how does IMF see the Spanish situation? Will tourism be a problem for us?
You know, Spain has been one of the hardest hit countries in Europe, in terms of the Coronavirus, and the economic fallout, you know, a large service sector dominated by small and medium-sized enterprises, strong reliance on tourism, as you mention, and widespread use of the temporary employment. So, the Spanish economy has been severely affected. You know, how this will play out remains uncertain. We commend the forceful government measures that have been taken, including income and liquidity support. As the lockdown measures are being gradually lifted, now, in Spain, economic activity will start to resume. So, we had a forecast on the Spanish economy with the — we will update some weeks ago, and you can expect new forecasts in the — we’ll update the world economic outlook update, coming on June 24th, to which I referred earlier. So, try to take as many questions as I can.
Thank you very much, everyone for, again, your patience and your collaboration in sending many of these questions in advance. It is so helpful. I hope these updates are helpful to you. Again, on behalf of everyone here, at the IMF, we wish you all well. Please, stay safe, and I’ll see you in a couple of weeks. Thank you very much.