Looking forward to an economic recovery after the pandemic subsides, International Monetary Fund (IMF) Managing Director Kristalina Georgieva urged policymakers to plan actions now to give their economies the best chance at a robust recovery.
Speaking at a virtual question and answer session on April 15, Georgieva said that the outbreak “is a crisis like no other” that has sparked the worst global recession since the Great Depression.
She insisted, however, quoting Abraham Lincoln, that “this, too, shall pass,” and said leaders should now plan for the “challenges we face at the other end,” including elevated debt levels and rising unemployment, as they devise policies to give their economies the best chance for a sharp rebound.
“Exceptional times call for exceptional actions,” she said and called for coordinated fiscal stimulus to boost demand and restore growth.
“It’s crucial for governments to lean forward with all we have,” she said, adding that countries with the “fiscal space” to stimulate demand through government spending should do so.
While calling for more fiscal actions, she said it was important that they are enacted responsibly.
“Our message is: ‘Spend as much as you can, but keep the receipts.’ We don’t want accountability and transparency to take a back seat,” she said.
Her remarks echo statements made in an April 15 IMF blog post, which called for governments to target their assistance, and to assess, monitor, and disclose fiscal risks.
“We do not know enough to foresee the timing and circumstances of the eventual recovery. But in times of emergency, the implication for policymakers is do whatever it takes but make sure to keep the receipts,” the authors wrote.
“Governments should reinforce principles of good governance commensurate with the scale of intervention. That should include, for example, accurate accounting; frequent, timely, and complete disclosure of information; and the adoption of procedures to allow for ex-post evaluation and accountability,” they added.
Georgieva said that, so far, countries around the world have taken fiscal actions in the amount of some $8 trillion to contain the pandemic and mitigate its economic impact.
“This is remarkable,” she said of such a huge amount being mobilized in a “record short amount of time.”
Some of the measures taken so far in countries like the United States and Germany include extended unemployment benefits, payroll tax deferral, as well as wage subsidies to small and medium businesses.
“Some countries need more help, and that’s where the IMF is so critical,” Georgieva added, noting that the World Bank and other institutions were mobilizing $200 billion to help such countries.
“In those cases, in countries like India and Kenya, cash transfers made with the help of unique identification systems and digital technologies, or in-kind provision of food and medicine, such as in Bangladesh, are possible options,” the blog authors wrote.
Georgieva said “the novel coronavirus is a new unknown we are wrestling with” and illustrated the unprecedented nature of the challenge by saying that “for the first time in IMF history, epidemiologists are providing input to macroeconomic projections.”
On Tuesday, the IMF released its world economic outlook, predicting the global economy would shrink by 3 percent in 2020 because of the fallout from the pandemic.
The dismal forecast is a major downward revision of 6.3 percentage points from the IMF’s January 2020 outlook.