IMF official warns coronavirus will weigh on some economies for years

WASHINGTON: The coronavirus crisis is lasting longer than expected and it will take some countries years to return to growth, the No. 2 official at the International Monetary Fund said on Wednesday.

The Fund has provided some $90 billion in total financing to 79 countries, including 20 in Latin America, since the start of the health crisis, an IMF spokeswoman said.

It is continuing to work with member countries on how to contain the pandemic and mitigate its economic impact, First Deputy Managing Director Geoffrey Okamoto told an online event hosted by the Center for Strategic and International Studies.

“We’re trying to preserve our financial firepower,” Okamoto said. “We’re talking about a ... return to growth that’s going to take a few years, and many countries along the way that are probably going to need assistance.”

Latin American and Caribbean economies are the hardest hit in the world by the pandemic, reporting around 8.4 million coronavirus cases, and more than 314,000 deaths, both figures being the highest of any region.

Okamoto told the event that Fund officials were in talks with the Group of 20 major economies about extending a temporary halt in official bilateral debt service payments by low-income countries under the Debt Service Suspension Initiative (DSSI), and how to kickstart private sector participation.

The G20 initiative approved in April expires at the end of the year, but experts and government officials in many countries have backed extending it into 2021, with a decision expected in coming weeks and months.

The issue could come up when finance ministers from the Group of Seven advanced economies meet online on Friday. In August, the ministers agreed to consider extending the DSSI.

United Nations officials and others have urged the G20 to expand their efforts to include middle-income countries and island nations hit by the collapse of tourism.

The issue of debt sustainability was “top of mind” for Fund officials, Okamoto said, noting that many countries in Latin America had debt distress before coronavirus, which had exacerbated those pressures.

The DSSI is giving the IMF more time to assess the full debt picture for these countries, he said. “It’s lasting longer than we anticipated, and so that is going to change a bit the dynamics of what we think is sustainable in the long run.”

He said the Fund was continuing to ask rich countries to fund two specific Fund programs that lend to poor countries.

The United States, the largest shareholder in the IMF, has signalled it hopes to contribute, but no funds have been provided for those programs so far.