(Bloomberg) -- The International Monetary Fund on Thursday asked the leaders of world’s biggest economies for more support to keep the international monetary system from seizing up due to the pandemic.
The IMF sought backing to create a sizable quantity of reserve assets called SDRs, or special drawing rights, as it did in the 2009 global financial crisis, Managing Director Kristalina Georgieva said in a statement after a conference call with Group of 20 leaders. The move, which would require backing from the IMF’s membership, would immediately boost the liquidity of all IMF members once approved. The fund also asked for support to expand the use of swap-like instruments.
G-20 leaders on Thursday pledged in a joint statement after a teleconference summit to inject more than $5 trillion into the global economy and do “whatever it takes” to overcome the pandemic. U.S. President Donald Trump said he will discuss the meeting during a 5 p.m. news conference from the White House.
Read more: G-20 Leaders Commit to ‘Whatever It Takes’ to Overcome Virus
Georgieva also called for G-20 support to double the fund’s $50 billion emergency financing capacity and for official bilateral creditors to ease debt burdens of the poorest nations. She has cited the need to boost liquidity in emerging markets after investors withdrew tens of billions of dollars since the crisis began.
“It is paramount we recognize the importance of supporting emerging market and developing economies to overcome the brunt of the crisis and help restore growth,” Georgieva said. “These countries are the main focus of our attention.”
The IMF expects a global recession this year that will be at least as severe as the downturn during the financial crisis more than a decade ago, followed by a recovery in 2021. Georgieva reiterated the IMF’s readiness to deploy its $1 trillion lending capacity.
Read more: IMF Sees Recession at Least as Bad as World Financial Crisis
While creating more SDRs isn’t the most targeted way to get money to the neediest countries, because they must automatically be granted to all IMF members and not just those in need, it’s one of the simplest, said Douglas Rediker, a senior fellow at the Brookings Institution and former U.S. executive director at the Fund.
“It’s literally the equivalent of pressing a button and presto, countries have more reserves,” he said. It still would be important for those governments to find other funding to pay for crisis response and stimulus measures to boost their economies, Rediker said.
On the other hand, swaps imply greater risks for the IMF’s conditions-based lending model, he said. Pushing for an easing of bilateral debt burdens is effectively a call to China, the largest official lender to many of the world’s poorest nations and not a member of the Paris Club of foreign lenders, Rediker said.
Also on Thursday, World Bank President David Malpass said in a statement that he presented to the lender’s board with a plan to provide $160 billion in financial support over the next 15 months. The statement also announced the death from coronavirus of Carole Brookins, a former U.S. executive director of the bank during the George W. Bush administration.
(Updates with Rediker comments from seventh paragraph.)
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