The IMF expects the global economy to contract about 3% this year, which would be the deepest one-year decline since the 1930s.
The financial toll of the Covid-19 pandemic is breaking the budgets of governments around the world. More than 100 of the International Monetary Fund’s 189 member nations have applied for the institution for emergency funds to cope with the effects of the virus. The IMF has pledged to use its full $1 trillion lending capacity—which it can expand through a new issuance of special drawing rights (SDRs)—assuming US objections can be overcome.
Some 170 countries will experience declines in per capita income this year, according to Vitor Gaspar, director of the IMF’s fiscal affairs department. Globally, budget deficits and debts will increase substantially more this year than in 2009 at the peak of the global financial crisis, he said in releasing the IMF’s latest Fiscal Monitor on April 15.
The sum of discretionary policy actions with a direct budget impact—together with loans, equity injections and guarantees—is about $8 trillion, or 9.5% of world GDP, Gaspar said. Gross government debt will rise 13% this year to more than 96% of GDP, he added.
Kristalina Georgieva, IMF managing director, told a recent meeting of G20 finance ministers that the IMF is ready to use “its full toolbox” and that “everything is on the table” in terms of measures it could take. The G20 has agreed to a temporary debt-service standstill on bilateral official loan repayments from a group of 76 of the poorest countries.
The IMF rejected Venezuela’s request in March for a $5 billion emergency loan, saying there was no clarity among its member states on who is the country’s rightful leader. The IMF announced on May 12 that it would back Chile’s request for a $23.8 billion flexible credit line (equal to 1,000% of the country’s quota), given the country’s “very strong fundamentals.”
The IMF expects the global economy to contract about 3% this year, which would be the deepest one-year decline since the 1930s. At the beginning of 2020, it had forecast a 3.3% rise in global GDP for the year.