IMF Outlines Policy Steps to Address COVID-19


Obinna Chima

The International Monetary Fund (IMF) has stated that monitoring, containing and mitigating the effects of the COVID-19 should be top priorities for countries.

The Fund, noted that timely and decisive actions by health authorities, central banks, fiscal, regulatory and supervisory authorities could help contain the virus outbreak and offset the economic impact of the pandemic.

According to the Washington-based institution, central banks must support demand and confidence by preventing tightening of financial conditions, lowering borrowing costs for households and firms, and ensuring market liquidity.

On the other hand, it urged fiscal policy authorities must step up to provide sizable support to the most affected people and firms, including in hard-to-reach informal sectors.

“Regulatory and supervisory responses must aim to preserve financial stability and banking system soundness while sustaining economic activity.

“Significant steps have been taken in recent days, going in the right direction, but more needs to be done. As the virus spreads across the globe, decisive and coordinated action is key to providing stability to the global economy and financial markets, boosting confidence, and preventing deep and prolonged economic effects.

“We must also help poorer and the most vulnerable countries by providing equipment and financing to prevent and treat infections,” it stated.
The Fund stated that it was ready to support its membership, including through financial support for the countries hardest hit.
It noted that monitoring and containment measures were essential to slow the spread of the virus and reduce the peak load on health systems.

According to the IMF, early monitoring and swift and comprehensive containment measures would slow the spread of the virus.
It pointed out that the WHO was providing guidance on health measures.
“Ensuring sufficient paid sick leave will help to curb contagion. In countries with less reliable social safety nets, health interventions must be targeted to reach informal sectors and those living in extreme poverty.

“Systematic testing is necessary to document progress and inform when it is safe to resume activity in previously affected regions.
“Ramp up public health expenditure urgently.
“Overwhelmed systems can amplify the initial shock through social anxiety, reduced detection and treatment, and heightened need for quarantine.

“Key steps include supporting medical tele-consultations and extra-ordinary recruitment in the health sector, complemented by coordinated industrial response in medical supplies production and steps to reduce negative cross-border spillovers from excessive hoarding.
“Inform populations of the seriousness of the crisis and change individual behaviors. A high-level group should be established to coordinate responses,” it added.

The IMF stated that timely and regular communication of information from credible sources was essential, including daily updates on severity.
It noted that national directives and transparent policy advice would help guide efforts and resource allocation of firms and the public sector to monitor, plan and respond to the pandemic.

“Cooperate on measures to help the vulnerable within, and across countries. It remains important to ensure that crucial medical supplies are not restricted from reaching the people and countries most in need, as it would raise infection rates further and prolong the pandemic.
“Central banks should support demand and confidence by easing financial conditions, ensuring the flow of credit to the real economy, and fostering liquidity in domestic and international financial markets.

“Central banks should provide liquidity to support market functioning and ease stresses in key funding markets, through open market operations, expanded term lending, and other measures such as outright purchases and repo facilities.

The IMF stated that monetary easing would support demand and confidence while reducing borrowing costs for households and firms. In addition, the fund noted that rate cuts (where there is policy space), stimulus could be provided through forward guidance about the expected path of monetary policy, and expansion of asset purchases (including risky assets).

It noted that temporary targeted measures would support sectors that have been hit hardest.
According to the IMF, to complement generalised policy measures, more targeted support for certain asset classes should be considered.
“Coordinated action by G7 central banks can provide stability to the global economy and financial markets. This includes coordinated monetary easing and swap lines to lessen global financial market stresses and liquidity pressures, including swap lines to emerging market economies. “Monetary policy in emerging and developing economies (EMDE) will need to balance cushioning growth with tackling external pressures, including commodity price shocks and capital flow reversals.

“The fiscal response by G20 countries has been timely but so far remains lower than during the global financial crisis. Given the temporary nature of health epidemics, the current crisis is likely to be more short-lived. “However, as the virus spreads across the globe, more needs to be done in 2020, and the case for a coordinated and synchronised global fiscal stimulus to enhance confidence is becoming stronger.

“Low-income countries (LICs) with limited domestic policy options depend critically on global growth. Many LICs are buffeted by multiple shocks on external demand, terms-of-trade and financing conditions,” the IMF added.