World leaders need to preempt a wave of social unrest that could follow in the wake of the coronavirus pandemic, according to the chiefs of the global financial system.
“We simply cannot take social cohesion for granted,” International Monetary Fund Managing Director Kristalina Georgieva told reporters Thursday.
She aired that warning after a private conversation among the members of the International Monetary and Financial Committee, which included such financial luminaries as Federal Reserve Chairman Jerome Powell, French Finance Minister Bruno Le Maire, and British Treasury chief Rishi Sunak. Georgieva revealed that she heard such misgivings “in many of the comments” from meeting participants, who agreed on the need for global coordination to ward off such crises.
“We got a lot of support from the membership to help countries’ efforts in calibrating their social policies to reduce inequality, protect vulnerable people, and promote access to opportunities for all,” Georgieva said.
IMF officials have $1 trillion available for lending to struggling nations, the senior leaders emphasized after the meeting. They are doubling the amount of emergency financing that a given country can obtain annually. Among other measures, the IMF also has launched a short-term liquidity line to help nations that see their incoming revenues crater due to the loss of tourism and blows to other economic sectors.
“What you have seen coming out of this IMFC is an unprecedented global solidarity, where countries with resources pledged those resources to the IMF so that the IMF has got the firepower to deploy to countries that are vulnerable,” said IMFC Chairman Lesetja Kganyago, the governor of the South African Reserve Bank. “We were able as a global community to say that we are in this together: ‘Let us deploy the resources to take care of the vulnerable parts of the world’ was, for me, the most crucial point to take away.”
Their agreements follow an IMF report that warned government leaders that “some countries remain vulnerable to new protests, particularly if policy actions to mitigate the COVID-19 crisis are perceived as insufficient or as unfairly favoring large corporates rather than people.” And U.S. officials suspect that China will move to take advantage of the economic struggles that Western allies face as a result of the social distancing policies adopted to slow the spread of the contagion.
“With the peak of the outbreak still ahead, many economies will require significant fiscal outlays to tackle the health crisis and minimize bankruptcies and job losses while facing mounting external financing needs,” Georgieva said during her opening remarks in the IMFC meeting.
Yet the IMF chief also acknowledged that some of those measures may prove difficult to sustain. “Key questions include how long to maintain the extraordinary stimulus and unconventional policy measures and how to unwind them, dealing with high unemployment and ever ‘lower-for-longer’ interest rates, preserving financial stability, and, where needed, facilitating sectoral adjustment and private sector debt workouts,” she also said.
Still, Georgieva emphasized that the countermeasures the IMFC has developed so far may prove insufficient as the pandemic continues. “To just quote one of the governors, everything has to be on the table,” she told reporters after the meeting. “We simply don’t know yet how the crisis will evolve. What we do know is that we have strong financial capacity to act now and that speed of action is of the essence in the crisis that has moved so rapidly and is so deep. Building a bridge over it — this is what the fund is doing with the strong endorsement of the membership.”
