IMF, World Bank set aside $20bn for coronavirus response in low-income countries

Security checks at an airport in China
Masked passengers undergoing temperature checks, a containment measure aimed at controlling spread of the coronavirus disease, at Changchun Longjia Airport in northeast China. Photo: Wikimedia Commons

The International Monetary Fund and the World Bank are allocating more than $60 billion in emergency funds for countries across the world to combat the coronavirus outbreak.

The IMF on Wednesday announced that it has set aside “$50 billion through its rapid-disbursing emergency financing facilities for low income and emerging market countries that could potentially seek support,” of which $10bn is available at no interest for its poorest members.

The World Bank, on the other hand, is providing $12bn “in immediate support to assist countries coping with the health and economic impacts of the global outbreak.” The funding includes grants and low-interest loans for low-income countries, and loans for middle-income countries.

The outbreak will lead to slower expansion of the global economy in 2020 compared to 2019’s 2.9% growth, said Kristalina Georgieva, the IMF’s managing director. This is lower than the fund’s initial projection of 3.3% global growth this year.

Uganda’s GDP growth is also set to slow in the short term as a result of the coronavirus outbreak, the Bank of Uganda said last month, mainly as a result of supply chain disruptions. The bank also warned that “some sectors could be significantly affected”.

Indeed, the private sector expanded at its slowest pace in five months in February due to supply chain disruptions caused by the outbreak, according to the latest purchasing managers’ index released on Wednesday.

The fast-spreading disease will disrupt “significant elements” of both global supply and demand, the IMF said.

“Experience suggests that about one-third of the economic losses from the disease will be direct costs: from loss of life, workplace closures, and quarantines,” said Ms Georgieva.

“The remaining two-thirds will be indirect, reflecting a retrenchment in consumer confidence and business behaviour and a tightening in financial markets.”

Ms Georgieva said governments should prioritise “front-line health-related spending” to look after the sick and slow the spread of the coronavirus. In addition, policymakers might also have to tackle the supply and demand shocks caused by the outbreak, as well as any financial stability risks.

The World Bank said its support will help “developing countries strengthen health systems, including better access to health services to safeguard people from the epidemic, strengthen disease surveillance, bolster public health interventions, and work with the private sector to reduce the impact on economies.”

A statement issued by the bank said: “The World Bank support will cover a range of interventions to strengthen health services and primary health care, bolster disease monitoring and reporting, train front line health workers, encourage community engagement to maintain public trust, and improve access to treatment for the poorest patients. The bank will also provide policy and technical advice to ensure countries can access global expertise. 

“IFC will work with commercial bank clients to expand trade finance and working capital lines.  IFC will also directly support its corporate clients — with a focus on strategic sectors including medical equipment and pharmaceuticals — to sustain supply chains and limit downside risks. These solutions will leverage the lessons learned from similar events in the past with a goal to minimize the negative economic and social impacts of COVID-19 globally.”