On March 2nd, the Managing Director of the IMF announced, in a joint statement with the World Bank President, her intention to use all available instruments to support countries in addressing COVID-19.
The IMF detailed on March 9, 2020 the mechanisms available to support countries:
- Emergency financing. The Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI) provide emergency financial assistance to member countries without the need to have a full-fledged program in place. These loans—which could amount up to $50 billion for low-income and emerging markets—can be disbursed very quickly to assist member countries implement policies to address emergencies such as the coronavirus. Emergency lending to low-income countries available under the RCF is about $10 billion, and for emerging markets under the RFI it could amount to about $40 billion
- Augmenting existing lending programs. The IMF can modify as needed existing programs (the so-called Stand by Arrangements, SBA) in support of countries to accommodate urgent new needs arising from the coronavirus.
- Grants for debt relief. The Catastrophe Containment and Relief Trust (CCRT) allows the IMF to provide grants for debt relief to the poorest and most vulnerable countries with outstanding obligations to the IMF to help address disasters, including public health disasters. This facility was used to support Guinea, Liberia, and Sierra Leone during the 2014 Ebola outbreak. The CCRT is currently underfunded with just over $200 million available against possible needs of over $1 billion.
- New financing arrangement. The IMF can also provide support through a new financing arrangement under its existing facilities such as Stand-By Arrangements, although some of the tools listed above would generally be preferable, including because they can be disbursed quickly to address the urgent financial need.
An unprecedented number of countries have reached out to the IMF for financial support, with the IMF Chief Economist stating on April 8 that over 90 countries are engaging the Fund on some type of support. In response to this demand for support, the IMF Board double the limit of resources that countries can access under the RFI
Since March 23, 2020 the IMF Board has approved support to about 10 countries under different instruments. While some of these had been under consideration before COVID-19, the support has been expedited as part of the COVID-19 crisis response. Other requests are being considered in the coming weeks.
In addition to financing, the IMF has started to systematically track actions that countries are taking and it has developed a technical series on COVID-19 to support countries in taking policy measures to confront the crisis
The IMF Managing Director has also pressed global leaders on the need to provide debt relief to the poorest countries to maximize countries’ ability to address the health crisis.
On April 22, 2020 IMF announced a new facility called the Short-term Liquidity Line (SLL), in order to face the sizable demand for US dollar liquidity. This new facility provides a reliable and renewable credit line. The SLL is designed to address a special balance-of-payments need reflected in capital account pressures following external shocks.