Answer to Question #271827 in Economics for Nalyn

Question

Explain how the IFIs help eradicate the Covid-19 and help the globe amidst pandemic 

Answer 1

The COVID-19 pandemic has demonstrated the ability to quickly mobilize, consolidate, and, in general, has shown a fairly high degree of reliability of the healthcare system. At the same time, she identified many problems associated not only with the medical aspect, mostly expressed in the level of preparedness of the healthcare system to repel serious infectious threats, but also with social, informational, cultural, and other aspects.

Protecting the lives of citizens and containing the burden on health systems required the introduction of quarantine, self-isolation of citizens, the closure of borders, and the suspension of the activities of many sectors of the economy.

In fact, this became the trigger for the long-forecasted new global financial and economic crisis, which in terms of its scale and depth may become the most destructive in the entire post-war period.

As a result, many countries are faced with a multilateral crisis, including a health shock, domestic economic hardship, a sharp drop in external demand, a reversal of capital flows, and a drop in world energy and certain commodity prices.

At the height of the pandemic and the beginning of a new financial and economic crisis, almost all the leading industrialized countries were forced to switch to "manual" economic management, in the best traditions of classical dirigisme.

Countries with limited financial resources in the context of an impending economic crisis, a widespread decline in production, and a collapse of the service sector were forced to seek help from international financial organizations and, above all, the World Monetary Fund (IMF) and the World Bank Group (MB).

About 90 countries of the world applied to these international institutions for loans to combat COVID-19 and economic difficulties.

In response to countries' requests for financial assistance, the IMF leadership announced its readiness to use all its credit resources in the amount of up to $ 1 trillion in order to overcome the consequences of the crisis.

As part of the IMF's response to the spread of the novel coronavirus pandemic and its negative impact on the economy, the IMF Executive Board on April 16. 2020 approved the creation of a mechanism for providing short-term liquidity to countries with limited financial resources. At the personal stage, it is planned to allocate from 50 to 100 billion dollars for these purposes.

In practical terms, these are renewable guarantees for IMF member countries in need of moderate short-term balance of payments support. As a result, many countries have received renewable access to financial resources of up to 145% of their quota in the IMF.

The measures taken have strengthened the countries' liquidity and contributed to a more efficient distribution of financial resources within the fund itself.

At the same time, the IB Board of Directors approved an emergency assistance program for countries in need within a $ 14 billion funding package.

The scale of the challenges posed by COVID-19 is unprecedented, and in recognition of this, the Bank Group intends to provide countries in greatest need by the end of 2020 and an additional $ 160 billion in early 2021 to protect the poor and vulnerable. business support and accelerate economic recovery.

One of the first components of this program will be up to $ 6 billion in fast-track loan guarantees from the Multilateral Investment Guarantee Agency (MIGA).