It will take some countries years to return to economic growth following the coronavirus crisis, which is lasting longer than expected, the No. 2 official at the International Monetary Fund said on Wednesday.
The Fund has provided some $90 billion in emergency financing to almost 80 countries, including 20 in Latin America.
It is continuing to work with member countries on how to contain the pandemic and mitigate its economic impact, First Deputy Managing Director Geoffrey Okamoto told an online event hosted by the Center for Strategic and International Studies.
“We’re trying to preserve our financial firepower,” Okamoto said. “We’re talking about a … return to growth that’s going to take a few years, and many countries along the way that are probably going to need assistance.”
Latin American and Caribbean economies are among the hardest hit in the world by the pandemic, reporting around 8.4 million coronavirus cases, and more than 314,000 deaths.
Okamoto told the event that Fund officials were in talks with the Group of 20 major economies about extending a temporary halt in official bilateral debt service payments by low-income countries under the Debt Service Suspension Initiative (DSSI), and how to kickstart private sector participation.
The G20 initiative approved in April currently expires at the end of the year, but experts and government officials in many countries have backed extending it into 2021, with a decision expected in coming weeks and months.
The issue of debt sustainability was “top of mind” for Fund officials, Okamoto said, noting that a lot of countries in Latin America had been in debt distress before the coronavirus crisis, which exacerbated those pressures.
The DSSI is giving the IMF more time to assess the full debt picture for these countries, he said. “It’s lasting longer than we anticipated, and so that is going to change a bit the dynamics of what we think is sustainable in the long run.”
He said the Fund was continuing to ask rich countries to bankroll two specific Fund programs that lend to poor countries.
The United States, the largest shareholder in the IMF, has signaled it hopes to contribute, but no funds have been provided for those programs thus far.