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COVID-19: IMF defends US$650 billion support to developing countries

The IMF says the US$650 billion support to developing economies to cushion the impact of COVID-19 is a good beginning

The International Monetary Fund (IMF) has defended its allocation of US$650 billion to developing countries to cushion their economies against the impact of COVID-19.

Dr Gita Gopinath, IMF chief economist has been commenting on the organization’s 2021 economic growth forecast and says US$650 billion in currency aid to developing economies to cushion the impact of COVID-19 is a good beginning.

Speaking on Bloomberg, Dr Gopinath said, “I Think the US$650 billion would be very good…it is needed, it will be a good signal of global confidence, global multilateralism and in these highly uncertain times when we still have the pandemic it will help all countries to be in somewhat safer position with this additional reserve.

“Of course, this in itself would not be enough and we talked about the need for concessional financing especially for low-income countries. But also debt relief extensions, debt restructuring in some cases. So there is still a lot to be done but this would certainly be a good beginning,” she said.

Dr Gopinath also emphasised debt restructuring as the solution to helping countries with high debt.

She said, “…There are some countries that will need to get more resources at home; increase tax capacities implementation, they will have to rely on their domestic resources too. But then of course there are countries whose debt are already so high that it’s hard to think of a scenario on how they will get out on their own, for them, debt restructuring is the solution.

“I would say that the G20 common framework is one mechanism to which that can happen and we have three countries; Chad, Ethiopia and Zambia that have decided to use this particular framework. So I will say that’s one mechanism to bring everybody including the private sector on board in providing relief on the debt front,” Dr Gopinath added.

Meanwhile, Richard Ampaabeng, a member of the UN non-governmental lesion service also known as the UN NLGS has called on the G7, G20, the United States of America and other international financial institutions, to raise the offer of US$650 billion for developing countries to over US$3 trillion saying the previous amount, will not be enough to sustain developing countries’ economies against the impact of the pandemic.

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