IMF chief warns: Pulling plug too early on COVID-19 response risks serious harm

WASHINGTON (Reuters) - The head of the International Monetary Fund warned on Wednesday that halting spending aimed at containing the coronavirus pandemic and mitigating its economic consequences could have serious consequences for the global economy.

FILE PHOTO: IMF Managing Director Kristalina Georgieva speaks at the Global Women's Forum in Dubai, United Arab Emirates, February 16, 2020. REUTERS/Christopher Pike

IMF Managing Director Kristalina Georgieva urged countries to invest in green projects and digital infrastructure to boost productivity and incomes, and said it was imperative to help low-income countries deal with heavy debt burdens so they could maintain support for their citizens.

“The picture over the last few months has become less dire, yet we continue to project the worst global recession since the Great Depression,” Georgieva told a news conference during the annual meetings of the IMF and World Bank.

“Nine months into the pandemic, we are still struggling with the darkness of a crisis that has taken more than a million lives, and driven the economy into reverse, causing sharply higher unemployment, rising poverty, and the risk of ‘a lost generation’ in low-income countries.”

The IMF projects a partial and uneven recovering in 2021, with global growth expected to reach 5.2%, but warns that significant risks remain, including the resurgence of the virus.

“A durable economic recovery is only possible if we beat the pandemic everywhere,” she said, calling for strong international cooperation on development and distribution of a vaccine.

Faster progress on medical solutions could speed up the recovery and add almost $9 trillion to global income by 2025, which in turn, could help narrow the income gap between poorer and richer nations, she said.

Georgieva said it was critical for all countries to continue essential measures to protect lives and livelihoods, including through lifelines such as credit guarantees and wage subsidies.

“Pull the plug too early, and you risk serious, self-inflicted harm,” she said.

Georgieva said the IMF had reached over $280 billion in lending commitments, with over a third of that approved since March, shortly after the crisis began.

The Fund had aided 81 countries and had extended debt service relief for its poorest members, she said. It had also mobilized an additional $21 billion from members to support concessional, zero-interest loans, and was considering other options to expand lending.

Reporting by Andrea Shalal; Editing by Chizu Nomiyama