IMF chief quotes hockey legend Gretzky to lay out virus challenge

When faced with a great challenge, it can’t hurt to quote a sports legend nicknamed “The Great One”.  

That is what International Monetary Fund Managing Director Kristalina Georgieva did in a blog post on Monday, quoting ice hockey icon Wayne Gretsky to underscore the monumental task the Fund faces in helping member states whose economies are being ravaged by the coronavirus pandemic.

Having listed all the extraordinary steps the Fund has already taken to help struggling member states, Georgieva signalled that more exceptional measures may be required, writing: “To quote a great Canadian, Wayne Gretzky: “Skate to where the puck is going, not where it has been.”‘

Emerging markets and developing economies have seen an outflow of $100bn in recent months – the highest on record. But more resources may be needed, said the IMF chief, if market pressures continue to mount, and lending – even on easy terms – is not always the best solution, given already high debt burdens faced by many countries.

“The IMF, like our member countries, may need to venture even further outside our comfort zone to consider whether exceptional measures might be needed in this exceptional crisis,” Georgieva said, suggesting increased collaboration with other international institutions and the private sector.

She gave no details, but her remarks came after a joint IMF-World Bank paper published on Friday said a broader group of countries – beyond the 77 poorest countries that have already been promised a suspension in debt payments on official bilateral loans – may need debt relief.

Georgieva also revived her call for a possible allocation of Special Drawing Rights (SDRs). A unit of exchange created by the IMF from a basket of freely usable currencies, an SDR allocation is a low-cost way of bolstering IMF member states’ international reserves during times of extreme stress.

The IMF sees the global economy contracting by three percent in 2020 due to the coronavirus pandemic, marking the steepest downturn since the Great Depression of the 1930s.

“We stand ready to deploy our full lending capacity and to mobilize all layers of the global financial safety net, including whether the use of SDRs could be more helpful,” Georgieva wrote in the blog.

United States Treasury Secretary Steven Mnuchin last week rejected an SDR allocation, arguing that 70 percent of the funds created through that would go to Group of 20 countries, most of which did not need it, while only three percent would go to low-income countries.

SDRs are based on dollars, euro, yen, sterling and yuan. Member countries hold them at the IMF in proportion to their shareholdings.

Reuters news agency last week reported that the US, the IMF’s dominant shareholder, is blocking an SDR allocation because it would give new avenues of funding for Iran and China.

Mnuchin urged advanced economies to contribute instead to two IMF facilities that provide funds to the poorest countries, and said the US government was exploring such a contribution. A US Treasury official said a US contribution to one or both of the funds would require congressional approval, and potentially new funds. No further details were immediately available.

In her blog, Georgieva lauded the generosity of the United Kingdom, Japan, Germany, the Netherlands, Singapore and China in boosting the resources available in the Catastrophe Containment and Relief Trust, which helps the IMF’s poorest members by providing grants to cover their debt service payments to the IMF.

She also recognised Japan, France, Britain, Canada and Australia for pledges to expand the IMF’s Poverty Reduction and Growth Trust to $11.7bn, taking the fund to about 70 percent of its $17bn goal.