As the coronavirus crisis grows worse, it becomes apparent that additional funding will be required. The International Monetary Fund confirmed it will “free up” $50 billion in the weeks and months to come.
Coronavirus Funding Aid is Necessary
The world is ill-prepared to deal with a crisis such as the coronavirus. Most hospitals are not well-equipped to perform ample tests. This is due to a wide variety of reasons, including a severe lack of resources and funding. Finding fresh capital to address this situation will never be an easy feat.
Thankfully, the IMF is willing to offer a helping hand. Today, the IMF confirmed they will provide an additional $50 billion in funding. The funds will primarily be distributed to low-income and emerging market countries. A portion of the money will also make its way to other countries actively dealing with this trend already.
Of the $50 billion, 20% will be made available at zero interest for the poorest members. Emerging markets officially approaching the agency can receive their share of up to $40 billion in funding. Today, the International Monetary Fund has a lending capacity of roughly $1 trillion.
With one-third of all IMF member countries already handling the coronavirus, the threat cannot be ignored. This current rate of growth will also slow down the global economy. Current predictions indicate that global economic growth will be lower compared to 2019’s figures.
Where Does the Money Come From?
Contributing $50 billion to the coronavirus outbreak is the right decision by the IMF. At the same time, people need to realize where this money is coming from. Several revenue streams contribute to the IMF’s operations every single day.
Member states – currently 183 countries – pay quota subscriptions every year. The size of such a quota is determined by how much a government can pay compared to the size of its economy. Not all member states are equal in terms of economic strength and growth, however.
This quota also serves a secondary purpose. It is a determining factor as to how much financing a specific country can receive from the IMF. During a crisis like this, it is unclear how this will factor in exactly.
As this $50 billion is extended in the form of loans, there are several options to explore. The IMF offers financing of a short-term balance of payments, for up to 18 months. The second option is a medium-term arrangement for a three-to-four-year period. There is also a poverty reduction and growth facility option.
Currently, it has yet to be determined which options will be explored by the different member states. There is no such thing as free money, not even during a coronavirus outbreak threatening the entire world. Eventually, the International monetary Fund will expect a return of these loans in some capacity, which may pose another set of problems for “weaker” regions.