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IMF Managing Director Kristalina Georgieva, seen arriving for a conference at the Vatican, Feb. 5, 2020, said the global crisis lender has received interest from about 20 additional countries for financing programs.

Remo Casilli/Reuters

International Monetary Fund managing director Kristalina Georgieva on Monday said 20 additional countries have asked about receiving aid from the global lender as the coronavirus pandemic halts economic activity, and she called for strong, co-ordinated fiscal stimulus to limit the damage.

In a blog post on the IMF website, Ms. Georgieva said the Fund was ready to mobilize its full US$1-trillion lending capacity to help member countries deal with the crisis.

She did not identify the countries that have expressed interest in new financing programs. Iran last week said it was seeking an emergency loan from the IMF.

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“As the virus spreads, the case for a co-ordinated and synchronized global fiscal stimulus is becoming stronger by the hour,” Ms. Georgieva said.

The IMF chief issued her message shortly before she was due to participate in a 10 a.m. EDT (1400 GMT) call with leaders of the Group of Seven wealthy democracies, several of which are battling severe coronavirus outbreaks.

U.S. stock markets were down sharply in midmorning trading with the S&P 500 index down about 10 per cent and shedding US$2-trillion in value.

Ms. Georgieva, in her blog, suggested that co-ordinated fiscal action on the scale of the 2008-2009 financial crisis may be necessary. She said that in 2009 alone, Group of 20 countries deployed about 2 per cent of their GDP in stimulus, or about US$900-billion in today’s money, “so there is a lot more work to do.”

She said that governments should continue to prioritize health spending and provide support to the most affected people and businesses with policies such as paid sick leave and targeted tax relief.

On the monetary policy front, she said central banks “should continue to support demand and boost confidence by easing financial conditions and ensuring the flow of credit to the real economy,” citing emergency actions by the U.S. Federal Reserve and other central banks on Sunday as an example.

EMERGING MARKET RISKS

She applauded the opening of swap lines between major central banks, adding that such swap lines may need to be extended to emerging market countries in the future.

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She said central banks’ policy actions will need to balance the difficult challenge of addressing capital outflows from emerging markets and commodity price shocks, citing recent record outflows of US$42-billion reported by the Institute of International Finance last week.

“In times of crisis such as at present, foreign exchange interventions and capital flow management measures can usefully complement interest rate and other monetary policy actions,” Ms. Georgieva said.

She said financial system supervisors should aim to preserve stability, ensuring banking system soundness while sustaining economic activity.

“This crisis will test whether the change made in the wake of the financial crisis will serve their purpose,” she said, referring to increased capital requirements and other policies put in place over the past decade to rein in financial market excesses.

Ms. Georgieva said banks should be encouraged to use their capital and liquidity buffers and renegotiate loan terms for stressed borrowers.

The IMF earlier this month announced that it would make about US$50-billion available to emerging and developing economies through various emergency financing programs.

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In addition, Britain has contributed US$195-million to the Catastrophe Containment and Relief Trust, a fund for the poorest countries, bringing its debt relief fund to about US$400-billion.

The IMF currently has loan and financial backstop programs with about 40 countries valued at about US$200-billion.

Ms. Georgieva said all of the fiscal, monetary and regulatory actions would be “most effective when done co-operatively.” She added that IMF research shows that spending increases have a multiplier effect when countries act together.

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