COVID-19 is the IMF’s Chance for Redemption
After decades of failing to fulfill the explicit purpose for which it was created, the International Monetary Fund now finds itself uniquely positioned to facilitate a globally coordinated response to the COVID-19 crisis. But to make good on its potential, the Fund first needs to abandon some bad old ideas.
NEW DELHI – The COVID-19 pandemic has thrust the entire world – rich and poor – into uncharted territory, prompting extraordinary policy responses almost everywhere. The looming economic fallout will be more severe than that of the Great Depression, the 2008 global financial crisis, and perhaps even the two world wars. After all, none of these previous epochal crises involved a simultaneous global collapse of both demand and supply, with little certainty of how long the sudden stop would persist.
In an already unequal world, the COVID-19 meltdown has further increased inequalities within and among countries. Developing countries (even those with very few coronavirus cases) are being economically and financially devastated by collapsing global trade, sharp capital-flow reversals, and currency depreciation, all of which intensify external debt-servicing problems.
Moreover, policy responses within countries have compounded existing inequalities. In India, for example, the Modi government’s inept, draconian response is forcing millions of vulnerable people out of cities and back to their native villages, generating a gratuitous humanitarian catastrophe on top of the underlying COVID-19 crisis.