Economic Policy Research Center (EPRC) continues the series of informational and analytical papers related to COVID-19 pandemics and its economic impact.
This paper overviews the initiatives proposed by international banks and organizations to mitigate the economic pressure caused by the pandemic worldwide.
• By 17 March, the World Bank and the International Finance Corporation (IFC) increased fast-track financing package to $14 billion to help companies and countries prevent, detect and respond to COVID-19.
• On 18 March, the Asian Development Bank (ADB) allocated $6.5 billion financial package to help its developing member countries having suffered from COVID-19. $3.6 billion will be used to finance responses in healthcare and economic areas. $1.6 billion will be used for private sector. The financial assistance will support micro, small, and medium-sized enterprises, internal and regional trade. It will also be available for companies directly affected by the pandemic. ADB will also mobilize about $1 billion of soft resources from ongoing projects and contingency costs of project. It will additionally allocate $40 million for technical assistance and rapid-disbursing grants.
• EBRD allocated $1 billion Solidarity Package to support affected companies (on 13 March). This is just a first step and EBRD is ready to mobilize larger resources when needed.
• The International Monetary Fund takes efforts to mitigate economic impact of COVID-19. After request for help from around 80 countries (including Georgia), IMF said it is ready to deploy $1 trillion lending capacity. In early March (on 4 March), the IMF allocated $50 billion to assist economies of member states affected by the pandemic.
• According to the statement released following the G20 Summit (on 26 March), the member states agreed to inject $5 trillion into global economy. Details are yet unknown.
• Today, Georgia is conducting negotiations with the IMF and expects to mobilize substantial resources from it. Georgia also received a EUR 45 million from the World Bank for Economic Management and Competitiveness Development Policy Operation. Although the direct aim of the project is to support ongoing reforms in Georgia rather than mitigate the economic impact of COVID-19, it is apparent that this resource is crucial for the economy that is in crisis.
• The US Embassy released a statement saying that the United States will give $1.1 million to support the healthcare sector. In particular, it will be used to finance preparation of laboratory systems, epidemiological research and surveillance, support and preparation of technical experts, exchange of information, etc. In the past 20 years, the US assistance for Georgia’s healthcare sector made up almost $139 million in total, while for other sectors exceeded $3.6 billion.
• On March 30, 2020 the European Commission announced about the allocation of the funds worth up to EUR 140 million to help the Eastern Partnership (EaP) countries – Georgia, Armenia, Azerbaijan, Belarus, the Republic of Moldova, and Ukraine – meet the most immediate needs amid the coronavirus pandemic. In addition, the European Commission has stated, that it will also redirect the use of existing fiscal instruments worth EUR 700 million to help mitigate the socio-economic impact of the public health crisis.
• ADB also stands ready to support Georgia and pledges to cooperate with the government. However, details about the cooperation and assistance are not known yet.
• Since the pandemic is only expected to increase, it is premature to speak with accuracy about economic effects. It is apparent that the global economy will be seriously hurt. Whether economic stimulus packages implemented by international banks will suffice is hard to say now. However, early prevention measures undertaken by the banks give rise to expectations that developing economies (including Georgia) will not have to go through the economic rehabilitation totally by themselves and will have an opportunity to get financial and technical aid from international community. How well will the country’s economy overcome the impact of the virus depends on how successfully will the country work with international financial institutions and more importantly, how effectively will it spend the attracted amounts.
The full version of the report can be found on this link: bit.ly/EPRCInstitutionsCOVID19ENG