News Excerpt
Union Finance and Corporate Affairs Minister attended the Plenary Meeting of the International Monetary and Financial Committee (IMFC) through video conference.

•    The IMFC has 24 members who are central bank governors, ministers, or others of comparable rank and who are usually drawn from the governors of the Fund’s 189 member countries.
•    Each member country and each group of member countries that elects an Executive Director appoints a member of the IMFC.
•    The IMFC operates by consensus, including the selection of its chairman. While there are no formal rules on term limits, since 2007 IMFC chairman have been appointed for a term of three years.
•    A number of international institutions, including the World Bank, participate as observers in the IMFC’s meetings.
•    The IMFC meets twice a year, once during the IMF-World Bank Annual Meetings in October and other during the Spring Meetings in April. The committee discusses matters of common concern affecting the global economy and advises the IMF on the direction of its work.
•    This year, due to the COVID-19 outbreak, the meeting took place through video-conference.

    The IMFC is the ministerial-level committee of the International Monetary Fund (IMF).
    The discussions at the meeting were based on IMF Managing Director’s Global Policy Agenda titled, “Exceptional Times – Exceptional Action”.
    The members of the IMFC updated the committee on the actions and measures taken by member countries to combat Covid-19 and on IMF’s crisis-response package to address global liquidity and members’ financing needs.
    The Finance minister outlined various measures taken in India to tackle the health crisis as well as to mitigate its impact.
o    She mentioned the allocation of $2 billion (₹15,000 crore) by the Government of India to strengthen the healthcare system.
o    Announcement of social support measures amounting to $23 billion (₹1.70 lakh crore) to alleviate the hardship of the poor and the vulnerable
o    Provision of relief to firms in statutory and regulatory compliance matters
o    Easing of monetary policy by the RBI; and three-month moratorium on loan instalments
    Countries have taken fiscal measures and central banks together injected a whopping USD 14 trillion as part of their efforts to mitigate the challenges posed by the novel coronavirus pandemic.
    The IMFC called on the membership to urgently provide USD 17 billion of concessional financing for its poverty reduction and growth trust. During the meeting, they received 70 percent of the commitments from members.

Effect of Coronavirus Pandemic on economy
    The COVID-19 pandemic is having a “severe” effect on the world economy and is expected to cause a -3% change (i.e., a contraction) in global output in 2020, something not seen since the Great Depression of the 1930s.
    This is “much worse” than the 2008-09 financial crises, as per the International Monetary Fund’s (IMF) World Economic Outlook (WEO).
    India’s growth is expected to dip to 1.9% in 2020 and rebound to 7.4% in 2021, as per the WEO, which was released by the IMF in April 2020.
    The cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around 9 trillion dollars, greater than the combined economies of Japan and

    As per the IMF If the pandemic does not recede in the second half of 2020, global GDP would fall an additional 3% in 2020 and if the pandemic continues into 2021, global GDP may fall next year by an additional 8% relative to the baseline scenario.
    Many countries will face multi-layered crises, including health shocks, domestic economic disruptions, reversal of capital flows, plummeting external demand, and a collapse of commodity prices.

Measures needed to tackle the economic situation
    Policymakers should make targeted fiscal, monetary and financial sector interventions to support impacted households and businesses.
    Fiscal measures should be two-fold, cushioning the impact on the most-exposed households and businesses, and reducing firm closures i.e., preserving economic

    Effective policy responses must reach informal workers and their families quickly to prevent them from falling (deeper) into poverty and to protect their livelihoods.
    India has taken various steps in this regard mentioned above under the heading highlights.
    Following measures would also strongly benefit the needy population: Expanding existing social assistance programs, introducing new transfers, preserving livelihoods through employment retention, by providing support to small businesses to help them survive.
    Necessary measures to reduce contagion and protect lives will take a short-term toll on economic activity but should also be seen as an important investment in long-term human and economic health

Importance of the IMFC
    The IMFC advises and reports to the IMF Board of Governors on the supervision and management of the international monetary and financial system, including responses to unfolding events that may disrupt the system.
    It also considers proposals by the Executive Board to amend the Articles of Agreement and advises on any other matters that may be referred to it by the Board of Governors. Although the IMFC has no formal decision-making powers, in practice, it has become a key instrument for providing strategic direction to the work and policies of the Fund.

The IMF has played a pivotal role in maintaining stability of the international monetary and financial system during the times of crisis and it should continue rendering this critical role in maintaining the stability of the global financial architecture. The IMF should help the countries through following measures - (a) Emergency Financing (b) Augmenting existing lending programme (c) New financial arrangements (d) Capacity development

WEO Report, Global Financial Stability Report, Development Committee of IMF,2008 Recession