Guedes will ask the IMF for money for emerging countries.
The minister notes that emerging and developing countries are facing unprecedented capital outflows, a sudden drop in external demand, and a "dramatic" decline in commodity prices.
BRASILIA (Reuters) - Economy Minister Paulo Guedes will advocate to the International Monetary Fund (IMF) for a new, broad allocation of Special Drawing Rights, the Fund's currency, in order to leverage global liquidity amid the constraints generated by the economic impact of the coronavirus crisis.
In a prepared speech for a meeting taking place on Thursday as part of the IMF and World Bank Spring Meetings, held virtually, Guedes states that there is still room for further international coordination of policies to address the crisis, especially to meet the needs of countries with low levels of international reserves.
The minister notes that emerging and developing countries are facing unprecedented capital outflows, a sudden drop in external demand, and a "dramatic" decline in commodity prices.
He praises the IMF's actions amid the crisis, particularly its responses to requests for emergency assistance from over 100 members. "It is now crucial to ensure that the new resources are effectively additional to the Fund's regular assistance," Guedes argues, also suggesting that the new allocation of special drawing rights would be very useful.
“This is a low-cost, low-risk mechanism that has already been tested during periods of crisis. It improves liquidity flow and is particularly useful for medium and small economies that do not have sufficient international reserves or access to swap lines,” says the speech, which Reuters had access to.
Amid the need for containment measures imposed by the pandemic, which may include border closures, it is important that the world avoid protectionist measures, says the minister.
In the case of Brazil, he says that the policy package to combat the crisis is close to 10% of GDP, with liquidity provisions equivalent to about 17% of GDP and measures that will support a credit expansion of 16% of GDP. “The country has taken truly extraordinary steps to combat the pandemic, ensure the smooth functioning of the financial system and the supply of credit, as well as income, jobs and businesses. No Brazilian citizen will be left behind,” he states.