Jakarta. The International Monetary Fund, or IMF, has warned countries that the world is heading for a global recession this year with recovery not expected until 2021 when the Covid-19 pandemic might finally show signs of easing, Finance Minister Sri Mulyani Indrawati said.
The minister made the comment after a virtual meeting of G20 finance ministers and central bank governors hosted by this year's G20 leader Saudi Arabia on Monday to discuss global economic conditions amid the pandemic.
"The IMF managing director [Kristalina Georgieva] said the situation now could be worse than the 2008 [global financial crisis]. Global economic growth this year will contract even more, lower than the previous projection of 3 percent," Sri Mulyani said to the press on Tuesday.
She said Saudi Arabia advised financial institutions to focus on helping lower-income countries, which will be the hardest hit by the recession because of their limited resources.
G20 members will work together to restructure developing countries' debts so they can focus on fighting the pandemic.
"[Saudi Arabia] is taking the initiative to prepare [relief efforts] for the pandemic. It has asked the World Bank and IMF to use their resources to maintain liquidity in all countries and to allocate the assistance effectively," she said.
G20 central banks have also initiated a swap line cooperation to counter the impact of the pandemic on the global economy.
The IMF will offer $1 trillion in loans, while the World Bank and the International Finance Corporation (IFC) will pitch in $14 billion.
"The IMF will use all their current resources, totaling $1 trillion, and has promised $500 billion more in swap lines for all IMF members. This relief fund is expected to help countries suffering from capital outflow, lack of dollar liquidity and tight foreign exchange," Sri Mulyani said.
The International Development Association (IBRD, or IDA) will also pitch in $6 billion to improve health systems in countries that need it.
The IFC and the Multilateral Investment Guarantee Agency (MIGA) will also provide $150 billion in Covid-19 relief fund in the next 15 months.
Another meeting of G20 leaders on Thursday will discuss the group's collective response to the pandemic, including how quickly a Covid-19 vaccine could be made available.
The meeting is expected to return some semblance of global confidence amid escalations of the pandemic in many parts of the world.
The former managing director of the World Bank said other countries are also rolling out stimulus packages to protect their economy from the pandemic.
"Almost every country has increased its social safety net, not only for the poor but also for people who have just lost their jobs. Countries are pouring in extraordinary amount, up to 10 percent of their GDP, to fight the impact of the pandemic so it doesn't spill over to their economy," Sri Mulyani said.
G20's Joint Humanitarian Actions
Bank Indonesia Governor Perry Warjiyo, who was also present at the virtual meeting, said G20 members will join forces to improve health systems around the world in the fight against Covid-19.
"Governments are intensifying measures for the prevention and containment of Covid-19. Joint actions, especially in the health sector, are needed to overcome this pandemic," Perry said to the press on Tuesday.
He said the G20 countries will focus on sharing knowledge and experience in the handling of the pandemic, and cooperating to ensure there are enough supplies of medical equipment and medications to go around.
Currently, there have been 332,000 Covid-19 cases worldwide with 14,000 deaths.