Monetary Fund: The massive extent of the Corona shock will further bankruptcy


Geeta Gopinath, chief economist of the International Monetary Fund, has urged governments to switch to “equity-like” support from loan-focused support while the Coronavirus pandemic continues to harm companies.
According to “Reuters”, Gopinath said that the huge extent of the shock means that more companies will go bankrupt with their suffering from declining revenues for several months.
She said that government support in the form of loans would burden these companies with a huge debt, which would be a tax that would make it difficult for them to get out of the crisis.
“Because there is a bigger bankruptcy issue here, government support has to move more towards becoming a property-like, unlike debt-like. Otherwise, many companies, which emerge from this crisis, will end up with a massive amount of excess debt,” she said.
“If lending takes a equity-like formula … that is a lesser burden for companies. This will make it easier for companies to recover from the crisis,” she added at an online seminar hosted by the fund in conjunction with the University of Tokyo.
No details were provided on how this type of financing would work. During its domestic banking crisis in the late 1990s, Japan pumped capital into companies through programs through which state entities bought preferred shares issued by those companies.
Gopinath said that any recovery of the global economy would be very uneven and shrouded in great fog, and urged countries to implement strong fiscal and monetary stimulus measures to support their economies.
She stated that while food price inflation rises in some countries, consumer price inflation in general will likely remain low in most parts of the world because job losses will hold back wages.
The IMF is the current recession the worst since the Great Depression of the 1930s, and in its most recent forecast in June, the IMF predicted global output will shrink in 2020 by 4.9 percent, compared to an expected 3 percent contraction in forecasts released in April ( April).
In addition, the World Bank and the International Monetary Fund will hold their autumn meetings mainly via video circle, similar to their spring meetings in light of the outbreak of the new Corona virus, according to “French”.
In a brief joint statement yesterday, the two financial institutions indicated that “while we continue to monitor the status of the” epidemic “Covid-19 in the world and in light of the health problems caused by the pandemic, the International Monetary Fund and World Bank Group departments recommended that the annual meetings of the International Monetary Fund and the World Bank be held in 2020. To be held during the week of October 12-18, in a mainly virtual format this year. “
However, the administrations of the two financial institutions indicated that they would show “flexibility regarding the format of these meetings in light of the evolving situation.”
“Our goal is to serve our members effectively while maintaining the health and safety of participants in the annual meetings and employees, as well as the local population in the Washington area,” the statement continued.
The two institutions held their spring meetings in April, via video, at a time when the United States was recording a surge in epidemic infections after its outbreak in China and Europe, and domestic quarantine was being imposed on a large portion of Americans.
Tens of thousands of people from all over the world usually participate in these meetings, which contribute to pumping huge amounts of money into the local economy.


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