Until the epidemic comes under control, it is imperative to adopt monetary and fiscal policies that immediately support countries around the world, says an International Monetary Fund (IMF) official. The official also suggested creating a security network against fluctuations in external capital flows that could affect economic stability in countries like India. Tobias Adrian, financial adviser and director of the IMF’s financial and capital markets division, said the economy was most adversely affected by the coronavirus epidemic. He said economic activity in most countries declined rapidly by 2020.
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“As long as the epidemic is not controlled, monetary and fiscal policies that support it will continue to be necessary,” he said. We now feel the same for our member states. “On the economic policy front, good means there is favorable support and this has helped to mitigate the impact of the decline from the epidemic,” Adrienne said. Therefore, a revival is expected. He said the epidemic put a lot of pressure on financial markets early last year.
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The IMF official said central banks have taken swift measures to ease monetary policy, provide liquidity and prevent a collapse due to the epidemic in the financial market. These steps proved to be effective. The second important issue is the stability of the banking system globally. The IMF has conducted global bank pressure tests in 30 countries, Adrian said. It also found that banks have better capital globally even in adverse circumstances. This is actually the result of 10 years of regulatory reforms internationally.
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The third major component of crisis response is financial measures. Countries around the world have taken major financial measures to support the corporate sector. Adrian said India is on the brink of this terrible epidemic with many chronic problems in the financial sector. In the core banking system, there were some weaknesses, which were related to non-performing loans. He said the non-banking sector is very important in India. “Financial companies have grown very fast and there has been a rapid contraction in the credit of these finance companies,” he said. This can lead to some negative reactions, which we have seen. Thus, there were some problems in the non-banking sector before the epidemic. These problems were exacerbated by the economic downturn, and the lockdown, which was triggered by an epidemic, has certainly exacerbated them.
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The IMF official said, “At present, we have improved the situation in India to some extent. We hope that a strong economic environment will help us achieve better results in the banking sector as well.
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