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Afghanistan, Nepal, 23 other countries get IMF Coronavirus debt relief

ECONOMYNEXT – South Asian nations of Afghanistan, Nepal and 23 other African and small island nations will be given debt relief for the next six month, the International Monetary Fund said.

“This provides grants to our poorest and most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months and will help them channel more of their scarce financial resources towards vital emergency medical and other relief efforts,” IMF Managing Director, Kristalina Georgieva said in a statement.

The IMF periodically bails out countries with mainly soft-pegged monetary arrangements without reforming the central bank’s domestic operations permanently to block them from getting into currency crisis.

The money given is typically invested in US Treasuries to bring down American interest rates.

The agency was set up after World War II to help countries that got into the failed Bretton-Woods system of soft-pegs based on a Keynesian idea that a country could print money (have independent monetary policy) and maintain a stable exchange rate at the same time.

All contradictory policy gets all countries that practice such contradictory policies eventually get into currency crisis.

The entire peg system collapsed in 1971-72 when the US Fed printed money to close a so-called output gap while fighting the Vietnam War and funding then-President Nixon’s ‘Great Society’ program. (Colombo/Apr14/2020)