Speech

Remarks at General Assembly High-Level Meeting on Middle-Income Countries

December 4, 2018

President of the General Assembly, Maria Fernanda Espinosa Garces and Assistant Secretary General for Economic Development Mr. Elliot, let me first thank you for inviting the International Monetary Fund (IMF) to participate in this important discussion of the challenges facing middle-income countries in achieving the SDGs.

Middle-income countries (MICs) have come far over the past 25-30 years. Since 1990, we have seen huge leaps forward in social and economic development—reflected in strong performance in achieving the Millennium Development Goals.

For sure, middle-income countries have experienced diverse development paths. But the big picture is clear: over a billion people in these countries have risen out of poverty.

Yet, much more remains to be done. Both to meet the Sustainable Development Goals (SDGs) and to rise above middle-income levels. In fact, converging to advanced economy income levels and meeting the SDGs are linked. Success in one will need success in the other.

The dual success, however, requires overcoming many challenges.

At the global level, the economic expansion is continuing, but there are signs that growth is moderating. And, recent data have surprised on the downside, suggesting that the deceleration may be faster than we had expected.

The challenge of convergence is different depending on the country’s level of development.

Some middle-income countries, moreover, are already facing rising external and financial pressures. Others need to manage well their structural transformation and raise productivity associated with demographic and other changes. Small states are among those most vulnerable to natural disaster and climate change.

However, macroeconomic and financial stability, as well as trade and financial openness, are key for all countries.

What is the way forward?

First, we must work together. Working together, toward what the IMF Managing Director Christine Lagarde said is the “new multilateralism,” policymakers can contain risks and ensure that the global expansion continues to the benefit of all. This is especially true for trade. Strengthened trade could lift incomes considerably over time. Including by boosting investment and productivity.

Second, for middle-income countries, a strong structural reform effort is needed to sustain growth over the medium term.

Key in this regard is further improving allocative efficiency. By that, I mean advancing product and labor market reforms, increasing the use of less distortionary taxes, and advancing trade liberalization. Further efforts are also needed to ensure that the benefits of high growth are widely shared.

Here, I would like to emphasize the following five reform priorities.

1) Fiscal policies. Countries, of course, have different needs, social preferences, and fiscal room to maneuver. With that caveat, options include more progressive fiscal policies and a well-designed tax-benefit system that reduce distortions. Tax measures can support low-income household saving, for example, in the form of education and retirement accounts.

2) Targeted structural measures. Possible measures include action to ensure equal access to quality education and health services or to remove gender barriers, for example in the labor market. Investment in human capital focused on the disadvantaged groups will help to lift productivity while also ensuring that the resulting higher income is more widely shared.

3) Economic and financial inclusion. Enhancing financial inclusion, which means greater access to financial services to more people in more areas. It will require legal and regulatory frameworks that facilitate information sharing, protect consumers, and provide risk-based supervision.

4) Building economic and financial resilience. This is especially needed for countries that are particularly vulnerable to natural disasters and climate change, including many small middle-income countries. Priorities include, making effective use of insurance instruments and financial resources, investing in well-designed public infrastructure, and disaster planning.

5) Preparing for the “future of work.” This means adapting social insurance systems and safety nets to account for what the jobs of the future may look like, especially with advances in technology.

The IMF is working to deliver its commitments made in 2015 to support implementation of the 2030 agenda through policy advice and capacity building. These efforts focus on actions to close SDG financing gaps as well as gaps in policy reforms and institutional capacity, including governance and public sector management. The Fund will continue to support member countries to strengthen domestic revenue mobilization, develop capacity for infrastructure provision, enhance disaster and climate resilience, promote economic and financial inclusion. Support for fragile and conflict-affected countries that are furthest behind in achieving the SDGs will be increased.

In response to a UN request, the IMF developed a methodology to assess the SDGs spending needs. This illustrates the challenges faced by many MICs, especially those at the lower end of the income range, in financing SDGs. It concludes that mobilizing the necessary additional official development assistance and private sector resources requires a strong governance framework, binding on all stakeholders.

In summary, middle income countries have made considerable progress over the past decades. And, with sound policies and strong reform efforts, they will meet the challenges of the future. The IMF will remain committed to continuing to work with our member countries and development partners, private sector, and civil society organizations to achieve the dual goals for boosting living standards and meeting the Sustainable Development Goals.