Transcript

Transcript of the 2020 Annual Meetings IMFC Press Conference

October 15, 2020

Speakers:

Lesetja Kganyago, IMFC Chair

Kristlina Georgieva, IMF Managing Director

Gerry Rice, IMF Communications Director

Mr. Rice ‑ Hello, everyone. A very warm welcome to you, wherever you are in the world, to these Annual Meetings of the IMF and World Bank 2020, and to this press conference on behalf of the International Monetary and Financial Committee this morning. We look forward to your questions online and live via WebEx.

I believe the IMFC communique has been sent to you all. I hope you have received that and maybe had a chance to take a quick look. Anyway, we will be talking about that in this press conference. Very pleased that we have with us this morning the Chairman of the IMFC, Mr. Lesetja Kganyago, who is, of course, the Governor of the Reserve Bank of South Africa, and also the Managing Director of the IMF, Kristalina Georgieva.

I am going to ask the Chairman to make some brief remarks, followed by the Managing Director, and then we will turn to your questions. If you can keep them brief, we will take as many as we can. Mr. Chairman, over to you, please.

Mr. Kganyago ‑ Thank you very much, Gerry, and hello, everyone. Thank you for joining us. Six months ago when the IMFC last convened, we stressed that extraordinary economic policy actions would be necessary to deal with the COVID‑19 pandemic.

Today, we revisited these actions and agreed that conditions remain extraordinary and that exceptional policies are still called for. The pandemic is still spreading, while the recovery, as the communique notes, is partial, uneven, and marked by significant uncertainty. Emerging market and developing countries are particularly vulnerable right now, given the nature of the pandemic and some of the economic challenges and risks they uniquely face.

I want to remind everyone that the driving principle of our economic and monetary policies has been about protecting people. COVID‑19 has already taken the lives of more than 1 million people worldwide as the virus continues to spread.

The World Economic Outlook also highlights that the pandemic will reverse progress made since 1990 in reducing global poverty, as close to 90 million people could fall into extreme poverty this year. Protecting people, or what Kristalina has called "saving lives and livelihoods," is essential.

In our discussion, we recognize that countries' experiences are varied. In this regard, the IMFC endorsed continuing extraordinary policy responses that are tailored to country‑specific circumstances and needs.

Appropriately targeted fiscal measures are an important feature of saving people, not only because of the health risks associated with the disease, but because of the longer‑run social and economic costs that are associated with this pandemic. We also have more work ahead to make sure policies are targeted and effective, given heavier debt burdens that many countries are facing.

As you see from the communique, we commit to working together to help vulnerable countries achieve their financing needs and support their efforts to preserve debt sustainability.

The core features of the IMF's immediate crisis response that were initiated six months ago remain intact. Fortunately, debt relief has been extended another six months for the poorest countries.

We also agreed to support the IMF's efforts to expand concessional lending resources, facilitate timely sovereign debt resolution, and explore whether additional tools are needed to serve the membership as the crisis evolves.

More broadly, the IMFC underscored the importance of achieving strong, sustainable, balanced, and inclusive growth, and it pointed to the role that structural reforms can play in lifting growth, employment, and productivity.

Most importantly, we underlined today that international cooperation is essential so that research, development, manufacturing, and distribution of COVID‑19 diagnostics, therapeutics, and vaccines is equitable and affordable.

Cooperation, when combined with the economic policies I have outlined, will help us overcome the pandemic and support global economic recovery.

Finally, let me also thank Kristalina and her team at the IMF. It has been a pleasure working with you as Chair of the IMFC. At this stage, Kristalina, let me hand over to you for any remarks that you might have.

Ms. Georgieva ‑ Thank you very much, Lesetja, for summarizing the key outcomes from the IMFC meeting we just completed. Before I touch on a few issues, let me first thank and congratulate you. You have served the IMFC and the international system extraordinarily well over the last three years, and we are in a better place because of the work you have done. You are a great colleague and, above all, you are a very dear friend. You may step out of the Chair but never out of this friendship, camaraderie borne in crisis.

We broadly agreed this week that this is a crisis like no other, and it calls for steps to enable a recovery like no other. It is my determination to take the encouragement from the IMFC for steadfast support to countries and people across our entire membership. I want to focus on three policy areas in particular.

First, continue with essential measures to protect lives and livelihoods. Stepping up vital health measures is imperative, as is well‑targeted fiscal and monetary support to households and to firms. So the IMF's message from these meetings is very clear: Avoid premature withdrawal of support. Pulling the plug too soon risks serious, self‑inflicted harm.

Two, build a more resilient and inclusive economy. Public investment, especially in green projects and digital infrastructure, can be a game changer. They have the potential to create millions of new jobs while boosting productivity and incomes.

Three, deal with debt. Global public debt is projected to reach a record high of 100 percent of GDP in 2021. This is partially because countries rightly need to boost spending to fight the crisis and to secure the recovery.

Addressing this issue over the medium term will be critical, but for many low‑income countries, urgent action is required now. In this context, I want to especially welcome two significant deliverables from the G20 and endorsed by the IMFC.

First, the agreement to create the common framework for handling sovereign debt treatments beyond the Debt Service Suspension Initiative. This will be an important advancement in the international architecture for resolving sovereign debt matters in an orderly way.

As you may recall, the IMF has raised several issues with improving the architecture so we can have a fair, quick, relatively simple, relatively low‑cost resolution of unsustainable debt. This common framework is a significant step in the right direction.

The second deliverable is the extension by the G20 of the Debt Service Suspension Initiative for at least another six months from end of 2020, and for the option to extend it further, if necessary.

In addition, and again as the IMF has been emphasizing, further private sector participation is still needed, and it remains an outstanding issue.

Let me finish with a point that echoes Lesetja's comments. He noted that we need strong international cooperation. This is most urgent today for vaccine development and distribution. If we make fast progress everywhere, we could speed up the recovery, and we can add almost $9 trillion to global income by 2025. That in turn could help narrow the income gap between richer and poorer nations. The value of cooperation right now cannot possibly be overstated. Together. Thank you.

Mr. Rice ‑ Thank you very much, Managing Director and Mr. Chairman. Let us get straight to the questions I am going to take one online as you prepare to come on WebEx and give us your questions live.

The first one is from China Business News. It is a question about the second wave of the pandemic, how much further damage can it do, what kind of global cooperation is needed to address a potential second wave of the pandemic. Mr. Chairman, that might be one for you.

Mr. Kganyago ‑ Thank you very much, Gerry. Firstly, I think we need to work from the premise that the virus does not know any borders. The virus knows no borders. Our response to the virus has got to be coordinated. Whether it is in the form of a therapeutic or it is in the form of a vaccine, we actually need to cooperate as a global community.

Additional global cooperation is more important because the manner in which countries have responded to the pandemic was to do national lockdowns. What comes from the national lockdowns is that none of us, no individual country, can survive without international cooperation. It has become very clear we have seen that the [inaudible] contraction adjusted for global economic growth for this year. The life blood of the global economy is actually international trade, and once we had these lockdowns and international trade, basically for all in intents and purposes ceased, the global economy was in serious trouble. It should become very clear to us that different countries are in different positions in terms of resources and that lots of countries will still need access to IMF resources.

So having the IMF at the center of the global financial safety net has become even more important than it has been in the past. Because of that, cooperation in making sure that the IMF is adequately resourced so that it should not just respond to the current crisis but that it actually looks after those countries that are vulnerable, that are poor, that do not have access to resources, that the only source of resources would be the IMF, it just makes international cooperation so much more important than it has been in the past. Back to you, Gerry.

Mr. Rice ‑ Thank you so much. That question was from China Business News. I think they may be with us on WebEx. Are you there? Would you have another question?

Question ‑ Yes, I have another question for the Managing Director. So China is the only major economy you are forecasting to have a positive economic growth this year, and what does China's recovery means for the global recovery now, and what role can China play in global cooperation? Thank you.

Ms. Georgieva ‑ Thank you very much for your question. We have upgraded our projections for China's growth for this year to 1.9 percent. This is almost a percentage point higher than we had a couple of months earlier.

This is on the basis of two very important actions China has taken. One, to contain the pandemic, very decisive health measures; and, two, to provide a positive stimulus for the economy in terms of fiscal stimulus and in terms of monetary policy. China continues to boost the support to the economy. Of course, we see the outcome in the performance of the Chinese economy and our projections for the future. For next year we project 8.2 percent growth in China [NB: This figure was corrected after delivery from 8.8 percent as stated during the press conference].

When we look at the more disaggregated data, the manufacturing sector is doing better, where services, especially contact services, are still more constrained. What does it mean for the region and for the world? This is a positive impulse for the world economy, and it is particularly important for three types of countries. For countries that export metals and other commodities, demand from China has been a much‑needed relief, with commodity prices now going up.

Secondly, for countries that are connected to the Chinese economy through global‑value chains, demand from China is an engine for growth there.

Thirdly, in terms of building confidence that we can overcome the pandemic, not only the domestic measures but also the fact that China has joined the international efforts to have a vaccine, I cannot stress enough how important it is to boost the confidence that we together can get out of this crisis.

Until we have a durable exit from the health crisis everywhere, the recovery will remain uneven, uncertain, and obviously we want to see that in the rearview mirror as soon as possible.

Mr. Rice ‑ Thank you so much. I am looking at a question coming in from a Al‑Ahram newspaper. Are you there?

Question ‑ Good morning to all. Thank you for taking my questions. First of all, I want to congratulate Ms. Georgieva for receiving the Distinguished International Leadership Award from the Atlantic Council. You deserve the best.

For my question, as the World Bank and the IMF recent report shows that debts are rising in the emerging markets and low‑income countries and medium‑income countries, how do you think these economies can deal with such a serious issue? Thank you.

Mr. Rice ‑ Thank you very much. Mr. Chairman, would you like to talk about the questions relating to emerging markets, middle‑income countries, how they can deal with unprecedented debt?

Mr. Kganyago ‑ Yes, thank you very much. Emerging market countries are in different circumstances. Country circumstances differ. Getting into this crisis, there were countries which were highly indebted or were hitting rising debt levels. If you had the fiscal space, you had to use it during this crisis, but even countries that did not have the fiscal space found themselves having to spend more to respond to the pandemic.

Many countries, including emerging markets, took extraordinary measures to respond to the crisis because we were faced with extraordinary circumstances. These are measures, for lack of a better expression, for war‑time periods. They are not for peace‑time periods. But we have got to be alive to the fact that we are going to have to prepare ourselves to deal with the debt that becomes elevated as the economy begins to recover.

At some point or the other, we are going to have to withdraw these extraordinary measures so that we can actually deal with the challenge of debt. As the communique states, that withdrawing these extraordinary measures, it must be done in such a manner that it does not [hinder] recovery that we are seeing beginning to come through. Different countries would face different circumstances and each country would have to look at its circumstances.

What is also clear is that countries that are having access to markets, including my own, have been able to continue to tap the markets because the extraordinary measures taken in the advanced economies meant that there was abundant global liquidity, and that extended to contain the borrowing costs for various emerging market economies, but still these emerging market economies are not in the same position. There are low‑income countries that do not have access to markets, and for which the IMF and the World Bank and other multilateral institutions are the only source of finance. That is why it is important that we make sure that the IMF is not just well‑resourced, but that it is also capable of offering concessional facilities to the countries that do not have market access.

So, to sum it up, it was correct for countries to respond in the manner that they had responded to the crisis. That meant that spending has to be increased, and given that revenue was not easy to come by, borrowing had to be done. That meant that debt had to go up. At some stage, we are going to have to deal with the debt. As you deal with the debt, you are going to have to do fiscal consolidation. It is important that fiscal consolidation is done in a growth‑friendly manner.

Mr. Rice ‑ Thank you, Mr. Chairman. Kristalina, do you want to add anything?

Ms. Georgieva ‑ I want to say two things. One, thank you for your kind words. Two, we see the evidence of benefit of coordinated action. The fact that fiscal authorities and monetary authorities, especially in advanced economies, were swift to act in a synchronized manner meant that we saw massive injection of liquidity. What we fear may happen, collapse of economies, especially emerging market economies, developing countries, because of flight to safety, lack of access to finances, did not happen. So if you need evidence that when we act together there are positive spillovers, we find it here in this case of access to finance.

That being said, for countries that are experiencing severe difficulties where debt is not sustainable, acting decisively and early on debt restructuring may be the way to go. We have seen two middle‑income countries, Argentina and Ecuador, taking decisive action. What we would like to see is a more orderly process of restructuring and one in which both creditors and debtors can rely on sound foundation of principles and clear debt sustainability analysis. We will play our role in these processes.

Mr. Rice ‑ Thank you so much. I see a question coming from Japan. Can you come in? Please go ahead.

Question ‑ Thank you for taking my question. My question is about the COVID‑19 crisis and taking developments against it. Could you explain more in detail how important it is, and what do you think of Japan's contribution to the Initiative? Thank you.

Mr. Rice ‑ Managing Director.

Ms. Georgieva ‑ I want to wholeheartedly thank Japan for the highly responsible attitude to international cooperation in these times of crisis. Japan leads by example domestically by prioritizing investment in health and universal health coverage, also by acting decisively domestically to provide the necessary stimulus and monetary policy easing for the economy. But Japan also acts responsibly by supporting countries in need. Through the IMF, Japan has allowed us to increase our concessional financing resources, to provide debt relief to our poorest members, and today Japan also announced financial support, US$10 million, for a capacity development initiative to help countries build up strong institutions and policies to deal with the impact of the crisis and especially to help poor countries that need strong debt management so they can deal with the burden of debt themselves in that regard. I want to thank Japan once again for all it has done and for this recognition of capacity development as equally important as many if countries are to come out of this crisis stronger.

Mr. Rice ‑ Thank you very much, Kristalina. I think we have time for one last question. It is going to be live. It is Reuters. David Lawder, do you have a question for the Managing Director and the Chairman? Go ahead.

Question ‑ Yes. I would like both the Managing Director and the Chairman to respond to this one. Certainly you have called for countries here to not let up on the accelerator to maintain stimulus. In the U.S. we have seen kind of a gridlock here on another round of stimulus. The first one is basically running out. You see unemployment rates going up today. You are seeing infection rates going up today.

How important is it for you for the United States to do another round of stimulus? Will it be too late if it waits until, say, February? How important is it to accelerate that recovery that you just said could add $9 trillion to income? Thank you.

Ms. Georgieva ‑ Let me first recognize that decisive actions both on the fiscal front and the monetary front from the United States have not only helped the U.S. economy, they have had a positive spillover impact for the rest of the world. If we are to have today a floor under the world economy, the role of the U.S., given the size of the economy, the significance of the economy, and how much the U.S. leaned forward cannot be overstated.

We are, of course, keen to see that lifelines for businesses and for workers are sustained. This is our main message. Do not cut prematurely these lifelines.

Luckily for the U.S. it has fiscal space, and it also has monetary policy capacity. It is deploying both. The exact sequencing, how it is being done, of course, is for the U.S. authorities, but it has been an important, positive impulse. We would like to see how it would be continued. Again, I want to stress, the U.S. fortunately has the fiscal space to do it.

Mr. Rice ‑ Mr. Chairman, the question was also directed to you. I am going to give you the last word on both the U.S. and, more broadly, the issue of continuing policy support.

Mr. Kganyago ‑ Well, there is not much to add to what Kristalina just said; just to underscore that in particular the U.S. is in the position that many developed countries are in. Initially the U.S. has done what it could do under the circumstances, and they are at the zero lower bound. They embarked on unconventional monetary policy support to continue to support the economy. What is very clear now is that you do not go into a boxing match with one hand tied behind your back. So fiscal policy has to come to the parties here. A strong U.S. economy is actually good for the global economy. After the U.S. economy recovers from the pandemic, you will see the spillovers for the rest of the global economy, so it is important that that happens.

With respect to measures taken by other countries outside of the developed world, understand that most central banks deployed the tools that they have, including my own central bank. We acted with speed; we expect we stay to try and support our economies. But for many emerging market economies, including my own, fiscal space was not something that we had. We actually used the little fiscal space that we had to respond to the pandemic. Fortunately, monetary policy had the space, and the central bank was able to come to the party and support the economy. So different countries will face different circumstances. You would be lucky if you had both fiscal and monetary policy space because then you could deploy those at the same time, but for most countries, they have either one or the other.

Mr. Rice ‑ Thank you very much, Mr. Chairman. You get the last word on this your last press conference at the IMFC as Chairman. Thank you so much for everything. Thanks also to the Managing Director. Thanks to all of you for joining us today for this press conference. We are rushing off now to do the IMF Global Debate, so you will see Kristalina again there in about 20 minutes time if some of you are joining that. Thank you for joining us at these Annual Meetings. We will see you in the coming days. Goodbye.