Transcript

Joint Press Conference by IMF Managing Director Kristalina Georgieva and IMFC Chair Magdalena Andersson

January 19, 2021

MS. ANDERSSON: Welcome, everyone, to this Press Briefing as I begin my tenure as Chair of the International Monetary and Financial Committee, the IMFC. And I am succeeding Lesetja Kganyago who is Governor of the South African Reserve Bank, and he has successfully chaired the committee for the last three years. And I want to start by thanking him for his excellent work, not the least, his efforts during the current crisis.

The IMF is and should be the hub of global economic cooperation. And the IMFC provides advice to the Fund and its 190 member countries on issues of strategic importance. I’m honored to contribute to this important multilateral cooperation and for the confidence the IMF member countries have shown in me. I'm taking on this role during challenging times, and I am aware of the responsibility that it entails because this pandemic is a historic challenge. First and foremost, to public health, but also for the global economy. And the IMF responded quickly with much needed crisis support to member countries through 2020. And I know that the IMF will continue to support its members in the year ahead. I look forward to contributing to that work.

With me today is Kristalina Georgieva, the Managing Director of the IMF. It's a privilege to have you here. Thank you very much for joining. And I very much look forward to working with you in the coming years, and I think it's important to state that the quick response from the Fund during your leadership has been very important for many countries during this crisis. And I will start by making a few remarks on the state of the global economy, the need for relevant fiscal policy, and the important role of IMF in the years to come. I will then hand over to Kristalina who will provide her reflections and remarks.

Starting with the global economy, about a year ago, the IMF forecasts indicated that the world economy would grow by more than 3 percent in 2020. And then the pandemic hit. And in its latest forecast, the IMF adjusted the expected global growth for 2020 to -4.4 percent. This is a much sharper contraction than during the 2008 global financial crisis.

And the pandemic has placed enormous pressure on our societies and the recovery is likely to be both gradual and uneven, and undoubtedly, the scars will last for years to come. And at the current juncture, the social and economic situation is especially grave in the poorest countries. Because for almost 25 years, we'd had a fantastic development. Extreme poverty has declined steadily. But the pandemic has meant that we see a very worrying setback. In 2020, the number of people living in extreme poverty is estimated to have increased by up to 115 million people.

So, this crisis is taking a massive toll on the poor and vulnerable with high human and economic costs. And global action is urgently needed and support from the IMF and other multilateral institutions will be very important. So, the global economy is in a truly difficult situation. And naturally, the recovery depends on the spread of the virus and crucially, on the roll out of vaccines. And in that race, the unprecedented speed of vaccine development provides hope. And now, we need a just as unprecedented speed of vaccination. The number one argument is being health, of course, but the economic effects of a speedy vaccination are enormous.

Now, let me continue with fiscal policy. During this crisis, countries have responded with extraordinary fiscal support. And taking firm action was the right thing to do in order not to compromise with health of our population or to protect people's livelihoods. And without this response, more people would have been unemployed, more firms would have gone bankrupt. The global economy would have been in an even worse situation.

An important lesson from the global financial crisis was that support should not be withdrawn too early. So, right now, we should continue our crisis support. But once circumstances allow, we should, however, restore public finances to ensure preparedness for the next crisis because previous economic crises have also taught us that as well as being timely, fiscal support must be temporary. And when the time comes to support our economies to recover from this crisis, we should act smart and effective because we have a remarkable opportunity to rebuild our economies and equip them for the future.

Through sustainable investments, we can create jobs and at the same time, push our economies into a more green, more inclusive, and more digital future. So, our reforms during the recovery phase should be designed both to restart the economy and to address long-term challenges such as the climate crisis and the growing inequalities because we can, and we must emerge stronger from this crisis.

So, just let me say a few words on the important work of IMF in this situation. The IMF's core mandate is to be the global firefighter in times of economic distress. And with its broad membership, its global approach, and position at the center of the global financial safety net, it is uniquely placed to promote financial stability. And the IMF will be a key player if we are to build a world that is fairer, more robust, and more sustainable than before the pandemic. And to do so, the Fund must be “Accurate, Agile, and All inclusive”.

On Accuracy, I think the Fund should uphold its accurate and high-quality work on forecasts, analysis, and advice so the IMF provides crucial guidance for policy makers across the globe. And the importance of this work has been emphasized during these uncertain times. But the Fund must also be accurate in its financing activities calibrating them to achieve the highest possible impact.

The IMF essence should also be an Agile institution. Its lending and analytical tools should be adapted when needed to always stay relevant and attuned to developments in the global economy. Being agile also means adapting to meet new challenges. And the IMF and the Managing Director have shown great commitment in making sure that the Fund will be part of a global response against climate change. I fully supported that, and I look forward to discussion on how this work can be further developed.

The Fund must also be All inclusive both in terms of promoting inclusive economic growth in its member countries, and when it comes to the governance of the Fund itself. Evidence from the IMF supports that the pandemic is likely to increase inequality within and between countries. Through the disproportionate impact of containment measures on low skilled workers, the young, and on women, COVID-19 risks amplifying longstanding inequities in our societies. And the IMF shows that workers most at risk of reductions in income or permanently losing their jobs not surprisingly are those that are least able to bear them, the poor and the young in the lowest paid jobs.

Vulnerable groups must therefore be protected, and as economies start to recover, tackling inequalities will be of essence. Income equality and gender equality are important objectives as such, but it is also smart economics because inclusive growth ensures that everyone can participate in and contribute to the development of the economy. And we need all the human capital we have to restart the global economy.

These issues are on the IMF agenda and I look forward to taking them further as Chair of the IMFC. To conclude, the world and the IMF's 190 member countries face a historic challenge. The IMF will continue to support its members' effort to build a world that is more prosperous, more robust, and more sustainable than before the pandemic. To do so, the IMF must be accurate, agile, and all inclusive. And as the platform for global multilateral economic discussions and cooperation, the IMFC is uniquely placed to give advice towards this end.

I also want to thank the Fund and its members for the warm welcome as the Chair of the IMFC I've received. And I am confident that together we can build an even stronger IMF and a stronger multilateral cooperation. With these words, it's now my great pleasure to hand over to the IMF Managing Director. Kristalina, the virtual floor is yours.

MS. GEORGIEVA: Thank you very much, Magdalena Andersson. I cannot stress enough how delighted I am that the membership of the IMF has selected you to head the IMFC over the next three years. We have had a chance to work together in the past. I also have seen you in action in this crisis and your deep experience as well as your strong commitment to multilateralism are exactly what the IMF needs today.

You have also made history as the first woman to lead the IMFC in its 76 years of history at the IMF. It's so fitting that you're the one that takes the first shot at the IMFC chair as a woman coming from a country with very strong traditions in pursuing gender equality, where women have exactly the same legal rights as men.

Likewise, I want to pay tribute to the outgoing chair, Governor Lesetja Kganyago of South Africa. He has steered the IMF's ship in the choppy COVID waters so extremely well. I recall how we swiftly called two virtual meetings of the IMFC in the early weeks of the pandemic. And this is what allowed us to swiftly take action as a first responder at the time of crisis.

US$103 billion total financing has been approved since the start of the pandemic , covering 83 countries.

Very important to recognize that 49 of these countries are lower income countries. And for this the IMF was and continues to be the only sizeable source of financing at the time of crisis. I am very, very grateful to Lesetja for what he has done.

And now stepping into your three year term, Magdalena, unquestionably a challenging time. A year in front of us that is going to be truly consequential. I am going to echo to a great degree the priorities outlined in this uncertain time. We see three very important areas where the IMF ought to serve the membership with (audio drop).

One, pursue an exit from the health crisis and economic crisis of COVID-19. And what it means is there is a very important role for international cooperation in this race between the vaccines and the virus, and we ought to win it everywhere. If we do, as you said, the economic benefits are enormous. We are going to get $9 trillion more in global output between now and 2025 if we press on collective action in the delivery of vaccines everywhere.

And while we are still struggling with the health crisis, we do need to continue to provide support through monetary accommodation and fiscal measures so we prevent a massive scarring as a result of bankruptcies going up. Scarring, however is not going to be long even if we are successful over the next months and year. Therefore, we will have to step up support and target the most vulnerable and offer a helping hand to workers that are going to be inevitably affected by accelerated automation and digitalization.

What we also have to do as you stressed as our second priority is to pursue a recovery that is truly transformative. Inclusive, green, smart. And that's (audio drop) can be steered with good policies. And I (audio drop) more equality, more (inaudible) and accelerated transition to the new climate economy that is bound to secure benefits in terms of new jobs and new opportunities. But also, a protection against a looming climate crisis. And rest assured, the IMF will play very important variance to the (audio drop) we shape our progress and provide capacity development support.

Last but not least we are facing an uneven recovery. At the risk of growing divergence between rich and poor countries, this requires from us at the IMF to think how we can generate more resources. We can help countries burdened by high level of debt to bring this debt level down.

So, a lot for us to do and I believe that we could not be in better hands then to have you, Magdalena, steering the IMFC over the next three years. And let me say in conclusion also a word of thanks (audio drop) since I had a chance to look at you with the Swedish and EU flags behind.

Sweden is at the early (inaudible) the IMF to be (inaudible) the first member. And you notice this year, we are going to acknowledge 70 years of membership with Sweden at the IMF. Throughout this period of membership and no doubt in the future, we can always count on Sweden for progressive policies for emphasis, equality, on the ability to create more dynamic, more competitive economies. And to pursue the betterment of everyone everywhere.

Sweden (audio drop) who had $1 trillion lending capacity at the Fund by participating in the new arrangements to borrow and the bilateral borrowing arrangements. And Sweden has gone beyond that, lending a helping hand to capacity development, especially on tax policy and on financial inclusion.

And for this, I am very grateful to the Swedish authorities and to the people of Sweden. I am (audio drop) as you know, and I recognize that the European Union very much shapes its priorities for its members for green, equitable growth that our priorities that we more broadly embrace in the work we will be doing in the one, two and three years of your term. Thank you very much for the opportunity to join you today. Very best of luck in the chair of the IMFC, Magdalena. Thank you.

MS. ANDERSSON: Thank you very much, Kristalina. Thank you for your kind words, and I really look forward to working together with you. And I am sure we will have a really good cooperation.

And we will now open the floor for questions from journalists, around the world.

MODERATOR: All right. And we will start off with Bloomberg.

QUESTIONER: I have two questions for Managing Director Georgieva. On fiscal stimulus, you said recently that governments should spend as much as they can to do whatever it takes to stimulate during this crisis. And I think the Fund is known for a somewhat more frugal approach to fiscal policy, how do you expect to get along?

MS. GEORGIEVA: Thank you very much for this question. The point I make is one that we also heard from Minister Andersson, that we cannot afford to withdraw support prematurely until we see the health crisis in the rearview mirror, it is important that governments within their fiscal space, within their capacity, and of course, reflecting on the needs of their economies, are there to make sure that we can build the bridge over the health crisis into recovery.

As the Minister emphasized, this support is not going to be forever. And at some -- at the point when we are through the health crisis, we do need to build fiscal consolidation measures that allow us to have the strength for future shocks to come. What we can see in this crisis so clearly, is that countries like Sweden, that responded to the crisis with strong fundamentals, have been more resilient and more able to provide the support that is necessary. And let me stress that the affordability of fiscal measures and accommodative monetary policy is a factor in the speed of the recovery. Advanced economies have been able to provide, on average, 20 percent of GDP in terms of support measures, emerging markets, six-percent, low-income countries, two-percent. And for us, at the Fund, it is very important to be there for countries with very limited fiscal space so we can help them also provide the necessary support while we are striving to exit the health crisis. And of course, as we do that, the -- I want to -- I want to get to that point of making sure that as we move forward, we also target the support where it would be most needed.

QUESTIONER: So, if you would look for example, to the E.U. Rescue Package that was negotiated before the second wave of COVID, is it sufficient, according to you? Or do we need more stimulus now, as the second wave has turned out to be so much worse than expected, would we even have funds (phonetic)?

MS. GEORGIEVA: It is very important to recognize the high-degree of uncertainty within which we operate. We got a very good third-quarter, and so on that basis, what we could see is that the pressure for fiscal support is somewhat. And then, many countries were hit by a second wave that led to new restrictions and the need to calibrate support, and in some cases, build it up. We are at the time when vaccines are, moving into implementation of massive vaccinations but, they are not there yet. And for that reason, what we strongly advise governments is to calibrate support, depending on progress we are making to exit the health crisis. Not too early to withdraw, and to calibrate it in terms of size, according to how we are progressing with this key determinant, which is the scale and the scope of the health crisis that imposes a scale and scope of restrictions on our economies.

But, let me -- let me say, if I may, we need to give credit where credit is due. One, there has been decisiveness in providing the support of monetary and fiscal measures. And I don’t think that we give enough credit to what Central Banks and Ministries of Finance have done in the world, swiftly, to put the floor under the world economy, and to continue to protect it against the health crisis.

Second, we are doing better in adjusting to function within the parameters of the health crisis. The measures we take, masks, social-distancing, moving big chunk of companies to operate digitally, to operate online. They are improving economic performance, even with the health crisis being with us.

And last, but not least, there has been maturity in judgement of fiscal authority measures being as responsible (phonetic) as possible (inaudible) and that has been a success story and continues to be so. One, very important for fiscal measures, objective for fiscal measures is to also target better the most vulnerable parts of the economy and most vulnerable people. Something that monetary accommodation cannot do so effectively. And that combination, we are seeing across the world, more maturity of how these two levers, monetary policy, and fiscal policy, are put in place.

MODERATOR: Okay, and then we have a question from Reuters.

QUESTIONER: Good morning, Kristalina, so nice to see you, Happy New Year. And yeah, thank you, Madame Minister. I wanted to follow up on what you said about the need to continue supporting the SDR allocation or to find new resources. So, there has been difficulty in getting agreement on having a new allocation of SDR, Special Drawing Rights, do you think that will change now that there is a change in the U.S. Government being your largest shareholder and was opposed to doing a large allocation? I am just trying to interpret your comment about the need for additional resources. I also want to ask you about the need to perhaps, even look at the sale of Gold reserves, and also the question of whether the freeze, or the moratorium in debt service payments should be extended to, and -- and also the common framework that was agreed by the G20 should be extended to include more countries, in other words, middle-income countries, and small island states. Thanks.

MS. GEORGIEVA: These are -- this is also for our incoming Chair, but let me since you asked me, I would -- I would say a word, but I do hope that Magdalena would express views. These are shareholder questions in fact.

So, first let me say that we have seen an increase demand for sort of for a number of reasons. Low-income countries, emerging markets with weak fundamentals found themselves in grave danger (phonetic) of the (inaudible). Because even with massive liquidity made available by many central banks, that allowed many emerging markets to go (phonetic) at low-cost. For these group of countries, this access is either nonexistent or prohibitively expensive. So, it became very important for the IMF to rapidly expand concession of finance. For which we did tap into existing SDRs. And I am stressing this because it played such an important role in 2020. Some $20 billion of existing SDRs were provided to the IMF to then lend to low income countries at nominal terms. That is going to be a need in the future. It will continue to be so important, even more important for us to be able to expand our capacity to support countries that are falling behind (audio drop) to have the fiscal space for health measures, and to protect the most vulnerable today.

But also to have fiscal space to take this transition to digital and green that the world, as a whole, is (audio drop). And in that sense, having more liquidity, having more concessional capacity, a new SDRO allocation can be very helpful. We have this discussion with all the membership, they never took this off the table, and they actually have been bringing it up. So it will be discussed, and we will have the steer of (audio drop), as we go through this discussion.

With regard to gold sales. Let's remember that gold does serve a purpose. It is part of the special strength of the IMF that makes it possible for us to lend to countries (audio drop) fundamentals. And in that sense, a gold sale, if the membership decides to go for it, does have some opportunity costs for financial strength of the IMF.

It was done in the past. And again, it is a membership matter. Minister Andersson may have some views on that. So we will hear from the minister, her view on that.

And finally on debt, this crisis is not going fast enough for us to say, oh well, come April it is all done, and we do not need to extend the debt services special initiative. My personal view was -- or actually not mine. Our professional view at the Fund was that a year extension in October was warranted. The membership decided to go for six month extension. Comes to April, this question will, again, be revisited. And it is expected that the pressure to extend six more months will be still there.

But I think it is fair that Minister Andersson, since these are membership matters, gives you her views.

MS. ANDERSSON: Thank you. Thank you very much. I mean, the need for liquidity in the world economy is very big and will continue to be big for quite some time ahead. And of course, to have a well-funded and well-resourced IMF is central to support a global economy.

And, of course, one of the issues that I have discussed before I was elected, and also when I have contacts as the chair with my colleagues, this will be one of the issues that will be discussed. And, of course, I will investigate the appetite among colleague ministers for what way to proceed forward, but the need for liquidity is definitely big. Then there is no question about, from my perspective, but also when I listen and talk to my colleagues.

When it comes to the debt suspension initiative, I look forward to discussing this and it will be discussed during spring. And my forecast is there will be good and strong arguments for prolongation, but of course, depends on also what happens with the rollout of the vaccine now in the coming months.

MODERATOR: Thank you. And now we have a question from the Africa Bazaar magazine.

QUESTIONER: Thank you. I was wondering given what has been going on for the past more than 10 months since the COVID-19 pandemic started, I was wondering regarding Africa if you plan to make any changes to the plan that you have in place in order to update some of the program or just keep any of the program that you have?

My other question is regarding Sudan. Secretary Mnuchin from the U.S. was recently in Sudan, and he said the U.S. plans to work with the country, with the World Bank, to provide debt relief. And I was wondering if you could talk about that? Whether that's something you plan to be involved in?

MS. GEORGIEVA: Magdalena, would you like to go first?

MS. ANDERSSON: No, Kristalina, you go first.

MS. GEORGIEVA: So Africa, very important that we stand by Africa. As the minister said, we face the risk of losing important gains that has been made, impressive progress that has been made in development over the last decades unless was act decisively.

Africa in 2020 shrunk for the first time since majority of African countries obtained their independence. And it is very important that we our concerned about a growth impetuous in Africa. For 2021, very (audio drop) the world economy to grow over 5 percent, and the African economies to grow 3 percent. Clearly, this is not enough. Africa needs to grow, 6, 7, 8, 9, 10 percent. It has wonderful opportunities to grow, but right now it is very restricted in terms of access to financing.

And many countries are affected tremendously, not only by high mortality and morbidity in the youthful continent has been somewhat less, although the trend recently in a number of countries goes in the wrong direction. But the economic devastation from COVID has been a very significant (audio drop) in countries that are either tourism dependent or commodity exports dependent. We have seen a number of months of very, very harsh conditions.

For this reason, what we did in 2020 was to very massively lean forward with emergency financing, making sure that countries do have the capacity to (audio drop) economy, and more importantly, their most vulnerable people.

In 2021, I don't anticipate for us to continue with emergency financing, unless there are shocks that are justified. What we want is to work with countries on helping them have fiscal space to address the (crisis, and most important, to take on the opportunity for economic transformation, accelerating digital, and accelerating climate resilience, and in some countries, low carbon investments that they can make with public support, but also make sure that this public support is oriented towards addressing issues of governance.

So (audio drop) attractiveness for private sector domestically, and also foreign direct investments to flow into Africa and again, I want to stress this is a continente of opportunities and it is important that these opportunities are not foregone because of lack of domestic and international action.

On Sudan, we actually just got a Board discussion at the Fund on Sudan. We had the staff monitored program (SMP). We're working very intensively with Sudan to build the preconditions for debt relief so Sudan can become eligible for HIPIC. It is not an easy case. This is the longest example of a country in arrears, therefore, it may not be (phonetic) trivial, but I was very encouraged by the strong support from the membership. We're going to have an assessment in March on how the SMP is advancing and we do hope as swiftly as posible to present to the membership a strong case on Sudan for HIPIC, so the country can reintergrate with the international community. We are encouraged by the determination of the Sudanese authorities. As you know, this is a success and (phonetic drop ) said enough is enough to the old regime and we want to be there for the whole country. I expect that in March, we will have to (inaudible) more about Sudan and the prospects of real clearance and debt relief for the country. And I want to recognize that a number of countries, U.S., U.K., have indicated that once progress is made, they will, indeed, also step up grant support for Sudan.

MS. ANDERSSON: Thank you, Kristalina. Just to say something about West Africa, I mean, as I said in my introduction, the development we've seen in Africa when it comes to economic development and poverty reduction in the last decade has been fantastic. So many families have been lifted out of poverty and the (inaudible) that we have seen and the setback we have seen during this crisis is truly worrying and therefore, I see that support from IMF, World Bank and other international institutions will be very important for the -- in the coming years to make sure and to do what we can help to put Africa back on track in economic development and this together with internal resource mobilization and advice and studies that can be done from the IMF will, I hope, important pillars when Africa can go back to a trajectory of high economic growth and poverty reduction.

And just as Kristalina said, there is so much potential in Africa. Not the least the demography (phonetic) in Africa looks very different to that in other parts of the world, which is also something that can help during economic growth in the years to come.

MODERATOR: Okay, the press conference is --

MS. GEORGIEVA: Can I just add, Minister Andersson said about domestic mobilization? You would see in our problems as we go forward that we would be assigning five priorities of countries having tax systems that are effectively operating to lift up domestic resources. We cannot cut situations in which tax to GDP is so meager that it is hard for the country to invest in people and in infrastructure for growth. When it is below 15 percent tax to GDP, that is holding (inaudible) that this message of domestic results mobilization, the rate tax policies and ability to collect taxes for the good of people that this is being recognized.