Transcript

Transcript of the IMFC Press Briefing

April 8, 2021

Speakers:

Magdalena Andersson, Chair, IMFC

Kristalina Georgieva, Managing Director, IMF

Moderator: Gerry Rice, Director, Communications Department, IMF

Mr. Rice:

Hello, everyone, and welcome to this press conference on behalf of the IMFC. The meeting of the IMFC just concluded some minutes ago actually, and I think we have been able to share with you all the IMFC communiqué. I hope you have been able to take a look at that, and we look forward now to your questions at this press conference.

This morning we have with us the incoming Chair of the IMFC, Magdalena Andersson, whom, as you know, is the Finance Minister of Sweden. Warm welcome to Magdalena. This is her first press conference in her new capacity. We also have with us the Managing Director of the IMF, Kristalina Georgieva.

I am going to ask Magdalena as Chair to begin the press conference this morning with a few remarks, followed briefly by Kristalina; and then we will turn to your questions online.

Magdalena, over to you.

Ms. Andersson:

Thank you very much, and hello, everyone, and thank you for joining us. As you know, this is my first IMFC meeting as Chair, and I am grateful to the membership for having put their trust in me. Let me also thank the IMF Managing Director, Kristalina Georgieva, and the IMF staff for helping us organize very substantial and productive discussions for the IMFC.

Kristalina is a tremendous leader, and the diligent efforts of the IMF over the past year in the constant context of the pandemic has been exceptional. These are unprecedented and historic times, and the IMFC praised the IMF's rapid response through substantial emergency financing but also important policy support.

You will see from the communiqué that the IMFC session reflects a strong and enhanced commitment to multilateral cooperation and to address common problems together. This is essential to help return the global economy to sounder footing. The IMFC's discussions reflected broad consensus among the IMF's membership to work together to do whatever it takes to end the pandemic and secure a strong, inclusive, and environmentally sustainable recovery.

I will briefly summarize some of the key points from the IMFC communiqué, and I think you have it so you can also read it by yourself, and we will then open the floor for questions.

The IMFC stressed the importance of accelerating the production and affordable distribution of vaccines to all across the globe. Prioritizing health spending and also assistance for the most vulnerable is essential to global economic recovery, and this requires a strong international cooperation.

While the global economy is recovering faster than expected when we last met six months ago for the Annual Meetings, the outlook is still clouded by high uncertainty and uneven economic activity within and across countries but also climate‑related challenges. And from a macroeconomic policy standpoint, we agreed to calibrate our policies and strengthen our concerted action to secure a durable exit from this crisis.

For the most vulnerable countries, the IMFC expects support for comprehensive action to meet their critical financing needs. Most prominently, the IMFC called on the IMF to make a comprehensive proposal of a new $US650 billion allocation of special drawings rights while enhancing both transparency and accountability in reporting the use of these SDRs.

It also asked the IMF to continue in parallel to explore ways for the voluntary post allocations of SDRs from members who do not need them to other members who need support in their recovery efforts. This will be a very important deliverable, not least for the most vulnerable countries.

We agreed as well to continue to work to strengthen debt transparency practices and other steps that ultimately will support the goals and efforts to maintain debt sustainability. We welcome, for example, the extension of the G‑20's DSSI and the ongoing work on the Common Framework.

We also supported exploration of measures to reform the IMF's Poverty Reduction and Growth Trust to better serve vulnerable countries and to secure contributions to the final tranche of IMF and World Bank debt service relief possible through the Catastrophe Containment and Relief Trust. These are important messages.

Overall, the message today from the IMFC is that all vulnerable countries exposed in the pandemic and its economic fallout deserve particular attention. The broad membership of the IMF is promoting comprehensive action to help them meet their critical financing and health needs.

One last point is that the IMFC agreed to strengthen multilateral cooperation further to ensure a sustainable, inclusive, and resilient global economy. We also expressed our support of the IMF in stepping up its work to help members identify and manage macrocritical implications of climate change and other areas such as digitalization, inequality, and fragility.

I will now hand over to Kristalina here if you have something to add before we open up the floor for questions.

Ms. Georgieva:

Thank you very much, Magdalena. I am very grateful to you for taking on the responsibility to be an IMFC Chair at this critical time for the membership and to wish you all the very best. You did a fabulous job today keeping us focused. This stewardship is what we will need for the years ahead.

As everybody can see from the communiqué, we recognize that the global economy is on a firmer footing, but we continue to face many challenges, many of which can only be met through stronger international cooperation. I am very encouraged by our meeting, the IMFC support for multilateral approaches to strengthen the global economy and for the Fund's agenda going forward. This includes our continued crisis response, the forthcoming proposal for a new allocation of Special Drawing Rights, and work on the macrocritical aspects of climate change and digitalization.

Let me add a word on the proposed 650 billion SDR allocation. A number of members in the discussion called it historic, and it is. This is the largest boost of reserves that our membership is giving us a mandate to follow on. It would provide a substantial liquidity boost to all our members, especially the most vulnerable. We will step up transparency, and it is for the sake of good governance for everybody; and the innovation that we are pursuing is for some of our better‑off members to be able to allocate their SDRs for the common purpose of bringing the more vulnerable members to a sounder position. We need a recovery that works for all. This is a critical step, and I hope in the next months you would hear from us an update on how we are bringing to fruition the mandate we have been given.

It is a crucial year for the IMF. Member countries, they face a crucial policy transition from crisis to recovery and then to mitigate and heal the economic scars, but also to take advantage of the opportunities for structural transformation. We want to make sure everybody has a fair shot at a better life.

I am grateful to our Chair recognizing that in response to this exceptional shock, the IMF stepped up in an unprecedented way by providing critical new financing to a record number of countries, as well as debt service relief. And as the countries move forward, we will ensure that our lending tools and policy advice offer the best possible support to help them navigate this difficult road ahead. We count on our Chair to steer our work, so we do bring forward a more prosperous, green, and inclusive opportunity for everybody in the global economy. Thank you.

Mr. Rice:

Thank you very much, Kristalina. Thank you, Magdalena. Let us turn to your questions for both the Chair and the Managing Director.

Question:

Thanks to the Chair and the MD. I have a question for both of you. I would like to sort of look a little bit ahead to quotas. What we did not get from the US Treasury Secretary, Janet Yellen, was a view on how she is viewing an expansion of quotas. As you know, the previous administration had opposed this, so what is the outlook for doing new quota? I see you have a bit of time, but how important is it to expand those quota resources and give a bigger say to the developing economies, and do you have any indication from the US side whether it is more open to that now?

Ms. Georgieva:

What we have experienced in the discussion today is a very clear commitment of the membership, everybody, to multilateral approach to the problems that can only be solved through collaborative action, through multilateral action. There has been a clear indication by many that the 16th Quota Review is important for the representation of members, for the inclusiveness of the Fund, for the legitimacy of the Fund, and we heard that call in these meetings.

We are just at the beginning of work for the 16th Quota Review, and all I can say today is that all members are engaged. We have until December 2023 to complete this work. What I took from the meeting are two messages: one, strong support for the IMF at the center of the global financial safety net; and, two, clear willingness of all members to see us resourced adequately to do our job.

So we will keep you briefed. With every meeting to come there will be more to say on this specific question on quotas. Reading the atmosphere in the room, I am encouraged that we will be able to come to a resolution. It is not going to be easy. Anybody who knows these matters of shareholding is aware of the complexity; however, the SDRs are such a clear signal of willingness to come together for the benefit of all.

Mr. Rice:

Thank you, Kristalina. Magdalena, would you like to comment, please.

Ms. Andersson:

Yes, from my perspective this will be one of the big questions during my tenure as Chair of the IMFC, and I expect to spend many hours discussing this with all the members during the coming years. And at the meeting today I must say I am a bit surprised that there is a lot of engagement in this issue at this early stage of the process, and that is something I see as a very good sign; and particularly I feel that there is a commitment to make sure that IMF is a well‑funded institution to be able to take their important role in the center of the global financial safety net. I really look forward to discussing this. No question, this is a complex issue. It is going to be many hours of discussions, but at the same time, I know that in the World Bank we were able to make a quota reform, so it is not impossible.

Ms. Georgieva:

If I may, I would add to this, my fortunes in life are many. I have been blessed. One of my fortunes is to work twice on this issue of shareholder reform at the World Bank, so I have the stamina. We finished where we should, and I have the stamina. Working with Magdalena, it will get done.

Question:

Thank you for taking my question. This is a question for Kristalina Georgieva. First of all, do you think the next meeting will be held in person in October. And second question is related to one of my colleagues [who] wrote about an initiative, that the World Bank and the IMF are planning to launch a platform to advise poor countries on funding for climate. Could you comment on that? And how could institutions encourage quickly the poor countries to invest in green projects? We know they are in a [financing] trouble, so how can you help them to take the transition towards the green growth and inclusive growth?

Ms. Georgieva:

Thank you very much for these two questions. First question, whether the meetings will be in person in October. Our baseline scenario is that they will be. If you project vaccinations, that would give us a chance to bring the membership together. Whether they would be the same size as they used to be? I am not confident we are going to get there, but our projections, our planning, is for Annual Meetings in person, of course with the caveat we are dependent on the developments of the pandemic. If anybody was to tell me on March 13 [2020] when we took the Fund to work remotely that we would be today still working remotely, at that time I would have not believed it. So please bear with me. I am not going to be definitive in answering your question. I can only tell you that these are our plans to return to in‑person meetings in October.

To your second question, let me start by the premise that seeking ways to address multiple problems is not new. Connecting debt relief to poverty reduction, debt relief to environment, there is history in that. And when we are faced with this dual crisis—the debt pressures on countries and the climate crisis, to which many low‑income countries are highly, highly vulnerable—it makes sense to seek this unity of purpose. In other words, green debt swaps have the potential to contribute to climate finance. They have the potential to facilitate accelerated action in developing countries. We are going to work with the World Bank, and by COP26 we will advance that option, which, of course, is then for creditors and debtors to decide whether to embrace.

More broadly, I want to make two points. One, we heard a very strong endorsement from our membership today on the role of the Fund with regard to climate change. According to our mandate, climate risks are growing, and they are substantial for macroeconomic and financial stability. Climate action can generate green growth and green jobs. This is the mandate of the Fund, and therefore, we are concentrating on bringing climate issues in our policy engagements, in assessing financial stability risks related to climate, in our work on macro data, and in capacity development.

Second point, answering your question would developing countries be interested in greening, and are they interested in what the Fund has to offer? Already we have had cases when Fund programs are supporting vulnerable-to-climate-shock countries to be better prepared against these shocks. You would not be surprised that these are primarily small island economies periodically devastated by hurricanes.

What we hear from the membership is interest in the Fund to help them on two fronts: to mitigate the risks of climate change, and do not forget for many countries relying on agriculture—agriculture that is hammered by droughts and floods or relying on the sustainability of their cities—this is a big priority. Also, because countries recognize that there is a big transition happening, they do not want to be left out of it.

Ms. Andersson:

When it comes to meetings in October, I can tell you there are so many Ministers of Finance and Central Bank Governors that really look forward and hope that we would be able to meet again. I would say having meetings virtually actually works as well. We have good meetings, but, of course, you miss out a lot when you cannot have that chat in the corridor between the meetings, so I really hope we can meet in October; but, of course, it has to be in a responsible way and safe way.

When it comes to climate, I think it was a clear signal today also in the communiqué and during the meeting that the members want the IMF to step up its work when it comes to climate change, and it is becoming obvious to all that there are macroeconomic and also financial stability risks that are connected with climate change, so it is an obvious task for the IMF. And just as Kristalina said, there is so much job potential, and there are so many other future jobs that are within this sector, so there is another reason for the IMF to work on this. I can just go back home and see Sweden—in the northern part of Sweden, where we have lots of green electricity from all the water and wind, there is now an industrial boom in the northern part of Sweden, and they are really screaming for more labor, so there is definitely an upward potential here.

Question:

Thank you. Managing Director, you have said that the global recovery is increasingly powered by the United States and China. In what areas can these two largest economies to strengthen cooperation to support global recovery? And by the way, could you offer some suggestions for channels to fight climate change. Thanks.

Ms. Georgieva:

Thank you very much. Indeed, what we see today is the US and China being the two engines that are powering up the world economy. They are the first to be able to reach their pre‑COVID levels among the large economies. Like the engines on a plane on which we are all passengers, it is important that they work in sync. Then we can fly faster, and we can get farther. We were very encouraged to see a very consistent view expressed by the US and by China on prospects for the recovery and their recognition of the responsibility they have for positive spillover impacts, as well as to recognize their significant roles. Other economies are also coming up, and that global cooperation, paying attention to who may be falling behind, is what has been at the center of our Meetings.

As regards to China and climate, again China expressed strong support for our work on climate, and they are interested in engaging with us exactly on the macro aspects as well as on climate‑related financial stability risks. China has set its eyes on becoming a net zero emission country by 2060. To get to that point, this decade is going to be crucial. We would engage in our comparative strength area, fiscal policies, and in particular carbon price, monetary policy, and financial stability. And we are very interested to see China doing well on that front. What would be good for China would be also good for the world.

Mr. Rice:

Thank you very much. Magdalena, I will move to the final questions if OK with you. We will try and squeeze in two more. I am seeing one online asking what was the IMFC's view on support for middle‑income economies, she said like Mexico, but the question is really about support for middle‑income economies.

And then I want to go on WebEx, can you come in.

Question:

Yes, I am here. Thank you very much for taking my question. For economies such as like emerging economies such as Costa Rica whose main trading partners are countries such as the United States and Central America region, how does the divergent recovery of this economy will affect the emerging markets, mainly in terms of access to the economic resources and reactivation of the domestic demand? That would be my question.

Mr. Rice:

I think both questions are on emerging markets and middle‑income countries. Kristalina.

Ms. Georgieva:

The issue of middle‑income countries was very present in the discussions today, and it had three dimensions: one, making sure that they have an accelerated access to vaccines, so vaccinations can advance. Second, the importance of recognizing that some of these countries are more severely impacted. Many times in the discussion small island states came up, those that are tourism dependent, understandably in a very difficult place, but also more broadly, countries that are experiencing more social tensions because of the relatively high share in many of them of people close to the poverty line. When things go bad, poverty increases.

The third issue that came in this discussion was middle‑income countries that may be under a higher level of debt. What we all agreed is that the Special Drawing Rights are a very important support element for all members, including middle‑income countries and low‑income countries, and quite a number of speakers from this group very strongly endorsed the new allocation of Special Drawing Rights because it lifts up their reserve positions at this still very difficult time.

When it comes down to spillover effects, clearly for everybody that is close to the United States, strong growth projections for the US economy is good news. We actually are projecting for the US 6.4 percent, higher than the average for the world for 2021. That is going to generate demand for goods and services globally but especially for the closer neighborhood. I think the recognition of this came in the meeting, but also what came in the meeting was the potential unintended consequence of a booming American economy in terms of possibly a faster return to normalization of monetary policy. What we heard very clearly is that the Fed is committed to take into account this potential impact to communicate well in advance and clearly, and I know you have heard that same message from Chair Powell on a number of occasions.

Mr. Rice:

Thank you very much, Kristalina. Magdalena, I want to give you the last word on this topic or any topic of your choosing, which is the Chair's prerogative.

Ms. Andersson:

Thank you. I think, Kristalina, you [portrayed] the discussions very well. The situation of middle‑income countries was one of the big topics actually and also the fact that people that risk poverty during this crisis, many of those people are in middle‑income countries, so this was definitely an important part of the discussions that we had. There, as Kristalina said, the new SDR allocation is really a big stimulus to the global economy, will be important both for the poorest countries but not the least for middle‑income countries, so I think this will be really, really important.

Also as Kristalina said, the small island states, very tourist dependent, was also on the agenda, and, of course, it is a very special situation for those countries, and we were aware of that during the discussion.

To sum up, very good discussions, very important step forward today with the very clear mandate for Kristalina to work on the SDR allocations, the new SDR allocation but also the possibility to redistribute unused SDRs to countries that are more in need. This will be a very important work in the months to come.

Then, of course, vaccination. It was vaccination, vaccination, vaccination on the agenda today, and I hope that many Ministers come home from this meeting and want to ramp up not only national vaccination programs but also support to make sure that we can vaccinate everyone across the globe, because that is the only way to end the pandemic, save lives, but also for economic recovery. And then a clear mandate also to work harder on climate change.

After this crisis we will be where we were before and also are during this crisis, namely, that we do have a climate crisis going on all the time, and we need to step up the work. On the other hand, I think what we all have learned during this pandemic, which I also sensed in the room today, although it was a virtual room, we are interdependent, and there is only one world, and we share it; and we need to work together in order to build a better common future because we are really interdependent, not only when it comes to the pandemic, when it comes to the economy, but definitely so when it comes to climate change.

Mr. Rice:

Thank you very much, Madam Chair. Congratulations again on your first meeting as IMFC Chair this morning. Thank you very much, Madam Managing Director, too. Thanks to the global media who has joined us today for this press conference.

Just to mention that coming up in just under an hour there will be the traditional global economic debate here at the IMF where Kristalina will be in discussion with Chair Powell of the US Fed, with Ngozi Okonjo‑Iweala, head of the WTO, and with Paschal Donohoe, who is the head of the Eurogroup. You can watch that live at noon today here at the IMF.

With that, again, thank you all for joining us today. Please, everyone, stay safe and well, and we will see you soon.

IMFC Communiqué: http://www.imf.org/en/News/Articles/2021/04/08/communique-of-the-forty-third-meeting-of-the-imfc