Transcript

Transcript of the IMFC Press Briefing

October 14, 2021

Speakers:

Magdalena Andersson, IMFC Chair

Kristalina Georgieva, IMF Managing Director

Gerard Rice, IMF Communications Director

Mr. Rice ‑ Hello, everyone. Welcome to this press conference on behalf of the International Monetary and Financial Committee (IMFC) here at the IMF and World Bank Annual Meeting. Great to have you with us today.

I hope you all have had a chance to look at the Communiqué, which has just been distributed to you from the IMFC. And I am delighted that we have with us this morning the Chair of the IMFC, Magdalena Andersson, who is the Finance Minister for Sweden. We also have with us the Managing Director of the IMF, Kristalina Georgieva. With that, we are going to try to keep this short and sweet today. We do not have a great deal of time, so I am going to turn straight to the Chair for some remarks, followed by Kristalina, and then we will come to your questions. Madam Chair.

Ms. Andersson ‑ Thank you very much. Thank you for joining us today. First of all, together with my fellow Ministers and Governors, I want to thank the Managing Director and IMF staff for their hard work. The IMF support has been truly important for us during the crisis and with dealing with the economic effects of the pandemic, so thank you for your excellent work and professional support.

Now, like today, we would conclude that the economic recovery continues and at the same time divergence between our countries is increasing, and our two primary explanations, differences in access to vaccines and differences in policy space and support. The IMFC called for strong international cooperation and immediate action to achieve universal vaccination.

Therefore, we encourage the Multilateral Leaders Task Force to accelerate access to vaccines and to facilitate coordination among international partners. This also includes mobilizing critical financing. Moreover, we agreed to take steps to reach the global goals, vaccinating at least 40 percent of the population in all countries by the end of 2021 and 70 percent by mid‑2022. The pandemic has worsened poverty and inequalities globally.

Meanwhile, climate change is becoming more pressing, and it requires our urgent attention. We made a strong commitment to further accelerate climate action in line with the Paris Agreement. Here, we will use all effective tools as fit to country‑specific circumstances. We will work together to help build a more resilient and sustainable global economy.

The decision from last spring to allocate $650 billion Special Drawing Rights to members is a historic achievement. And today we agreed to channel these Special Drawing Rights on a voluntary basis to the benefit of low and vulnerable middle‑income countries. We committed to significantly scaling up the Poverty Reduction and Growth Trust (PRGT), and this is the critical source, so IMF financing to the poorest countries. The IMFC also expressed support for establishing a Resilience and Sustainability Trust (RST). The purpose will be to provide much‑needed financing to vulnerable members to reduce risks, including those related to climate change and pandemics.

The IMF will collaborate closely with the World Bank in developing and implementing this trust, and we agree that healthcare and support to the most vulnerable groups should remain priorities.

We also underline the importance of carefully calibrating domestic policies to local circumstances, and once the recovery is underway, policymakers must be ready to shift their focus from a crisis response to promoting growth and preserving long‑term fiscal sustainability.

We also discussed sovereign debt, and we welcome the G20's effort to step up the implementation of the Common Framework, and we also welcome the IMF's agenda to promote debt sustainability, transparency, restructuring where needed.

Finally, we welcome the statement by the IMF Executive Board on the review on the investigation of the World Bank's Doing Business 2018 Report. Thank you again, and now I give the floor to the Managing Director.

Ms. Georgieva ‑ Thank you very much, Magdalena. You did a fabulous job again of keeping us focused and bringing the most substantive issues to the front of the IMFC. I want to recognize that you have provided very capable guidance as a Chair, and we could have not needed it more than in this exceptional year. Your leadership, your very steady hand, has been greatly appreciated by the membership and, of course, by the staff of the IMF.

I am very encouraged by the support the IMFC provided to all of us to rely on multilateral approaches, including calling for immediate international action to achieve universal vaccination. Without the coordinated global response of policymakers, we would not be on the path to recovery. And this is the spirit we now need more than ever to confront multiple challenges ahead, from inflation, to debt, to economic divergence, and the criticality at the same time when we wrestle with short‑term challenges to strive to build a more resilient, more sustainable world economy that benefits all.

I am grateful to our Chair for recognizing the IMF's role during this crisis, for the good words spoken, for the staff of the IMF. I am very encouraged by the IMFC's support for the Fund's agenda as we move forward.

We continue to calibrate our financial support, our policy analysis, our technical advice, and we are accelerating our own transformation to serve our members in new and better ways. Let me highlight just one thing‑‑the Chair brought it up‑‑the historic decision to allocate $650 billion in Special Drawing Rights to our members. Now we have a historic opportunity and a collective responsibility to make the most of this allocation.

Countries are already putting the new SDRs to good use, boosting reserves, creating space for spending on vaccines, on lifelines for vulnerable households. And the key is to use SDRs wisely, to use them transparently, to be accountable to the citizens and to the global community.

With the support of the IMFC, we are calling on countries with strong external positions to voluntarily channel their SDRs, as we heard from the Chair, so that more SDRs go to those countries most in need. For that, this could make all the difference, and we heard it from countries that are struggling on the losing end of this divergence.

So, I am very pleased that some members have already announced new contributions to our Poverty Reduction Growth Trust. It provides zero interest rate loans to low‑income members. We encourage further contributions, especially in the form of the new SDRs.

I was so [inaudible] by the IMFC's strong support for using SDRs to establish the Resilience and Sustainability Trust. This will serve the needs of low income and vulnerable middle‑income countries with greater flexibility and in close collaboration with the World Bank. We must build on today's decision, working together to create a more sustainable and inclusive foundation for a new economy. Thank you.

Mr. Rice ‑ Thank you very much, Kristalina. Thank you very much, Magdalena. Let us get right to your questions. We have about 15 minutes. I promised to get the principals out of here by noon to get to their next meeting. We will try to keep it short with the questions and try to keep it succinct with the answers. I am going to begin with the AFP. The journalist was trying to connect, but she is having technology problems.

Here are her questions: "Was the IMFC able to find any concrete actions to address the supply chain disruptions in the short term and further out? Are you worried that the new focus on domestic production, as mentioned by President Biden, among others, will cause trade disruptions and potentially damage global growth? There has been more discussion of climate issues, but do you see actual change in attitude or policies that can have an impact, including changes in IMF lending?" So, supply chains, trade, and climate. Chair, let me begin with you.

Ms. Andersson ‑ Thank you very much. Of course, the disruptions we see in supply chains are worrying. At the same time, I think it is not all about pricing. We are through a period where we have had very low economic activity. At least I am not very surprised that we do have some kind of problems when we are restarting the global economy.

On the positive side, there is the fact that this is a sign that the global economy is restarting, and growth is picking up. We would be [inaudible] if we would not be in that situation, so I think there is also some positive we can take away from this. Having said that, of course, it is important that we get the global value chains working better than they are today, we need more initiatives, both to make it work better, and then on some good, maybe, it also that there is a shortage on supply globally, and we need to expand the supply.

I think what we see in the global value chains under the disruption is also a sign that global trade is picking up, which is also a good sign because we need more global trade in order to let the global economy grow.

When it comes to climate and climate change, I think we have very strong vocabulary in the Communiqué today. It is a larger part of the Communiqué and has been before, and this is not a coincidence. After the IPCC report, there is an even more stronger sense of urgency when it comes to climate change. I really feel strong support from the members of the IMFC that we need to do more, both [inaudible] but also through the IMF. And the initiatives that Kristalina has been taking when it comes to‑‑have been more of climate‑related risks that will be analyzed on the Article IVs. I think that is a very good initiative. And also building more competence at the IMF when it comes to climate‑related risk, but also what we can do when we can do it. Of course, given what we have seen lately with energy prices, this has also been a discussion. And the conclusion there from that is that we must make sure that, when we do the green transition, that we know will create both jobs and growth, we have to do it in a way so that vulnerable citizens are not hurt, and we also do it as a just transition. Thank you.

Ms. Georgieva ‑ Very good answers. I would add two points. One, there was a lot of discussion on the reasons for disruption in supply chains. Clearly when demand jumps up and supply is slow to catch, that leads to disruptions, but there is a more fundamental problem, the growing divergence, countries that are pulling forward more strongly and those that are falling behind. In that sense, there was a very clear message coming out of this meeting, that vaccinating the world is critical to allow countries to go up and that helping poorer countries, more vulnerable countries with more fiscal space is also critical.

The second point I want to make is on the work of the output on climate. Where we are is very impressive. We have a climate strategy endorsed by our membership that leads to Fund staff integrating in Article IV Consultations, for large emitters, the issue of mitigation; for highly vulnerable countries, how they can adapt to climate change; for countries that need to make a difficult transition away from urban‑dependent sectors, how to support this transition. Those who know the Fund also know that when we integrate issues in our Article IV Consultations, this is the building ground to then import into our programs strong policy advice. And in that sense, I do expect not only our capacity development to integrate more climate but to see it coming through the work of our teams into the lending of the IMF. Of course, the Resilience and Sustainability Trust that has been so supported today has a very important objective, to help countries transition to low‑carbon climate resilient, smart inclusive economies.

Mr. Rice ‑ Thank you very much. I just want to follow up because there was a question just asked. It is a follow‑up on this, about supply chain bottlenecks and so on. You have talked about that, but the journalist has added the issue of inflation. He is looking for a comment on inflation. He is worried about this perfect storm of the bottlenecks, labor markets, and particularly inflation.

Ms. Andersson ‑ What is in the Communiqué and the discussions we have had is that‑‑I mean, most people do see inflation that we have today as transitory, something that will stay for a period and then will go away. Since we believe it is transitory, then also the heads of the central banks can look through transitory inflation. And, of course, it looks different in different parts of the world, but that is the main theme in the Communiqué.

Ms. Georgieva ‑ We recognize that when there is mismatch between demand jumping and supply not being able to catch up, that puts pressure on prices. This is why the issue of addressing divergence is important, as is addressing the bottlenecks that are created as a result of some parts of the economy recovering faster than others. This is why we think it is transitory, but we are watchful. We are going to be very vigilant because there are other factors that could put pressure on prices. For example, climate shocks, we have seen that in the past. And we know that to be watchful means central banks to do what they are so good at, identify where the inflation expectations are headed and should they be deanchored to take appropriate actions. I was very impressed to hear central bankers and Finance Ministers having a very deep, comprehensive discussion on this topic.

Mr. Rice ‑ Thank you both so much. Let us go to colleagues on the screen. I want to go to the journalist from Egypt. Can you come in?

QUESTION ‑ Hello.

Mr. Rice ‑ But now we lost you.

Ms. Georgieva ‑ That is why we need to support digitalization.

QUESTION ‑ Hello again, I am with the El Masdar newspaper from Egypt. I have two questions. The first question, what is your evaluation of Egypt's latest program with the Fund? What are the expectations for the Egyptian economy in the near future?

The second question, what are your views on the current global energy issue, and does it affect the future of the global economy?

Mr. Rice ‑ Thank you. I think Kristalina can take the Egypt question and the Chair can take the other one.

Ms. Georgieva ‑ I will take the Egypt question and I will share the other one.

On the Egypt question, Egypt has done a very good job to manage the pandemic and its economic impact. What we are seeing is [inaudible] underway. Last year‑‑well, actually, 2020‑2021, growth in Egypt was 3.3 percent. Now we are projecting, for 2021‑2022, 5.2 percent. This is a significant improvement in Egypt's growth forecast. We do know that Egypt has a high level of debt, public debt, significant gross financing needs. So as the economy improves, it would be very important to project medium‑term fiscal consolidation that allows the foundation of the Egyptian economy to be strong. We have had very successful experience working with Egypt with the Stand‑by Arrangement. What we have seen is sound progress on structural reforms, on governance reforms, and, of course, we would like to see those continued. Our teams are working well together and that feeds into sound policy framework for the country.

On your question of energy prices, it is an example of how, good news, the recovery is creating a bit of less good news, a rapid increase of demand for energy pushing energy prices up.

What we recommend is to be careful not to go with blanket subsidy programs. We much prefer to see attention paid to those that are hit the hardest, the poorer households. Why? Because once you put the subsidy in place, it is very difficult to take away, and we know these subsidies benefit not only the poor and vulnerable but also the rich and businesses that can pay their bills.

Looking into the future, it is so critical that investments, public and private, in expanding renewable energy and improving energy efficiency are rapidly put in place so we do not risk the green transition to lead to another source of pressure on energy prices.

Mr. Rice ‑ Thank you. Madam Chair, would you like to come in on energy?

Ms. Andersson ‑ I am going to echo Kristalina, but basically, we cannot‑‑of course there has been a lot of discussion on energy prices during these days, but we can never let the energy prices be used as an argument to slow down the green transition. On the contrary, we should use this as an argument to step up our ambitions when it comes to investing in renewable energy, both public and private, and while doing so, making sure that we can support the most vulnerable households in our countries.

Mr. Rice ‑ Thank you, both. I am going to break my promise. Can we go just over a couple minutes and take the last question? I am going to take it from Bloomberg, the last question today.

QUESTION ‑ Thank you, Gerry. Managing Director and Chair Andersson, I wanted to ask, Chair Andersson just made reference earlier to the Doing Business Report and the IMFC welcoming the end of the review by the Board. Managing Director, on Monday you released a statement saying that the allegations against you were unfounded, but the Treasury Department the same day called it legitimate issues and concerns. My question, one, do you share, or do you dispute the Treasury's view of the report from Wilmer & Hale having raised legitimate issues and concerns; and two, separate but referencing the comments about Article IVs and climate change, our reporting showed that you had directed staff economists to delete lines of analysis from Brazil's Article IV in July after the [inaudible] protested. I am wondering how much resistance you are encountering to efforts to get climate change policy analysis incorporated into the Article IV. I know it is in the comprehensive review that was published in May. Are there other cases of countries like Brazil who are resisting this push that you have been leading to see climate change incorporated as macrocritical? Thank you.

Ms. Georgieva ‑ Let me start with the second question first. We have been so pleased to see the membership endorsing our climate strategy, and work is now already underway to integrate climate in Article IV Consultations. We have to do more to underpin discussions with the members, and they tell us please do more. To your first question, I talked about it yesterday, so maybe it is fair to give the Chair a chance to respond.

Ms. Andersson ‑ Yes. Of course, as Chair of the IMFC, I followed the Board's work on this very, very closely. I can really note that they have made a thorough analysis, and they have made a very thorough review. They had several meetings, both with Kristalina but also with the law firm, so it is truly a thorough work that was done by the IMF Board. And the conclusion from that thorough analysis is that there is unanimous and full support for Kristalina and full support for her in the way she is conducting her work as Managing Director for the IMF.

Mr. Rice ‑ Thank you very much, Madam Chair. Thank you, Kristalina. Thanks to everyone who joined us today. We look forward to seeing you in the period ahead. Stay well. Stay safe, everyone. See you soon. Goodbye.