Transcript

Transcript of the IMFC Press Briefing

April 21, 2022

Participants:

Kristalina Georgieva, Managing Director, IMF

Nadia Calviño, Chair, IMFC

Moderator: Gerry Rice, Director, Communications Department, IMF

Mr. Rice ‑ good morning, everyone. Warm welcome to these Spring Meetings on behalf of the IMF. Great to have everyone with us today. The International Monetary and Finance Committee of the IMF has just concluded its meeting, so we are having this press conference to talk about that. I am delighted that we have with us today the Chair of the IMFC, Madam Nadia Calviño, who is the First Vice President of Spain and Minister for Economy and Digitalization. Warm welcome, Nadia. Good to have you with us.

Ms. Calviño ‑ Thank you very much.

Mr. Rice ‑ With us, as always, is the Managing Director of the IMF, Kristalina Georgieva. Lovely to have you too, Kristalina. They will both be able to tell you about the deliberations of the IMFC and what happened there this morning. I would just bring one thing to your attention, and that is that we have posted the Chair’s statement on our website, so you can find it there and refer to it, and it might help with some of your questions.

When we get to your questions, let me ask you to be as brief and as succinct as possible. We will try to be the same, and we will try to do as many as possible.

With that, I am going to ask Nadia to kick us off, the Chair, and Kristalina will follow with some brief remarks, and then we will get right to your questions. Madam Chair.

Ms. Calviño ‑ Thank you very much, Gerry. Good morning, everyone. This is my first meeting as Chair of the IMFC, which convened for its 45th time in what is probably one of the most intense and complex periods in the history of the IMF. Our discussions have been broad, frank, insightful, and I think very productive.

Before I touch on some of the key aspects of our meeting, let me thank Ms. Kristalina Georgieva, the Managing Director, for hosting us. We were able to focus on some of the most critical challenges facing the world economy, advanced, emerging market and developing economies, and our discussions touched on the current issues that certainly have the most impact on the poorest and most vulnerable members of our societies.

Members have made an overwhelming call to stop the war. Concerns have been voiced on the negative impact of the war, which goes beyond neighboring countries and has a global scope. This meeting has obviously not been business as usual. Russia’s war against Ukraine has made it impossible to come to a consensus in a Communiqué, which has the support nevertheless of an overwhelming majority. The IMFC has traditionally worked on the basis of consensus, so if one member breaks away, we cannot reach the agreement that the overwhelming majority of us would have wanted.

Nevertheless, there has been a broad agreement across the membership over the substantive issues on the table. I would say actually a virtual unanimity of the substantive issues on the table and a clear call on our multilateral institutions and specifically the IMF to continue pushing forward with their invaluable work.

I have therefore issued a Chair statement with the text agreed by the overwhelming majority of members. The statement shows that there has been a constructive and intense dialogue at the IMFC, as there is an agreement on all elements related to the important work of the institution. All IMFC members welcome the Managing Director’s Global Policy Agenda.

There was not only been consensus on the work of the institution but also on the critical policies that members will need to take. I should add that there was a very close engagement and dialogue amongst all countries on the substantive work of the institution and these policies.

If there has been a time for multilateralism, it is now. And against this truly challenging background, we need the international community to come together, stand strong, and demonstrate our full commitment to cooperation. Multilateralism is also the only way forward if we are to successfully address shared challenges, climate change, specifically, and other related issues such as energy and food security that demand our urgent attention.

As for the IMFC’s specific discussion, we explored the many elements of the double crisis generated by the war and the pandemic, which is still around us, particularly on inflation, growth, and in particular food and fuel prices.

On inflation specifically, central banks are closely monitoring the impact of price pressures on inflation expectations and will continue to appropriately calibrate the pace of monetary policy tightening in a data dependent and clearly communicated manner.

This goal is to ensure that inflation expectations remain well anchored while being mindful to safeguard the recovery and limit negative cross‑country spillovers.

Overall, strong domestic policies and international cooperation are needed more than ever to preserve the global economic recovery and safeguard macroeconomic stability while battling the pandemic and, where necessary, mitigating the impact of energy and food price increases on the most vulnerable groups. The IMF has also made clear that it will keep promoting this important agenda for the benefit of its 190‑member countries.

One last point. I think it should be emphasized that even in this complex context, there have been very concrete takeaways of our meeting. We have been able to deliver a response to try to minimize the negative impact on the world economy of the war and the still‑remaining pandemic, and there has been a major advance, which Kristalina is going to address just now, which is the agreement to establish the Resilience and Sustainability Trust, which is the first time the IMF will have the capacity to provide financial support to countries seeking to address longer‑run structural challenges, including climate change and pandemic preparedness. This is a new and important part of the IMF’s financial toolkit, and we hope it will help many countries deal with climate change and the lingering effects of the pandemic.

With that summary, let me again thank Kristalina and now turn the table over to her for some remarks before we take your questions.

Ms. Georgieva (IMF) ‑ Thank you very much, Nadia. The very first point I want to make is to congratulate you warmly on your first meeting in which you are in the chair. You have done a fantastic job. Your team, your working with the membership, working with us at the IMF managed to steer such a substantive and unifying discussion despite the difficult times we are or maybe even because of the difficult times we are in. So thank you for that.

We are certainly convening in a consequential moment, and it was very clear from the engagement of the membership, we face a pandemic, war, and the risk of geopolitical fragmentation, and at the same time we are confronted with major global challenges, such as climate change, such as pandemic preparedness, for which we need each other. You have heard from us this week about the massive setback for the global recovery from Russia’s invasion of Ukraine. It figured prominently in our discussions this week, both the human aspect and the economic impact. A very significant repercussion is increasing inflation with rising food and fuel prices. They are severely straining the budgets of ordinary families, and naturally that was one of the core topics of discussion of the IMFC.

Other factors, financial tightening, high debt, the lingering COVID‑19 outbreaks, they all found their place at the discussions of the membership. In particular, the necessity to take action to confront them. I want to give one example of the productive outcome of the discussion, also on the G‑20 Common Framework. We got a very concrete commitment from China to join the creditors’ committee on Zambia and more broadly to work constructively so we can have early debt resolution for countries that need it.

I want to welcome the Chair’s statement. It is truly a reflection of top of mind for the membership and commitments we make. We can see that our members do not want to jeopardize the benefits delivered for so many people from the rules‑based international economic system that has been in place for the past 75 years. And, in fact, there were very passionate statements, especially from emerging markets, developing economies in defense of this international order that benefits hundreds of millions of people.

I want to thank the membership for the support for our Global Policy Agenda and the work of the IMF. We have three avenues through which we help countries, and we are strengthening each and every one of them: The tailored policy advice: especially needed and demanded in this period of high macroeconomic stress when so many countries face inflation, debt, potential capital flow volatility; our continued financial support for countries experiencing balance of payments needs: and that applies in particular to those that now face the added stress from high energy and food prices; and our targeted capacity development: demand for it skyrocketed because of the complexity of the challenges our members face.

So I want to get to my breaking news for you today, echoing Nadia’s recognition of the creation of the Resilience and Sustainability Trust that is adding a brand new tool at the IMF to serve members needing longer maturity for longer‑term transformation, in particular, climate change and pandemics. We have gotten just today 12 countries stepping forward to support financially the RST, and we now have about $40 billion with which we can credibly move towards the implementation of the Trust.

I know that Gerry asked me to be very short, but I am going to read you the names of the 12 countries: China, Japan, South Korea, Italy, France, Germany, Saudi Arabia, the Netherlands, Canada, U.K., Switzerland and, of course, Spain.

So let me stop right here, and we will open up for your questions by stating that the RST is a demonstration that we can, we have to, and we do come together.

Mr. Rice ‑ Thank you very much, Kristalina. Thank you, Nadia. Let us turn to your questions and thank you all for turning on your cameras. Great to see you and for raising your hands. In honor of our incoming Chair, I want to begin today with a question from Spain, a question from Mark of EFE. Mark, come on in.

Question ‑ Sure. Thank you. So all the shocks and challenges that you just listed, having lots of cases postponed the fiscal and budget reforms that the IMF has been promoting for years. My question is, what does the IMF see as the economic threshold for switching from a recovery and growth mode into one that focuses on sustainability and structural reforms? In other words, when should countries do that?

Ms. Calviño ‑ Thank you very much for the question. I think for the past two years, indeed, we have been responding to the pandemic, and now we have to respond to the negative consequences of Russia’s war on Ukraine, but that has not stopped the countries and, of course, Kristalina may speak for the International Monetary Fund, but my impression is that has not stopped institutions from continuing to look to focus on midterm objectives. Fiscal sustainability, environmental sustainability, and social sustainability are features that are discussed in each and every one of our meetings and that are highly ranked in each and every one of the reports of the International Monetary Fund that also feature in the statements by the Chair that reflect the discussions and the agreed language between the members in the course of these IMFC meetings. So I think it is not ‘either or’.

We have to be very effective in responding in a coordinated and decisive, determined manner to any risks or any crisis that we may be facing without losing sight of the long‑term objectives in terms of financial stability, fiscal sustainability, et cetera.

Mr. Rice ‑ Thank you, Madam Chair. Kristalina.

Ms. Georgieva ‑ I will add to what Nadia said, and I will agree with her. Two points, one, even before the war, we have been recommending to countries to anchor their fiscal policy into medium‑term sustainability so as to send an indication that there would be prudent rebuilding of buffers, where they have been used, when the time is right.

What we have said in these meetings is that there is a need to retain some crisis management capacity because we have a crisis on top of a crisis. Deploy it wisely, in other words, target the most vulnerable people, the most vulnerable parts of the economy, but do think about anchoring your plans in a medium‑term fiscal sustainability framework.

Second, there are things that can be done that are good for fighting climate change and good for fighting this crisis. For example, the more we can expand rapidly the use of renewable energy and in some countries, there is space to do quite a lot fairly quickly at a low cost, the more we build energy security, and we deal with the price shock that comes out of the impact of the war. There is never a bad time to think about more equitable tax policies, but they also can help with short‑term and long‑term objectives.

Mr. Rice ‑ Thank you very much. Let me turn to Eric Martin of Bloomberg. Hey, Eric, come on in.

Question ‑ Yes, Gerry, thank you very much. I wanted to ask the Managing Director about the challenges that have been faced by the G‑20 and the IMFC particularly at its Springs Meetings and the relevancy of these kinds of multilateral fora in an environment of fragmentation and whether they continue to maintain their relevance and the ability to take collective decisions at a time of such splits among membership. Thank you.

Mr. Rice ‑ Thank you very much, Eric. I will ask both Managing Director and the Chair to speak, but let me add that Lalit Jha of Press Trust India has sent me a similar question online, so I will just read that question, similar to your question, Eric: “Next year India is going to be leading the G‑20, so in the current global economic scenario, what should be the collective role, if any, of the G‑20 group of countries and how can India play a leading role there?”

Ms. Georgieva ‑ Let me start. Eric, thank you for the question. Thank you also for the question on India. What these meetings have demonstrated is that there is a set of issues that cannot be addressed with countries working separately and, also, a set of issues that are better addressed when we collaborate, when we share experience. In fact, in my history of these meetings, these have been particularly engaged and frank candid meetings. And the overwhelming spirit of the meetings have been we have to work together. We do face a war in Europe. It is creating all the impacts, including making it possible to have a Communiqué with everybody signing in on it, but the overwhelming majority of the membership sees this crisis as proof that we have to cooperate, compare notes on policies, find ways in which we can act in solidarity. This is why I find it remarkable that we got nearly around $40 billion in commitments the first time we openly asked for support for the Resilience and Sustainability Trust because it is walking this talk. It is a demonstration that we need each other.

You are right. We have been for quite some time living in a more multipolar world, and that creates more risks of tensions, but it has been a world in which so far bridges are being built so we can come on issues of major significance, such as climate change, together. I see our institutions challenged to do even more to bring policymakers together.

On the India question, let me first say that it is really by chance but a good sequence that we have two large emerging market economies chairing the G‑20, one after another at this moment of time. Why? Because what the meeting has demonstrated is anxiety among emerging markets that what has worked for them to pull people out of poverty, to bring dynamism in the economy, and it is straight and global cooperation, may be challenged. In that sense I am confident that India will lead for us to fight to use the G‑20 as a platform for global cooperation.

They have a unique role to play to overcome challenges by reaching out to different parts of the world using India’s long tradition of being inclusive and open to collaborate with all countries. There is a particular task for India that we at the IMF are keen to see action, and it is the 16th General Review of Quotas. During the meeting today, almost everybody said it has to be completed successfully, and I have confidence in India’s G‑20 Presidency to help Nadia to achieve that objective.

Ms. Calviño ‑ Let me add two points on these questions. First of all, I could not agree more. Multilateralism is more important than ever. The G‑20, the IMFC, obviously the IMF and all the rest of international fora and institutions play a key role in ensuring coordinated action to respond to global challenges. This has been stressed by all members throughout the meeting, and it is particularly important indeed that India can be leading the G‑20 next year at this very important point in time to address common priorities like climate change, to address also support to the most vulnerable countries, et cetera.

Secondly, I would like to stress once again, these are institutions which have traditionally worked on the basis of consequences. Once one single member breaks away, we do not have that consensus, and we have not the possibility of having agreed Communiqués as we would have liked, as actually an overwhelming majority of members would have liked to have. But there was unanimous agreement on the substantive policies developed by the International Monetary Fund, on the agenda proposed by the Managing Director, and actually there was an overwhelming majority on all the issues and unanimous agreement on the substantive issues, which are so important for all countries and for citizens throughout the world.

Mr. Rice ‑ Thank you both. Let me turn to the Financial Times, Colby Smith. Colby, come on in.

Question ‑ Thank you very much, Gerry. I wanted to follow up on your comments yesterday that Ukraine needs 5 billion a month over the next three months to cover its fiscal deficit. I am curious what exactly the Fund is doing to mobilize those funds and how do you see the country’s funding needs evolving after that three‑month period and the IMF’s role at that point in helping to facilitate the support

Mr. Rice ‑ Thank you very much, Colby. Kristalina, if I may, just before you answer that, I see Yulianna Vilkos from Ukraine, and they want to come in on this question as well. Yulianna, do you want to ask your question alongside Colby’s about financing?

Question ‑ Thanks so much, Gerry. Yes, I would love to. My question was related in part, and it was related to practicalities around the special IMF account that was created for Ukraine. I know broadly what it is, of course, and I know the first pledges have been made. However, I would like to understand more how it will work in practice, how long it will take for funds to reach the account, and how quickly Ukraine will be able to utilize them.

Also, just a really quick question, those $24 billion that were pledged by G7 Finance Ministers today, are they separately or are they on top of the pledges for the IMF account, or will they be channeled by this account? Thank you.

Ms. Georgieva ‑ I am very pleased that I have a chance to follow up on this question because it is very important to understand what this number is and what it is not. $5 billion is the estimate of Ministry of Finance and more broadly the financial authorities of Ukraine for what is their monthly financial gap for the next couple of months. Our staff has worked on verifying, ascertaining whether this amount broadly is the right order of magnitude, and they confirmed that indeed for the observable future, for the next couple of months, this is an amount that would be necessary to provide for Ukraine performing its functions in terms of paying salaries, pensions, paying for social services, for the displaced population and, of course, the costs that are coming on top of the normal payments related to the war.

The composition of filling this gap is to be determined. We are of the view that as much as possible it should come from grants rather than from loans. Why? Because in the immediate future, Ukraine would have dramatically reduced revenues and even after the war would be faced with very high bills related to reconstruction. So piling more debt on top of the one they already carry in this environment of sharply reduced revenues and significantly increased expenditures is not just wise.

Let us remember that Ukraine has done an excellent job in macro policy and financial stability. They do have sound reserves. They have some $29 billion in reserves. And they would like to protect their reserve position so they can continue to function as a reliable economy in the eyes of their people and in the eyes of the international community, the business community.

Of course, they can draw down some of these reserves. They are also in a position to hopefully raise revenues should part of the economy be able to function. And I would not exclude with so many Ukrainians outside the country that we might see an increase of remittances. So to judge today beyond the next couple of months what would be the financial gap in Ukraine is really premature. How we are going to work on filling it. We have been engaged with the friends of Ukraine. Today there will be a meeting that the World Bank and the Ukrainian government will be hosting. It is more immediate relief of Ukraine as well as to think about the future of the country. It is already bringing support from multiple sources, you might have seen, U.S. committing $500 million for budget support. So our collective job is to make sure that there is a flow of funds.

We do have the Fund Administered Account. Let me go to it. We have created it specifically to allow countries to lend or provide support for Ukraine in other forms like guarantees or others using Special Drawing Rights rather than convertible currencies. Why? Because Special Drawing Rights are a very safe way to provide support to Ukraine. In the early days of the war, there was the concern that there could be an attempt to install an illegitimate government that could then make claims on the financial resources of Ukraine and protecting these resources at that point was very important. It is actually not a bad idea anyway.

We as the IMF are at the disposal of the membership. If members decide that they want to provide more financing through the IMF, we have the vehicle to do that.

And to finish with our own role, we have provided emergency financing, $1.4 billion. By the way, it is also in the SDR account of Ukraine. We are already starting preliminary discussions for a full‑fledged program for Ukraine once the conditions in the country allow it. We just do not want to wait for the war to end to build the parameters for what can help Ukraine.

I am very impressed by the way Ukrainian leadership is thinking. They are saying we do not want to rebuild Ukraine as it was before the war. We want a country that has strong governance that is accountable to its people, highly competitive, highly integrated in Europe. That would be the objective we would set for ourselves for a full‑fledged program.

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

Ms. Calviño ‑ No.

Mr. Rice ‑ We will take two last questions and I see two people who have had their hands up from the beginning. Let us take them quickly, please, because we are running fast out of time. Delphine of AFP, Delphine, I think you have a question around the Common Framework. Let us take it. Larry Elliot, Guardian, let us take your question and then we will turn back to the Chair and to Kristalina for closing remarks. Delphine.

Question ‑ Good morning, everyone. Thank you for taking my question. Yes, indeed I want to ask about the Common Framework because you mentioned earlier that you got a commitment from China on Zambia. Could you please elaborate a little bit? What does it mean concretely? Does it mean that we can expect a decision on Zambia’s debt shortly, and in general do you have any commitment from China for the implementation of the Common Framework of the G‑20?

Mr. Rice ‑ Thank you, Delphine. Larry, you get the last question.

Question ‑ Thank you, Gerry. It is about the same subject, fortunately, so you can answer the same question, really. Both the Fund and the Bank have been warning about the number of countries that are in or close to debt distress. Given that the Common Framework has yet to deliver any debt relief in two years, is it not the time to say this is a failed system and come up with something that is faster, more comprehensive and more generous?

Mr. Rice ‑ Thanks, Larry. So Kristalina and then we will finish with the Chair.

Ms. Georgieva ‑ They are indeed related questions. I will actually start from the second one because this is the broader one, what is the future of the Common Framework. Larry, we have worked very hard to get a way in which all creditors would sit around the table on a country‑by‑country basis and have: the Paris Club creditors—as you know, loans from the Paris Club in relative terms are now a smaller proportion of that of developing countries; non‑Paris Club official creditors, like China, Saudi Arabia, India, the United Arab Emirates and others; and private sector creditors. Why on a case‑by‑case basis? Because the universe of creditors has changed dramatically. And if we are to reach a solution, we have to really anchor it in a country‑level debt sustainability analysis and bringing those that actually matter for this particular case. So in that sense, the Common Framework conceptually is right.

What is the problem? The problem is that there are no clear, established processes and timelines. There is no incentive for countries to step forward and ask for it. There is, as you said, a very poor track record so far of debt resolution. And it does not include all countries that may be in need. Countries like Sri Lanka and Suriname are not eligible.

We have made recommendations together with the World Bank to address these shortcomings. What has been quite encouraging during these meetings is that we finally are hearing key players responding positively to this call of strengthening the Common Framework. That takes me to Zambia and also more broadly the role of China. As you know, among the official creditors, China is the largest. We were very pleased to hear from Governor Yi Gang both a commitment to the Common Framework, to work on the basis of IMF debt sustainability analysis on a country‑by‑country basis, and a very specific commitment to join the Creditor Committee on Zambia and work expeditiously for debt resolution.

Going back to the issue, should we drop the Common Framework? Our problem is that if we drop it and we seek, for example, debt relief of the kind of HIPC, at this point we do not see any pathway to get the mobilization that a debt relief, debt write‑off would take. So we are concentrating on one shot more at the Common Framework.

Larry, I can tell you, we actually have to make it work because if we do not make it work, that would be so detrimental to timely debt resolution for countries, and the problem of debt is only going up and up and up.

We also are pressing for some of the changes, legal changes that need to happen in York, in London, to close loopholes for vulture funds and others to prevent debt resolution. We are discussing how we can bring more contingency measures in debt agreements, how to press for more debt transparency.

The good news, and Nadia can confirm that, for the first time I hear it in our forum much more serious concentration on this question and much more forward leaning of key countries to get to a resolution.

Ms. Calviño ‑ Yes, I would like to close with two remarks. Before I get to that, indeed I would like to emphasize there was a unanimous call on the International Monetary Fund to press ahead and to reinforce existing instruments for financial support, in particular to most vulnerable countries, not only, but also middle‑income countries are going to be accessing some of the newly created instruments. And there was also unanimous commitment to reinforce the Common Framework, to making it operational and to try to have a clear, concrete calendar, clear deliverables thanks to the strong engagement of some key players, as the Managing Director was just pointing out.

Let me just to wrap up, to close with two remarks. First, I would like to thank the Managing Director but also the whole IMF staff for the excellent cooperation we have had throughout this very complicated IMFC meeting. We have been working for many weeks very intensely day and night, and I think that has proven to be the right way in view of the outcome. That is my final reflection. We have had frank, open, substantive discussions on the important challenges that the world economy is facing right now. There are clear and concrete deliverables coming out of this meeting, and there is a Chair statement, which reflects the unanimous view of the members on the substantive issues. Unfortunately, due to one member country breaking away, we did not have the unanimity so as to make these Communiqué.

Still, the Chair statement reflects these whole, overwhelming majority view on all of the elements and the unanimous view of the substantive issues, which are so important for all member countries and for citizens throughout the world in these dire times where multilateralism and international coordination and cooperation while implementing our economic policies is, as I think I have said a couple of times already, more important than ever.

Mr. Rice ‑ Thank you so much. Thank you so much, Nadia.

Ms. Georgieva ‑ Can I say a word that applies actually to Nadia’s leadership? One of the memorable phrases during one of these meetings came from one of the Governors, a man who said two words he would remember as the emblematic for these meetings. They start with ‘W’. War and women. He said the first negative, the second positive. Indeed, we have seen in the meetings very strong engagement of women and fantastic leadership from Nadia Calviño.

Mr. Rice ‑ We could not end this press conference on a better note. Thanks to Nadia Calviño, our Chair. Thanks to Kristalina Georgieva, head of the IMF. Thanks to all of you. Great to see you. Stay safe and stay well, and we will see you again very soon. Goodbye.