Speech

Remarks of the Managing Director to the 24th Jacques Polak Annual Research Conference

November 9, 2023

As prepared for delivery

Good morning! Welcome to the 24th Jacques Polak Annual Research Conference.

Let me give a huge thank you to the Research Department and Pierre-Olivier for organizing this conference. Our “dual mandate” here is to explore “Global Interdependence,” and to honor Ken Rogoff.

I will start with Ken. Gita will speak to his indelible mark on the field of economics, and I will speak to his specific contributions to the Fund. It would take the entire conference to do justice to them all.

So I will focus on three, with a common theme: in economics, as on the chess board, Ken is always thinking several moves ahead. He served here at the turn of the century, and it has taken the profession and the world two decades to catch up!

First, under Ken’s leadership, the IMF acted early to expand the use of modern macro models, such as the Global Economy Model. These tools help bridge the gap between theory and forward looking, real world policy analysis. Fast forward to today, and such models are standard in bilateral and multilateral surveillance here, and in institutions worldwide. Ken’s efforts were transformative.

Second, Ken left his mark on the Fund’s work on sovereign debt. This includes how we look at debt sustainability—absolutely critical to building Fund-supported programs.

He was also an early advocate for debt transparency—the reporting of comprehensive information on sovereign debts. Two decades later, the need for transparency has moved to center stage as the creditor landscape has broadened and debt instruments have become more complex.

Third, Ken majorly advanced the Fund’s work on exchange rates and external sector analysis—a key part of multilateral surveillance. Under Ken’s leadership, a more solid theoretical foundation was built for this work, and it was expanded to key emerging markets. You can draw a straight line from his efforts to the Fund’s flagship External Sector Report.

His legacy is visible every day in the quality of our research, and the Fund’s focus on how our policy recommendations affect ordinary people.

Perhaps most important, his legacy is the people who have learned so much from him—from the economists who served under him here, to our First Deputy Managing Director, Gita Gopinath, who sought him out as a thesis advisor at Princeton. And I appreciate Ken’s wise counsel as a member of my External Advisory Group.

Through the incredibly wide reach of his writings, we are all his students. Reading Ken leaves us all better equipped to analyze both country-level economic challenges, and the mechanisms of global interdependence—the second part of today’s “mandate.”

The last few years have shown us two big things about the world economy: it is more interdependent than we appreciated. Think of the ways supply chains were upended during the pandemic, and the impact of fragmentation since then.

Our world is also more shock-prone. After COVID, we’ve had Russia’s invasion of Ukraine and climate disasters continuing to grow more severe. These shocks have contributed to a cost-of-living crisis that hits hardest on the poor. And the Israel-Gaza conflict adds more uncertainty and risk.

Where are we today? We project global growth to slow down in 2023 and remain at around 3 percent over the next five years. This is the weakest medium‑term forecast in decades.

Core inflation is proving stubborn. Debt levels are near record highs. And higher-for-longer interest rates are making debt harder to service, while exposing vulnerabilities in real estate and other sectors.

Fragmentation is weighing on trade and capital flows. The volatility of these flows, and of exchange rates, is especially concerning for low- and middle-income countries that need external financing.

This leaves policymakers with a challenging set of questions. As they seek to create opportunities for their people, and to maintain social cohesion, they must ask:

First, how do we reduce inflation to the desired levels, while maintaining growth and financial stability? This is a question for both advanced and emerging market economies alike. Discussions at our Annual Meetings in Marrakech reinforced the broad agreement that monetary policy should remain laser-focused on bringing down inflation.

This is the right course, but it does present a risk of spillovers from advanced to emerging economies, and challenges to financial stability. These have been well-managed so far, but continued vigilance and policy agility are critical.

Second, how to support growth at a time of reduced fiscal space and rising funding costs from “higher for longer” interest rates? Well-designed and sequenced transformational reforms are key. This includes creating fiscal space to invest in people—in education and in health.

Third, what is the role of the international community? Domestic actions are not enough—we need cooperation on trade, debt, and ensuring that the poorest members of our global community have access to much needed concessional financing. And we especially need cooperation on the challenge where we are most interdependent—climate change.

Trying to think like Ken, we have the pieces on our chess board to attack all of these problems—innovation and creativity, capital and technology, and a growing sense of urgency around the world. Our job is to make these pieces work together.

Facing these challenges in our interdependent world, I am reminded of the words of the British philosopher—and chess enthusiast—Bertrand Russell: “The only thing that will redeem mankind is cooperation.” May this conference help build more of it.

Thank you.