Transcript

Transcript of IMF Managing Directors Press Briefing on the Global Policy Agenda

April 18, 2024

Moderator: Julie Kozack, Director, Communications Department, IMF

Kristalina Georgieva, Managing Director, IMF.

Ms. Kozack: Good morning, everyone. My name is Julie Kozack. I am the Director of Communications at the IMF. Thank you for joining us today and welcome to the Managing Director’s press briefing on the Global Policy Agenda.

As usual, we will begin today with some opening remarks from our Managing Director, Kristalina Georgieva, and then we will move to your questions. Kristalina, the floor is yours.           

Ms. Georgieva: Thank you very much, Julie. You are all familiar with this. We present at the Spring and Annual Meetings our policy priorities, and this is what you would see out today. I would like to start by thanking all of you for the work you do, covering these stories that impact the world. We know now over the last years there have been plenty of turbulence in the world economy for you to cover. We had the pandemic, wars, climate disasters, a cost‑of‑living crisis, but you also have the opportunity to cover remarkable resilience. As you saw from our World Economic Outlook on Tuesday, despite these multiple shocks and tight financial conditions, growth is firmly in positive territory, and we have slightly upgraded our forecast for this year to 3.2 percent. Yet, there is plenty to worry about. Inflation is down, but not gone.

In the U.S., strong economic performance has a flip side. Disinflation is taking longer than expected. Medium‑term growth prospects at around 3 percent are the lowest in decades, held back by a broad‑based slowdown in productivity. And divergences within and across groups of countries are growing with poorer countries falling even further behind.

In this context, we have the meetings, and we are presenting our Global Policy Agenda, focusing on three priorities. First, rebuilding fiscal buffers. We have long advocated that while central banks pursue return of inflation to target, they can use some help from the fiscal side. Now fiscal restraint is becoming even more important on its own right because fiscal capacity is exhausted in most countries, and that is dangerously up. Last year global public debt edged up to 93 percent of GDP. This is some 9 percentage points above the pre‑pandemic level. Debt service is also more expensive, as interest rates have increased.

In a world where crisis keep coming, countries must urgently build fiscal resilience to be prepared for the next shock. As hard as it is, when still part of the population needs support and half of the world is going to the polls, the time has come to adopt medium‑term frameworks for fiscal consolidation.

We recognize one‑size‑fits‑all does not fit all. The pace and speed of consolidation will vary depending on country circumstances, so will also the balance between mobilizing revenue and improving spending efficiency. What is very important is not to forget the burden should not fall on the most vulnerable people.

The second priority, to revive growth prospects. Foundational reforms, strengthening governance, cutting red tape, increasing female labor market participation, improving access to capital. They are all essential for growth, and even more so are productivity‑enhancing structural reforms and investment in human capital, the green and the digital transition. With artificial intelligence already upon us, coordination on global rules is as important as having the technology and the skills to tap into it.

New efforts to promote and maintain open flows of goods and capital can build on what has worked to lift living standards in the past while being mindful of the need to ensure that the benefits are widely and fairly shared.

We are directing a significant part of our research towards policies to enhance the growth prospects of our members, in particular, those most severely impacted by exogenous shocks. That brings me to the third priority, renewing our commitment to our membership.

Over the last years, the Fund has been there for our members when they need it, as much as they need it. We provided over $300 billion in financial support to almost 100 countries. As many of you have witnessed at the Annual Meetings in Marrakech, our members gave us a strong vote of confidence by increasing our quota resources and injecting concessional funds into the Poverty Reduction Growth Trust and our Resilience and Sustainability Trust. And this month I am very pleased to tell you we have reached our target of $25 billion SDR—this is around US$30 billion—in precautionary balances, our own protection against financial risks.

This financial strength allows us to play our role at the center of the Global Financial Safety Net at a time of exceptional uncertainty. And we will remain the transmission line for good policies and for global economic cooperation.

I want to finish with this. In a world of more frequent shocks, we know we will be tested again. And to quote Winston Churchill, “This is no time for ease and comfort. It is time to dare and endure.” And there we will, as we have done in the past years, to serve our members in the best possible way tailored to their individual needs. And with this, I thank you and we open your floor to your questions.            

Ms. Kozack: Very good. We will go around and take questions. I will ask that you please limit your questions to one so that we can get to as many of you as possible. Let us start right here, woman in the dress in the second row at the end here.          

Question: Thanks a lot for the opportunity to ask this question. You characterized the mood as resilience in the near term, but in the medium term, as you note, the projections are the worse they have been in decades, you know, that is due to fears about productivity. Could you maybe say a little bit more about what you think of the drivers of that slowdown in productivity, maybe in the explanation a little bit about why you think, say, the likes of the U.S. have performed a little bit better than the likes of, say, the EU? Thank you.    

Ms. Georgieva: Thank you for this question. This is what preoccupies us these days, how can we better understand the slowdown of productivity and growth and what we can do to reverse it, what we can do to help countries reverse it.

So what has happened is on multiple fronts. After the Global Financial Crisis, we have seen somewhat slower accumulation of capital and then the allocation of both labor and capital, not necessarily the most impactful from a productivity standpoint way.

As we are all aware, the last decades before the surge of inflation, it was a time of very low, sometimes even negative interest rates. And a question arises, was that a factor that allowed firms that otherwise may not have been competitive to stay afloat? We have seen the way technology penetrates the economy, bringing some gains but not the level of gaining that we thought we might see. And over the last years, there is a little bit of self‑inflicted injury. Fragmentation means that what otherwise would have been more optimal allocation of capital may not be so. I also would say this. In many countries, aging populations, labor force that does not bring dynamism that can help growth go up. In other words, we have multiple factors affecting productivity and growth. Among them, sometimes countries being shy to take forward reforms that would help productivity but may be difficult to carry.

So, to wrap it up, there are multiple reasons for slowing—for productivity and growth slowing down. And, of course, we know that productivity slowdown is not the whole reason why growth is slowing down. There are also other factors, and I mentioned some of them.

So you ask a very interesting question. Why is the U.S. doing better than Europe? And when we look at the U.S., there are three things that distinguish the U.S. economy. One is the force of innovation and how easy it is for innovation to turn into business development and then to be scaled up. We know that in Europe, there is still work to be done to unleash the power of innovation. Just comparing the cost of a patent in the U.S. and in the European Union tells a story.

Second, the U.S. is benefiting from abundant labor coming across the border. It creates a domestic political problem and not everybody who crosses the border adds positively to the economy, but that labor supply also gave to the United States another comparative advantage. Wages are not pushing up because there is no strong pressure because of the lack of labor on wages growth.

And the third reason is the U.S. has benefited from more favorable conditions in terms of energy prices, something that has been quite a serious factor for Europe, not a positive factor for Europe. So when we look at the future, if we add to this more investment in human capital, make the labor force more agile and dynamic, and more forceful allocation with capital where it would bring higher productivity, then we can see the picture lightening up.

I do not know whether you heard me—I am sorry, I am drawing—this is what I think, I wake up in the middle of the night and I think how we can help our members lift up productivity. I do not know whether you looked at the graph that shows the trajectory of global growth, medium‑term prospects for growth. It looks like a Swiss ski slope. And we sure do not want that for the future. OK. Enough on growth. Not enough on growth, but enough on growth for now.            

Ms. Kozack: Welcome right here to the woman in black in the second row.         

Question: My question is regarding China’s economic growth. You just went back from a trip to China. I would love to know more about your takeaways from your trip and also from your firsthand experience and observations, how you think China can hit its growth target this year.

Ms. Georgieva: Thank you for your question. I had an opportunity to visit China and discuss with the Chinese leadership how they think about growth prospects for the country and also reflect on what we have learned about China. And here are my main takeaways. First, China is on a fork on the road—at the fork on the road. Why? Because China has to define growth strategies for the future yet. China has the benefit of a particular set of policies over the last decades, export‑oriented growth, but the time has come to look at domestic sources for growth, opening up more opportunities for the market to lift up these prospects. And at the Fund, we see three important opportunities for China. Number one, to shift the economy more towards domestic consumption. It is actually in line with what China is aspiring, the dual circulation economy. It would take giving consumers more confidence and offering them more services, more things to buy. We know that the healthcare services in China can expand quite significantly. We know that getting the social safety nets to work more effectively would give people an opportunity to save a bit less, to spend a bit more.

Secondly, we see the reforms in China that have served the country well continuing to be needed, reforms of state‑owned enterprises opening up for a more competitive environment. In the years ahead, that can help China grow more.

Last but not least, there are some problems right now, and how they are solved will have implications for China’s growth. The most obvious example is the property sector. People in China rely on their homeownership as a way of saving. When prices there—as savings go down, when prices of real estate go down, that affects consumer confidence. So clearing up the problems in the sector more resolutely would certainly help China. And we see China taking some important decisions around greening their growth pattern. Again, the more China does for lifting up domestic consumption, the better.

Ms. Kozack: Let us go here in the middle, yes. Gentleman right here in the middle. Yes, the second row.

Question: Thank you. So, the Russian war in Ukraine is continuing to be part of the Global Policy Agenda, and Ukraine is continuing to be targeted by Russian missile attack which targets energy and other infrastructure in Ukraine. So, Ukraine’s financial needs are growing now probably more than expected earlier. How does the IMF view Ukraine’s current economic budget risks and is the Fund ready to take more steps to strengthen international support for Ukraine when the situation gradually becomes complicated? Thank you.

Ms. Georgieva: The war above all is a tragedy for people. Having men and women and children killed and wounded is a daily occurrence, so we need this war to end for their sake. And we also need the hands for the sake of the world economy, not just for Ukraine. It adds to geo‑economic tensions, and the further they go, the less good are our prospects. Going back to the growth issue, that worsens our prospects to reverse the direction of growth.

Within Ukraine, what we see after years of very close engagement is a remarkable determination of the economic team and of the Ukrainian people to have a functioning economy despite the war. We have a $15.1 billion program with Ukraine. We have completed in March our third review very successfully. And what it shows is that Ukraine has been able to counter the highly disturbing force of the war. Growth is 5.3 percent; inflation, 3.2 percent; and tax collection, around 36 percent of GDP. And I am asking you, how many countries do you know today that have that kind of performance?

We have disbursed a third time under our program, but the most important role of our program—and it goes straight into the answer to your question—is that it is a catalyst for financial support for Ukraine. The program mobilizes $122 billion over 4 years. It gives predictability to the Ukrainian authorities that funding would be there. And I was very pleased to listen to statements yesterday at the roundtable on Ukraine. The support for Ukraine remains steady. It is firm.

You are all aware of the EU 50 billion euros. The U.S. administration is pursuing in Congress support from Ukraine. Many other countries, Japan, Canada, U.K. are stepping up, South Korea. The list is long. You also asked would the needs of Ukraine grow because of the horrific bombing of critical infrastructure? At this point, we assessed the needs for this year at 42 billion. We have confidence that these needs would be met. Of course, we will have to continue to carefully monitor conditions in the country but let me say this. It is the best way to deal with the problem is for the problem, the war to go away. This war, the war in Gaza, the less of this we have as the human race, the better. And looking at the women in the audience, the more women we have in the position of authority, the better chance we have for peace.

Ms. Kozack: I will take the gentleman at the very end of the first row, please.

Question: Thank you. Zambia’s successfully restructured its debt. So what does—what interventions does the IMF wish to see to enable that the country does not get back into debit distress, bearing in mind the mounting pressures to raise about $1 billion for humanitarian aid on the people which are affected by the droughts?     

Ms. Georgieva: Let me congratulate Zambia for successfully completing very complicated negotiations on debt restructuring with both the official and the private‑sector creditors. Bravo. And very timely because, as you indicated in your question, Zambia is experiencing a very dramatic drought. It is affecting food security. It is affecting electricity production. And we all know how shortages of electricity supply, of energy supply overall affect the economy.

I have had many opportunities to meet with the Minister of Finance, with the President of Zambia. I visited the country. It is a country with enormous potential. It has very fertile soil. It has rich natural resources. It is one of the not many countries in Africa with a relatively small population—17 million people on a large territory. And it has a determined leadership to pursue reforms.

A bit about Zambia. I think we will see increase in investments. We also will continue to work with Zambia on economic reforms. We have done something very important. We did a governance assessment as a foundation for anticorruption measures because, as we all know, one of the problems in resource‑rich countries is the cancer of corruption. So removing this cancer is a very important factor to attract financing. And from what we can see, investors are coming to Zambia.

Also, the country has taken a very important decision to invest in its people, making education free and accessible. I went to a school, 80 kids in a small room, four per desk, four per book, textbook. But so eager to learn. So motivated to contribute to their country.

If I ever need a lift of the depressing news you guys deliver, I am going to go to Zambia.           

Ms. Kozack: Let us go here, third row, woman in the yellow jacket.    

Question: Hello. Considering the wreaks of a division of the world in blocks, how will that affect Latin America and what precaution has the IMF taken? Thank you.     

Ms. Georgieva: Thank you for your question. Let us start with where Latin America is. The region has faced problems in reaching dynamic growth, and in fact Latin America is—growth in Latin America is below the average global growth. Indeed, geo‑economic fragmentation is a negative factor for everybody, including for Latin America, with some caveats. When you look at Latin America, Mexico actually benefits from fragmentation because it has become an entry point into the United States for goods that otherwise might have come from point A to point B without going through Mexico. So there is this element of lengthening supply chains that we are seeing more broadly, and we see some of it in Latin America.

So what are the opportunities for Latin America? First, to improve what has not worked so greatly in the past. And it is in the area of macroeconomic policies, in some countries being too generous; in other countries being too generous in spending; in other countries being too restrictive. So get that fiscal monetary financial‑sector policies in the best possible shape you can. And we see that countries are looking—I mean, look at Argentina, a country that has been for a long time perceived as a lugger from a reform standpoint of view now is moving very rapidly in tightening the fiscal spending, getting the ability of private investment to find a better return. Inflation in Argentina is going down a little faster than we initially expected.

I want to actually sing a praise also to Latin America in the following. After the Global Financial Crisis, countries have taken to heart getting their monetary policy in order. And many countries in Latin America were faster in tackling inflation than the rest of the world. Now they can start cutting rates. So it is a complex region. There are different stories. But by and large, I think Latin America can go with more effort on the policy front. Latin America can go up and do much better.

Ms. Kozack: Let us go back to the center. I will take the woman in the front row in the pink, please.

Question: Thank you, Ms. Georgieva, for taking my question. So, in the MENA region, the economic cycle is quite different than it is globally and with rising inflation again, it is burdening everyone across the globe, especially with the rise in oil prices and commodity prices. Now, my question is, how can the different countries in our region, both oil and non‑oil‑producing countries, deal with the current contractionary monetary policy with the current strong dollar that is burdening the highly‑indebted countries; and how can the IMF support the countries affected by the current Gaza war and the war in South Lebanon as well? Thank you.

Ms. Georgieva: Thank you for bringing in focus the Middle East that has indeed been on the receiving end of more turbulence since October. What we recognize is that this impact of the war is indeed affecting the Middle East. At a time when we have upgraded slightly global projections from 3.1 to 3.2 percent, we have downgraded our projections for growth in the Middle East by 0.7 percent. And that is primarily the result of that uncertainty.

What we see is the most severe impact is felt where the epicenter of the war, West Gaza in particular, also the West Bank, Gaza’s economy is wiped out. More than 80 percent is gone. But also the West Bank is severely impacted. There is some impact on the neighborhood in the following way: most severe on Lebanon, somewhat less on other countries. I would say Jordan has shown remarkable resilience and so has Egypt. In both cases, in the case—you asked what the IMF can do. In both cases, in Jordan and in Egypt, we have programs. In Jordan, $1.2 billion program that is anchored in Jordan’s own reform plans. It does provide a strong buffer for Jordan and, as a result, the impact of the war is generally minimal.

In Egypt, we had a program, $3 billion program. We have done something that is rare. We have augmented the program by 5 billion. It is now an 8‑billion program primarily because of the severity of the regional shock.

When we look beyond those, I just want to bring attention to two countries that should get more attention than they currently do, Sudan and Yemen. Sudan is in the—the situation is terrible, so is in Yemen. And what I want to stress is that when we have these highly visible wars, like the one in Ukraine, like the one in Gaza—Israel‑Gaza, they overshadow the pain and suffering that is happening in other places. But rest assured, for us at the Fund, all members are benefiting from our support and our attention, as difficult conditions may be.

If I can go back to Latin America, I was searching for the growth number for Latin America in my brain. My brain said ask Julie for this this little sheet of paper.

So, in Latin America, Caribbean, growth last year, 2.3 percent. It slipped to 2 percent. This year it is going to improve marginally to 2.5 percent in 2025. As you can see, way below the global average. So countries are doing OK, but not great.

Ms. Kozack: I am afraid we have time for just one more question, so I am going to go back to the center, woman here in the center, in the plaid jacket, kind of right by the camera. And this will be our last question.

Question: Thank you. Thank you for taking my question. You mentioned the need to address the climate crisis; and while the Resilience and Sustainability Trust is a step forward, to qualify for RST financing, eligible countries have to be in concurrent, on‑track financing or non‑financing IMF‑supported program. However, such a requirement restricts a member’s access to the RST. The majority of the climate‑vulnerable countries are not in an IMF program. Is there consideration to either remove that as a requirement, to eliminate it, and why must it be tied to a program? Thank you.

Ms. Georgieva: Let me answer it this way. We are going to review the performance of the RST and then should there be agreement on adjustments. Adjustments will be made. We are not so sure that removing a requirement for a current program at this moment would be justified. And let me explain why. Two reasons. One, because for us to help countries integrate climate in their macro policies, it is helpful to have an active and intense engagement on macro policies overall. So when we plug recommendations on climate policies, be it mitigation or adaptation or transition, we do it in the context of intense engagement with the country. And that makes our job likely to be more impactful.

Two, right now we have many programs, both financing and non‑financial programs. And more countries are coming to us. Sometimes they do not need money, but they do want to use the Fund as an anchor for their macro policies. Most recently, for example, a country in—not in Africa, in the Middle East, Iraq, said we would like to have a non‑financial arrangement with the Fund because we would like to benefit from that anchoring that you offer.

We have approved 18 programs so far. We have about 30 countries that have expressed interest. These are countries with financial and non‑financial programs, and our ability to respond and our financial capacity is already being stretched.

So to help the countries the best in my hearts of heart, I think it is more likely to be effective when we have this more intensive—more tight engagement as we currently have. This being said, as we move forward and we build knowledge and expertise in this area, it might become less important to have that close engagement as one of the prerequisites for a successful RST program.

By the way, you are from Africa. Which country? You are from the Caribbean. OK, I love the Caribbean. You guys are—you know that the Caribbean holds one of the most successful IMF programs ever? Barbados, yes, Jamaica, they are both countries that have non‑financial arrangement. They both say they are very happy to have these non‑financial arrangements because what it does for them is it gives them more attention from the Fund and more access to expertise. So that works. But the short and the long is, we have something that works. We got very quickly to a very strong portfolio of programs. Let us keep it going. Of course, we will revisit, we will assess. And if there is a need for change or conditions for change, I guarantee you, a change will be made.

Ms. Kozack: I am afraid we are going to have—

Ms. Georgieva: Let me say, Africa. You are asking about Africa. So here is—people are saying no because it would be unfair. Sorry.

Ms. Kozack: I think we will need to wrap up now. We will have another opportunity to— 

Ms. Georgieva: Tomorrow. Come tomorrow.

Ms. Kozack: —tomorrow to discuss with the MD. We will have another opportunity tomorrow.

Ms. Georgieva: Come tomorrow. Come tomorrow. Come tomorrow. Because then people will say some words about this and about that and it would not be fair. Come tomorrow. We have another press conference, second bite of the apple. The apple will be right here. Please come.

Ms. Kozack: With this, I am going to conclude the press briefing. Thank you, Managing Director for joining us.

Ms. Georgieva: Thank you, everybody.

Ms. Kozack: The transcript will be available later today on IMF.org, and I invite you to join us for the IMFC press conference tomorrow.

Ms. Georgieva: Thank you.