Transcript

Transcript of April 2024 IMFC Press Briefing

April 19, 2024

Kristalina Georgieva, Managing Director, IMF

Mohammed Aljadaan, Chair, IMFC

Moderator: Julie Kozack, Director of the Communications Department, IMF

Ms. KOZACK: Good morning, everyone. Thank you for joining us. My name is Julie Kozack, and I'm the Director of Communications at the IMF. Welcome to this press briefing of the IMFC.

I am delighted to have with me today the Chair of the IMFC, His Excellency, Mohammed Aljadaan, Minister of Finance of Saudi Arabia, and our Managing Director Kristalina Georgieva. They will share with you a few key takeaways from the IMFC meeting that just concluded, and then we will have time for your questions.

Your Excellency.

Mr. ALJADAAN: Thank you. Thank you very much and thank you all for being here.

The IMFC's role is to advise and report on the supervision and management of the international monetary and financial system. This includes responses to events that may disrupt the system. Of course, the world and the IMF itself have faced multiple global disruptions over the last few years. Prospects are improving, which is very positive. But numerous challenges remain, and we need to be vigilant and ready to address them.

I want to report on a few successes out of this meeting today, and before that, I would like just to say that one of the successes is having Kristalina renewed for a second term.

Ms. GEORGIEVA: Thank you for having me.

Mr. ALJADAAN: This came actually early on. Normally it would have happened a few months later. But this is really a testament that the membership overwhelmingly supports the second term and appreciates what she did over the last four‑plus‑‑almost five years. We are delighted, and the membership has been overwhelmingly delighted to see her serve and agree to serve a second term.

The second achievement, which is actually very important for the Fund, is the membership's agreement on the priorities that were tabled. And this is very, very important to make sure that the way forward, we are all collectively working in a cooperative manner to deal with the challenges that we face. In addition to this, the IMF's precautionary balances are expected to reach its medium‑term target of SDR 25 billion for the first time this month. Kristalina reminded us that this is a target that we put ourselves about 13 years ago. And achieving it this month is really, good. It basically provides a very good buffer for the IMF to be able to use its financial powers to support the membership and deal with shocks. So, I am really glad that, finally, we achieved that target.

Second, the membership has agreed on the IMF's way forward, supporting the debt restructuring under the G‑20 Common Framework agreement. This is another testament that, really, the IMF and the IMFC members are caring about low‑income countries. They care about those who face difficulties and shocks, and want to make sure that we are prepared and ready to support them, including through the G‑20's Common Framework.

Third, on the quota increase that we have agreed last October, members are underway to finalize their domestic approvals and committed to conclude this by November this year. So, I am glad that will be behind us. That will make the IMF better prepared to support its membership.

I think the last thing I wanted to say is, IMFC would succeed with cooperation, and what I have seen as a new Chair is a serious effort by all members‑‑no exceptions‑‑to make sure that the IMF is supported by its members, by its shareholders, and making sure that this is a platform where we discuss what matters for the world. So, thank you very much.

Ms. KOZACK: Thank you very much, Minister. I will now turn to the Managing Director.

Ms. GEORGIEVA: Thank you, Julie. And thank you very much, Minister Aljadaan, dear Mohammed.

I would like to express my gratitude that you have accepted to serve as the Chair in a difficult time for the world. And I have been impressed by how seriously you take your duty to reach out to members, to understand where they converge and where they may diverge and how we can help bring that unity.

I want to share with the journalists here that this is a Chair who also holds the functioning of the IMF tight. We had four meetings under his chairmanship. They all ended on the dot, on time. So, thank you for that.

Let me move toward what this particular meeting has been about.

What we want is a world where growth is stronger. Living standards are higher. And low‑income countries are not falling behind. And a world that is more resilient to the shocks that will continue to come. And our Spring Meetings focused on what exactly the IMF can be empowered to do for this world.

I am very pleased with the progress we have achieved in key areas. First, as we heard from the Minister, we agreed on policy priorities. In addition to the need to finish the job on inflation, we agreed on the critical importance of rebuilding fiscal policy buffers, reviving medium‑term growth prospects, and renewing our commitment to supporting our membership.

Second, the IMFC reinforced the Fund's important role in our low‑income countries, which have been the hardest hit by recent shocks. We have increased our concessional financing by fivefold since the pandemic, with 57 countries benefiting. And we are strongly committed to continue this support and agreed to explore all options to fund our Poverty Reduction and Growth Trust, including through use of internal resources.

Third, and the Min Minister spoke about that, we need to address the challenge of rising debt. Public debt and debt service are up across the world, but for some countries, this issue is particularly severe and pressing. To assist countries in debt distress, we held another productive meeting of the Global Sovereign Debt Roundtable, in partnership with the World Bank and with the co-chairmanship of the Brazil presidency. Our Minister of Saudi Arabia, he was the initiator of the Common Framework and is a very active participant in this roundtable. Thank you for that.

So, what practically are we coming up with? Good progress on comparability of treatment and on timeliness for debt restructuring cases. And I want to stress that our Board just endorsed reforms to make Fund support to countries undergoing debt restructuring smoother and speedier.

Fourth, the IMFC reaffirmed the critical importance of a financially strong IMF at the center of the global financial safety net. As you know, our members agreed to increase the permanent quota resources by 50 percent. And they are moving on domestic approval, which the Minister and I urged them to do faster, so it is completed by mid‑November this year. And as the Minister recognized, our own financial strength is reinforced with reaching our target for precautionary balances.

Fifth, we are committed to a diverse and inclusive institution, best equipped to serve the membership. And that means diverse staff and management, as well as adequate representation and voice of all our members. We will have, comes November 1, a third chair for sub‑Saharan Africa on our Board. And we are fully committed to deliver by June 2025, possible approaches as a guide for a further quota realignment.

We could not do any of this without the support of our members.

I want to take this opportunity to thank Finland and the United States for their recent generous commitments to the PRGT and also recognize new pledges to the RST from Ireland, Mauritius, The Netherlands, Switzerland, and the United Arab Emirates. Much work to follow on, but like the Minister said, I came out of the meeting really impressed by the ability of the membership to come together. And I am sure that we will build on today's momentum because the world needs that. Thank you.

Ms. KOZACK: Thank you very much, Minister and Managing Director. We will now turn to your questions. Please raise your hand to ask a question. Please remember to introduce yourself. And please keep your questions concise and limited to just one question so we can get to as many as possible in the short time we have today. So, let's start on this side, a gentleman with the glasses at the end of the first row.

QUESTIONER: Good morning. I would like to ask in Arabic.

[Through interpreter]

Good evening. Ahmed from Egypt. My question is to His Excellency Minister Mohammed Aljadaan. In light of the geopolitical events in the Middle East, in light of the Red Sea events, and in light of the reduction of growth rates in different countries of the world and the increase of inflation, what is your point of view in terms of the global economy in the coming period? And the second part of the question is about, through your being the Chair of the IMFC, at the beginning of this year, what are the main priorities for the IMFC in the coming period? And on the other hand, what are the main challenges facing us? Thank you.

Mr. ALJADAAN: Thank you very much. So hopefully you have heard the question. In summary, what is the outlook globally and are the priorities for the new chairman of the IMFC?

A few things. I think, one, we should just remember that if we were here two years ago‑‑and even one year ago, taking a look at what would happen this time, we would have been more pessimistic. Actually, what is happening now is a lot better than what we expected. The global economy is more resilient. Inflation is coming down in most countries. And generally we are heading to a very soft landing against what a lot of people have feared to be a very difficult situation.

That said, the world is not free of challenges. Geopolitical challenges‑‑you mentioned is one. This can have actually severe consequences if they are not managed. The low‑income countries are not evenly feeling the pain. Obviously, advanced economies and emerging markets are in a lot better position than low‑income countries. And basically, the focus is resilience. We need to make sure that we provide that support. The IMFC members will continue to look for ways to provide our low‑income country members with the support that is needed.

In relation to priorities, I mean, I don't have priorities as the Chair. It is the IMFC that decides priorities. I try to steer the discussion and work with members to make sure that we come up with what, collectively, we think the priorities are. But initially, in the short term, I think finalizing the quota is a key. Making sure that the PRGT's sustainability is concluded is another key. Looking at what should we do now that we have reached certain of our targets in terms of the access limits, surcharges - is another priority. But in the longer term, I think streamlining the work of the IMFC, focusing on strategies, and leaving the details to Management and, obviously, led by the Managing Director, I think that is key. Make sure that the IMFC, as the highest‑‑almost the highest governing body, focuses on strategies and looks at potential risks and gives recommendations to management.

Ms. KOZACK: Very good. Let's go to this side of the room. The woman right in the front in the tan blazer. Right here.

QUESTIONER: Hi. Good morning. Thank you for taking my question. Kemi Osukoya from the Africa Bazaar magazine. My question is on Africa. What’s your outlook for the sub‑Saharan Africa and what is your key advice to countries in the region to steer their economy in the right direction?

Ms. KOZACK: Managing Director, I will ask you to take that question.

Ms. GEORGIEVA: Thank you. With the global outlook turning more positive, we also see prospects for Africa improving. In sub‑Saharan Africa, last year, growth was 3.4 percent. For this year, we project 3.8 percent. For next year, 4 percent. Inflation, like in the rest of the world, is going down. It peaked at almost 10 percent. Now it is around 6 percent and continuing to slip down, to go downwards. It shows the maturity of central banks and the fact that investment in independence, in professionalism are paying off.

Fiscal consolidation. Not easy. But on the basis of being carefully moderated over the medium term and executed with attention to the vulnerable parts of the population is starting to also bring results. The median debt ratio has stabilized at around 60 percent, and this is really welcome news because, after 10 years of going up, up, up, we are finally seeing debt stabilizing, and in some countries going down.

Now, this is good, but not good enough because countries in sub‑Saharan Africa do face a funding squeeze. They do face high debt payments. Just one number to illustrate -- the debt payments, on average‑‑debt service payments on average, 12 percent of revenues, on average. They were‑‑this is more than double. They were around 5 percent a decade ago. And what is heart breaking is in some countries, debt payments are up to 20 percent of revenues. What does it mean? What could have gone for education, for health, for investment in infrastructure, in jobs, is being sucked away for debt service and we know that a big part of the reason is because interest rates are still quite high.

So, what does that translate into for the authorities in sub‑Saharan Africa? Well, first, we see that those that have worked to improve public finances, to clean the ground for investments, for private sector to come, they are doing better. When you have tax to revenue at 26 percent, like in Côte d'Ivoire, you can bear the debt service burden. When you have 12 percent tax‑to‑GDP, you cannot. So, a big part of our support for sub‑Saharan Africa is in domestic resource mobilization, improving the efficiency of public spending, and also helping countries to develop local capital markets. So, local savings can then gear growth prospects.

Second, the inflation problem is not solved. So don't take your eyes off the ball.

Third, Africa has so much to offer. Well, let me first say, when we talk about Africa, it's kind of misleading because there are so many Africas in Africa. But this is the continent with the most exciting opportunities for the future. Natural resources are abundant. A very youthful population that is eager to work. So, the more countries can do to make themselves more attractive, more trustworthy for investors, I am sure we will see capital from other places flowing into Africa. And our determination is to work for that optimistic prospect, to see the rich opportunities in Africa, captured for the benefit of the African people.

Ms. KOZACK: OK. Let's go to the center. I will take the woman in the white, right in the front row.

QUESTIONER: Thank you so much for taking my question. My name is Rachel, a journalist at 21st Century Business Herald, Guangdong, China.

So, in the context of transformative '20s, you mentioned a couple of times in your previous speech. So, what are the top priority recommendations that the IMF has for countries that are facing high debt burdens, as well as high inflationary pressures? Thank you.

Ms. KOZACK: Managing Director, I will ask you to take that one.

Ms. GEORGIEVA: Thank you. Well, first things first, if you want to have a strong dynamic economy, the foundation has to be strong. Make sure that the policies are robust, that tax policies are in place, fiscal policies are in place, starting from good taxation -- preferably one that allows the wealthier part of the population to pay their dues. And then, of course, high quality of spending.

And sound monetary policy in place. That takes us to proactively what countries can do.

In the world of today and tomorrow, the quality of human capital would matter tremendously. You cannot transform your economy if the skills base is from the 20th century, and I think the issue here is not just to have schools but to get people to learn how to learn over their lifetime. Agility in social support. If there is a need to shift from one place to another, there has to be that space and support to do it.

I often talk about social safety ropes.

Or my colleagues say, use the word ladder. So let's say ladder, social safety ladders -- that you help people to help themselves. What does it mean? Access to financing, access to credit. Ability to support the functioning of the economy. And that takes me in the next critical part -- digital, accessible digital infrastructure. And this, in today's and tomorrow's economies is going to be paramount. And then comes the green transition. It matters not only because, if we don't deal with the climate risks, we are cooked. But it matters because it offers tremendous opportunities for new sources of growth.

And the last piece of this transformative puzzle is fairness in society.

One thing that we know from analysis is that high inequality holds growth down. When you have lower inequality in society, then you have better chances for the economy to function in the higher end.

And, of course, there are things like natural resources. Saudi Arabia has plenty. But if you don't have human capital, conditions for investment, and the prerequisites for dynamism for the new economy, the digital, the green economy, then it is hard to transform.

I want to say the following.

I lived through a major structural transformation, when the former eastern bloc moved from centrally planned to market economies. Very impressive, because it unleashed the potential of entrepreneurship and productivity to grow. Today my country is eight times better off than it was in 1990 -- eight times increase of income per capita. But there were things that we didn't do right. Inequality in my country increased. It is now the most unequal country in the European Union. And desperation pushed many of the Bulgarian people to leave the country. Our population shrank. Bulgaria is now No. 1 in shrinking in the whole world. So, lessons from our experience, transformation that lifts up incomes but diminishes your potential to grow, erodes your human capital, erodes the trust in society, cannot be fully successful. So, thank you for your patience.

Ms. KOZACK: Certainly. We have time for one more question. I am going to go to the back, so the gentleman with the burgundy tie, fifth or sixth row.

QUESTIONER: Thank you. Bloomberg news. Given the news on Iran and Israel last night, how will this impact energy markets, and how will these geopolitical shocks impact world trade going forward? Thank you.

Ms. KOZACK: Minister.

Mr. ALJADAAN: I will be very brief. First of all, obviously, it is very unfortunate to see geopolitical tensions rising, and the members recognize‑‑and you will see it from the statement that was issued earlier -- that geopolitical tensions have negative consequences on the world economy. No doubt.

We also heard today from the Managing Director of the World Trade Organization that, while generally there is a negative impact from fragmentation resulting from geopolitics, there are also some beneficiaries, and a lot of emerging markets are actually benefiting, which is good, from the diversification of the supply chain. However, we need to be careful, and I think there is a general agreement among members that we can only resolve global issues through cooperation and through fora like the IMFC and the IMF that will provide the platform for a proper, constructive discussion to deal with these challenges. Thank you very much.

Ms. KOZACK: Thank you very much. This will bring to conclusion this press conference. Thank you so very much for joining us. As usual, the transcript will be made available later today on IMF.org. And please reach out to my team at media relations with any additional questions that you have, and we wish you all a wonderful weekend. Thank you again so much for joining us.

Ms. GEORGIEVA: Thank you.