Transcript

Transcript of Global Policy Agenda October 2024 Press Briefing

October 24, 2024

Moderator: Julie Kozack, Director, Communications Department, IMF

Speaker: Kristalina Georgieva, Managing Director, IMF

Ms. Kozack: Good morning, everyone. A very warm welcome to you this morning. Thank you for joining us for the Managing Director's Press Conference on her Global Policy Agenda. As usual, we will begin with some opening remarks from the Managing Director, and then we will turn to your questions. So, Kristalina, the floor is yours. This is Julie Kozack.            

Ms. Georgieva: Good morning. Good to see you so bright and early. As always, we meet to reflect on the Global Policy Agenda that we present to our members, and this year is not an exception, so here it is.

I want to start, though, this time from you, to recognize the important work you do in a world that is unfortunately marked by turbulence and war. It breaks my heart to see the conflicts in the Middle East, in Ukraine, around the world, and I only can imagine what it is for the people who live in these zones of conflict. And then when I was coming for this press conference, I realize that many of you, many of your colleagues covered these events, they are there. So, thank you for your hugely important work, and thank you for being today with us, with Julie and me. 

As you saw on Tuesday when we released our latest World Economic Outlook, the global economy has held up remarkably well. Inflation continues to decline, thanks to the concerted efforts of central banks, and also thanks to the ease in supply chain performance. Growth remained in positive territory and interest rates are going down. For most of the world, a soft landing is in sight. But people are not feeling good about their economic prospects. Everybody I ask here, how is your economy, the answer is good. How is the mood of your people, the answer is not so good. Families are still hurting from high prices and global growth is anemic.

We expect the global economy to grow by 3.2 percent year and slow to 3.1 annual growth in 5 years. This is the lowest medium‑term outlook in decades. And trade is no more a powerful engine of growth. We live in a more fragmented global economy. Meanwhile, public debt is on track to surpass $100 trillion this year, an all‑time high, an equivalent of 93 percent of global GDP. 

By 2030, we expect that figure to approach 100 percent of GDP. So here is the bottom line. The global economy is in danger of getting stuck on a low‑growth, high‑debt path. That means lower incomes and fewer jobs. It also means lower government revenues, so less investment to support families and fight long‑term challenges like climate change.

These are anxious times. With these problems in mind, we have just published our latest Global Policy Agenda. Here it is one more time if you have not seen it the first time around. And it is very straightforward. It focuses on two priorities, secure the soft landing, and break out of the low‑growth, high‑debt path. How can we do this?

First, ensure that inflation gets back to target everywhere. Major central banks, including in the U.S., have rightly embarked on an easing path. The trick now is to finish the job on inflation without unnecessarily damaging the job market. Second, now is the time to act on debt and deficits. After years of much‑needed fiscal support in response to shocks, now is the time to rebuild fiscal buffers. In most countries, that can be done gradually, but it needs to start now.

Third and most important, it is crucial that countries carry out pro‑growth reforms from cutting red tape to improving governance. We have seen reforms being a source of significant benefits across countries. Our analysis shows that these reforms can boost output by up to 8 percent over 4 years in developing countries.

As we tackle these challenges, it is also essential that we continue to cooperate on climate, technology, debt, trade. Climate change and technology are unleashing transformations to the global economy that require global response. Only by working together can we seize the opportunities and mitigate the risks of these great changes.

On debt, we are making progress under the G20 Common Framework to speed up debt restructurings. The Global Sovereign Debt Roundtable that met yesterday is helping to make the process more predictable and efficient, but we need to do more to help countries in debt distress get back on their feet faster.

Many of our members still face high interest rates and high debt servicing costs, not unsustainable debt, but significant liquidity problems. And this is why jointly with the World Bank we are proposing a three‑pillar response, combining reforms to boost growth and mobilize domestic resources, adequate financing, including from international financial institutions, and crowding in private finance.

Finally, on trade, it is important to protect the gains from economic integration while ensuring they are widely shared. We know that globalization has not delivered for everyone, and we must attend to the needs of those who have lost out, and at the same time we must ensure that trade remains an engine of global growth, especially for developing countries. They have so much more to lose if we fracture the global economy.

At the IMF, we are as always deeply committed to serving our members, so they navigate these challenging times. We will do so through our analysis and policy advice. It helps policymakers to understand the costs and benefits of policy choices. And we will continue to use our financial resources to act as a buffer for our members in need. 97 countries, highest in our history, have benefited from our lending since the pandemic, the majority through multiyear programs.

During the same period, our concessional loans have tripled. Interest in the Resilience and Sustainability Facility continues to grow. We have 20 countries now using the facility to enhance their climate resilience, almost double the number when we met a year ago. And there are many more expressing interest. And I want to mention three firsts.

In April, for the first time, we reached our precautionary balances target of about $30 billion. This safeguards the Fund's financial soundness. We use the strength of our balance sheet to help our borrowing members. In just the past weeks, our membership came together to support two historic reforms. For the first time we reduced our charges and surcharges. The cost of borrowing from our general resources will go down $1.2 billion annually. This is a 36 percent reduction in surcharges and in the margin of charges. And for the first time, we work with our membership to creatively deploy our net income to bolster the IMF support to low‑income countries. A comprehensive reform and financing package generating about $8 billion in additional subsidy resources for PRGT over the next 5 years, more than doubling the long‑term, self‑sustained lending envelope to $3.6 billion a year.

This is global cooperation and solidarity in action. And I want to end, as always, using very good quote to speak to my message today. This time it is Antoine de Saint‑Exupery. "As for the future, your task is not just to foresee it but to enable it." And this is what we are committed to do, enable a peaceful and prosperous future for our members.

As you will see, we are ready to take your questions. Julie is at the post to pick up from this group and those online.

Ms. Kozack: Thank you very much, Kristalina, for those remarks. We will now turn to your questions. Let us start in the middle, gentleman in the second row with the dark jacket, white shirt.

Question: Good morning, Kristalina. Thanks very much for taking my question. I was wondering, you have spoken in the past and today as well of your concern over trade fragmentation and its impact on the global economy. I was wondering, what do you make of the joint declaration adopted by the members of the BRICS group of countries in Kazan yesterday, calling for the creation of an independent payment system by the BRICS Bridge? How concerned are you about the fragmentation of the global payment system? Thank you.

Ms. Georgieva: The idea of having a payment system of a group of countries is not new. What we need to see is more details. What is it in this idea, how that may translate into reality, and then we will be able to assess it. But more broadly, what I recognize is that we have different members forming different groupings, but all members support the IMF.

Ms. Kozack: Let us go to this side. I will take the woman in the front in the pink jacket.

Question: Good morning. My question is, given the global nature of many challenges you just talked about, like high debt and a slowing economic growth rate, so how should countries work together to foster future economic growth rate, and, during this process, what role does the IMF have in facilitating this economic growth? Thank you.

Ms. Georgieva: We have ample evidence that when countries cooperate, everybody benefits. We also have ample evidence that when there is a higher uncertainty, the value of cooperation is higher. When the world fell in the terrible hands of the pandemic, we had enormous uncertainty, what is going to happen next. And at that time cooperation of our members within the IMF, cooperation of members in the G20, it has helped crystallize what are the right policies to take and then synchronize a global response. In that spirit, the IMF continues to do three things for our members, to nurture that spirit of cooperation. First, we perform our bilateral surveillance and multilateral surveillance function for the benefit of everyone so countries can get a second opinion on their economies, but they also can see their trajectory in comparison to others and identify policies that can work. In other words, we are a transmission line of good practices.

Two, we are there for countries that may face financial difficulties. And as I mentioned, we are at a record high level of lending because of the complexities of problems countries face. I highly recommend to all of you to go and see an art exhibition—piece of art in—

Ms. Kozack: It is in the red level gallery in this building.

Ms. Georgieva: Go to the red level gallery. It is very interesting. A group of students were asked how they can demonstrably present decades of delivery of the Fund, and they present our lending by having for each decade a column with bows inside. And each bow is 500 million SDRs. So, you look at the columns, the first one, a couple of bows, the next one, some more, and then you go to the last one and it is actually breathtaking. I looked at it and I said, oh, my god, I am so glad the Fund is there, because that financial support is critical for countries.

And three, we are an institution that innovates and shares innovations with our members. One innovation is the Resilience and Sustainability Trust, but we have throughout our history, we have done many, and then we, of course, pass the benefit to our members.

Whenever we have these meetings now, previous meetings, what impresses me is how serious the discussion on the topics of the day is among Finance Ministers and Central Bank Governors. And I am very proud we host these discussions.

Ms. Kozack: Let us go to this side of the room. I am going to go all the way in the back, the woman in white in the back on the right there.

Question: Thank you. Latin America is facing low to medium‑term growth, which is one of the issues being discussed by the G20 in Brazil. What are your views on the Latin America economy, how can it address this issue, and which are the main challenges for the region apart from this? Thank you.

Ms. Georgieva: You are right, Latin America faces, not different from the whole world, by the way, it faces a disappointing growth path. Growth is moderating. And that means that Latin America needs to concentrate on how that growth trajectory can be lifted. We have been discussing the key reforms, growth enhancing reforms that can be undertaken by countries. I also want to recognize that Latin America is not a unified place because if you look at the Caribbean or Central America, they are actually doing better. Their performance is better than the global average. And when you look into the reason why they are doing better, well, because they have taken seriously the need to trim down debt. You take a country like Barbados or Jamaica; reforms are bringing results. And because they have taken to heart the significance of governance and engaging the public to pursue reforms.      

So, when I think of Latin America and the big economies in Latin America, it is time to do the same thing, have the ambition to reform in a pro‑growth direction. And what is encouraging is that I hear that countries recognize that.

Ms. Kozack: Let us go back to the middle. I am going to take the gentleman in the third row here on the very end.

Question: While the IMF continues to support economies, the 2024 World Development Report is indicating that 74 out of 108 countries are still trapped in the lower to middle‑income level. What are the significant initiatives that the Fund is undertaking to ensure that these countries are uplifted into upper‑middle‑income countries, and what will be the impact on the world?

Ms. Georgieva: We have seen through history how countries break out of this middle‑income trap. And it is a combination of four things, invest in education, in people, in human capital, invest in infrastructure. These days digital infrastructure is hugely important. It has to be equitable. Invest in governance, rule of law, transparency, and accountability to the public, and cooperate. Learn from others, engage with others. And I think this is where countries need to go.

We have learned a lot about growth‑enhancing reforms. We actually know, we have studied how they succeed. And they actually can lift our—analysis shows that growth‑enhancing reforms can lift up the growth trajectory significantly up to, as I mentioned, up to 8 percent. So it is that determination and engaging the public, creating public support that brings results.

I always like to give the example of Jamaica because Jamaica was a country 10, 12 years ago, it was a country with very high debt, a lot of crime. People were kind of desperate for their future. Well, they brought that down by half and they moved the country in a very positive growth trajectory by that holistic approach to development.

So basically, for low‑income countries, this is not given that you cannot break out of it, but it does require a comprehensive program of reforms. It does require consistency of implementing these reforms. And it does require bringing public support for it.

And what we do, what we do at the Fund is to work with countries to identify that pathway country by country, country‑specific directions of reforms that can help achieve that result.

Ms. Kozack: I am going to go now to this side of the room. I am going to go to the gentleman in the tan jacket kind of—yes, right there.

Question: My question is: what is the impact of the geopolitical tensions and the Gaza conflict on the region, especially or particularly on the neighboring countries; and Egypt is currently implementing the current economic reform program amid very difficult regional and international difficulties, and very strict circumstances. And so, the IMF at this point of time is burdening the Egyptian people because of the strict timetable of reforms and decline of the Suez Canal revenues by US$6 billion, and uncertainty about the future of the Egyptian global economy. So, did the Egyptian authorities discuss the review of the current economic reform program with the International Monetary Fund? Thank you.

Ms. Georgieva: I started today, my comments, thinking about the people affected by conflicts. And, of course, in the Middle East, this is an ever-increasing number of people. Tragedy that is personal, but it is also for the economies in the region. We have seen in the epicenter of the conflict very dramatic contraction in Gaza, West Bank, Lebanon, very significantly impacted. We also have seen some spillover to other economies. And you mentioned Egypt. Egypt is negatively impacted. Egypt is losing 70 percent of the revenues it used to collect from the Suez Canal because of the impact of the conflict, because of the Houthi attacks, because of the difficulties.

MENA as a whole is seeing growth projections revised significantly downward—0.6 percent downward revision from April to now. Now we project only 2.1 percent growth. And a big reason for this downgrade is the conflict.

And Egypt is bearing a very significant cost of what is happening in the neighborhood, plus the conflict in Sudan. Egypt is hosting, if I am not wrong, some 9 million people from the instability in the region. We have been standing firmly with Egypt. We had a program, $3 billion program; because of all these increased pressures on Egypt, we have augmented significantly the program. We increased it by $5 billion.

We have been very attentive to what are the right measures but let me say this. Egypt is better served by undertaking reforms sooner rather than later. In fact, there has been some delay in the past of actions, and that makes the cost higher. And that cost ultimately falls on the shoulders of people.

I will go to Egypt in about 10 days exactly for this reason. I would like to see for myself what is happening in the country. I want to hear what the views are. And we will look into the support of the Fund from the perspective of what is best for the country.

We have been very open to adjust the Egyptian program or any other program to what is best to serve people. But let me say that we are not going to do our job for the country and for the people of the country if we pretend that action that needs to be taken can be foregone, because the only thing that happens is the price of this action goes up. My deepest, deepest sympathy to everyone in the Middle East, and my heartfelt friendship to people there, so I look forward to visiting Egypt.

Ms. Kozack: Let us go right here in the middle, a woman in the beige blazer.

Question: So, I mention, Managing Director Georgieva, whenever you ask about the Chinese economy, the Chinese authorities said that it is facing a complicated external environment and challenges at home, and the government has recently rolled out a number of new measures to boost the economy. I wonder whether you think such measures would be sufficient to help the government reach its growth target. Thank you.

Ms. Georgieva: Thank you for your question. We will have to carefully assess the measures to be able to determine what exactly is their likely impact. What I can say is twofold. One, that there are measures that go in the right direction. The Chinese economy has been slowing down, and we were projecting—we are projecting today growth to grow by 4.8 percent in 2024, 4.5 percent in 2025. We need to see this package of measures, what is the likely to be the impact of it.

My second point is that China for quite some time has been faced with a fork on the road, continue with the export‑led growth policies or boost domestic consumption and shift the growth engine to the Chinese consumer.

We are on the view that as the Chinese economy has grown so big, it is the latter domestic consumption that is the reliable source of growth. We also have been keen to see China recognizing that in the short term, one big obstacle to consumer confidence is in the property sector, and a decisive action to resolve that would help lift up consumer confidence. But when you look at the potential for domestic consumption, by having social security and pension reform that gives people confidence that they do not need to save excessively, they can rely on the system. That would mean that they spend more.

Taking the sectors of the economy that are somewhat less‑developed from a consumer standpoint, like healthcare, education, elderly care, making services more of a driver for growth, that would help of course. And China is—I am sure the leadership in China is looking into these choices. As I said, we will have a chance to assess the measures that are proposed more thoroughly. If China does not move, growth can slow down to way below 4 percent. It is in the interest of China to take decisive action and implement what has actually been promoted the deal circulation economy. Let me stop here.

Ms. Kozack: I am going to go to this side of the room. We have a woman in the light blue, kind of in the middle.

Question: We heard a lot of what policymakers should do in the first, second and third day, right, but I am questioning what is the most important thing that policymakers in developing countries like Southeast Asia, including Thailand, should do to advance growth and stabilization because we face a lot of challenges, trade, war, climate change, AI, or even high debt, not only sovereign debt but also consumption debt because sometimes each policy conflicts each other. And moreover, as Thailand will be hurt, the IMF, so my question is what are your recommendations and expectations?

Ms. Georgieva: Thank you for your question. Thailand, one of the countries in the ASEAN, is enjoying a good economic performance, and overall ASEAN has been a bright spot on somewhat gloomy global economic horizon. ASEAN is outperforming the world. And the foundation for outperforming the world is twofold. It is in a strong policy sense, strong institutions, good macroeconomic foundation, and it is in the export‑oriented policies that countries have pursued.

With global growth slowing down, what we observe is that actually ASEAN is outperforming trade in the rest of the world. And they are outperforming because ASEAN has been working on deepening the trade links within ASEAN countries and also by working very actively in a world of more fragmentation to retain trade relations with everybody. In fact, what we are observing is that economies that have chosen not to be a part of any emerging block but to trade across have on the whole better performance.

When we look at the future, ASEAN needs to take on seriously the importance of structural reforms that would position the ASEAN countries even better in a world of fast‑changing technologies, in a world of climate change. This is one source of vulnerability for ASEAN, highly vulnerable to climate shocks countries, but it can also be a source of strength if investing in adaptation and in the climate, transition is pursued collectively.

I am impressed by the buildup of cooperation within ASEAN. Every ASEAN Summit is more substantive and more engaging, more effective than the previous one, so I wish the ASEAN countries all the success. This is the right path, cooperate.

As for Thailand, so I am going to ask your colleagues here, who wants to go to Bangkok for Annual Meetings? Raise your hands. Anybody wants to go to Thailand? Everybody wants to go to Thailand. Thailand actually has a fantastic track record because you hosted the Annual Meetings in 1991. We all very much look forward to coming there. The Thai people are so hospitable. The Thai authorities are so keen to make the meetings a success for the global community, they are already thinking of selecting a team for the meeting that could have a lasting impact, that we would carry forward as a global community. I myself look forward to coming to Bangkok. So does Julie.

Ms. Kozack: Absolutely. We have time for one final question. I am going to take the gentleman right in the middle, gray jacket, white shirt. Right up here.

Question: Recently the IMF approved the fifth review of the EFF arrangement for Ukraine. That means consistent implementation of the benchmarks by the country, including tough reforms. At the same time, the IMF on this course—and I quote—"That Ukraine needs decisive domestic revenue mobilization." What does the Fund expect in this context? And does it mean new changes in the tax policy in the country in conditions of the war? Thank you.       

Ms. Georgieva: Thank you. The Ukrainian people have shown incredible bravery, and the Ukrainian authorities have done an amazing job to steer the economy during a war very effectively. Performance of Ukraine is remarkable. We have looked into the—during the fifth review, all benchmarks in the program are met. Very important, actions that are around strengthening governance, fight against corruption. We all know that the war is a fertile ground for corruption, therefore more needs to be done in that area, and Ukraine is doing it.

We have completed the fifth review in exceptionally difficult circumstances. Just to remind everybody, over the last months, Russia has intensified bombing in Ukraine, indiscriminatory bombing, but there is one particular target, the electricity infrastructure. Just imagine what it means for families and businesses, they face winter and there would be restrictions in access to electricity to heat. And yet the determination of the country is there.

The program is based on very firm ownership of Ukraine, and that goes into the direction of domestic revenue mobilization. Why is this important? Because we have a program that is strongly supported by the international community. In fact, we look at something in the order of $150 billion support over the 4 years of our program. And that the Ukrainian authorities recognize has to be matched by the will of Ukraine to raise revenues as well. For that reason, we have been discussing the implementation of the Ukrainian strategy for domestic revenue mobilization, and that includes also looking at the way the tax system works, taxes are collected. We are very much in favor of what Ukraine is doing, which is use technology to make taxes transparent so you can see who is paying how much, and then you can see what the money is used for, accountability to the taxpayer, but that is the context, that needs have gone up, financial support from Ukraine's friends has gone up, and what Ukraine is doing is saying, we will do our part. We know it is now harder, we will do our part as well.

Ms. Kozack: So, with that, I do need to wrap up this press briefing. I thank you very much for joining us.

Ms. Georgieva: I want to go to the question on Latin America because I told you there are differences. You saw me flipping in my papers. I wanted to see the differences within Latin America. So, you look at the Caribbean region only, and you have growth, 2023, 7.5; 2024, 11.9. These are very big numbers of growth performance. Guyana there is the exception, but overall, they are doing very well.

When you look at the Latin America and the Caribbean as a whole, much lower. We have, in 2023, 2.6 percent; in 2024, 2.6 percent growth. This is not enough to lift the performance of the Latin American economies. That is why this issue of pro‑growth reforms is so important. Ok. Now we are done.

Ms. Kozack: Now with that, I bring it to an end. I do invite you to please join us tomorrow. 1