Speech: Brothers and Sisters, There is Much to Do by Christine Lagarde, IMF Managing Director
IMF News, October 9, 2015
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- Authors: Christine Lagarde
- Published: October 9, 2015
Introduction
- Delivered at the 2015 IMF-World Bank Annual Meetings Plenary, Lima, Peru, October 9, 2015.
- Themes: changing global landscape, changing Latin America, and a changing IMF—framed as a call to action: “Hay, hermanos, muchísimo que hacer.”
The Changing Global Landscape
- Key observations:
- Global growth projected at 3.1 percent this year, compared to 3.4 percent last year, with a modest acceleration to 3.6 percent in 2016.
- Transition risks include China’s shift to a new growth model and the expected shift in U.S. monetary policy.
- Spillovers affect trade, exchange rates, asset markets, and capital flows; commodity-dependent emerging market and low-income countries are particularly vulnerable.
- Major long-run “Nazca Lines” shaping the future:
- Climate change: integrate implications into macroeconomic frameworks.
- Energy pricing: IMF projects global energy subsidies at $5.3 trillion for 2015, or 6.5 percent of GDP; recommendation to eliminate subsidies while energy prices are low.
- Innovative technology: global commitment under the Sustainable Development Goals (SDGs) to make the internet available to all by 2020, with potential to expand access to education, healthcare information, and financial services.
- Migration: urgent action needed to address refugee crises; IMF will provide economic analysis and fiscal support (examples cited: Iraq and Jordan).
- Demographic change: large youth cohorts in some regions (e.g., Middle East: a third of the population aged between 15 and 29) and shrinking working-age populations in advanced economies.
- Gender inclusion: IMF research indicates a one percentage point increase in the income share of the poorest 20 percent can lift growth by about 0.4 percentage points; empowering women is a major factor to mitigate demographic constraints and boost entrepreneurship.
- Role of emerging economies:
- Emerging economies accounted for almost 80 percent of global growth over the past five years and now generate more than half of global output.
- Policy upgrade recommendations:
- Central banks in advanced economies should consider spillover risks from their policy decisions.
- Emerging economies should address corporate leverage and foreign debt buildups.
- Restarting global trade (reference to TPP) as a way to boost resilience.
The Changing Latin America
- Regional context:
- Latin America has adopted more robust policy frameworks and used counter-cyclical measures during the global financial crisis, yielding strong growth, low inflation, and social progress (declines in income inequality and poverty over more than a decade).
- The region is diverse and faces new challenges: falling commodity prices, anticipated rise in U.S. interest rates, and volatile capital flows.
- Policy priorities:
- Strengthen policy frameworks to buffer shocks: use fiscal policy responsibly to put rising public debt back on a sustainable path; use monetary policy wisely; shrink large current account deficits.
- Monitor corporate foreign currency exposures and bolster bank resilience to reduce downside risks.
- Press ahead with structural reforms to diversify economies and boost inclusive growth.
- Inclusion and inequality:
- Greater inclusion is essential; Latin America remains the world’s most unequal region.
- Specific example: the potential of indigenous populations highlighted via the “Haku Wiñay—My Enterprising Small Farm” program.
- Natural resources and governance:
- Natural resources can transform the region if managed with respect for affected communities, rule of law, transparency, and governance.
- Infrastructure investment:
- Infrastructure is highlighted as a key avenue to interconnect regions and boost competitiveness and inclusion (evocative student essay vision for Peru in 2025).
The Changing IMF
- Vision and strategic objectives: AIM — agility, integration, and member-focus.
- Agility:
- Ebola response: provided debt relief and financial support worth more than $400 million, delivering “cash in the bank” quickly.
- Support for SDGs: increasing access to concessional loan facilities by 50 percent and maintaining zero interest rate for countries facing major shocks and disasters.
- Institutional shift toward exploring innovative approaches rather than “this is not how we used to do it.”
- Integration:
- Increase macro-financial focus and analysis of cross-border spillovers (examples: planned stronger macro-financial emphasis in upcoming Article IV reports for Mexico, Brazil, and Canada).
- Commit to stronger emphasis on financial inclusion, inequality, gender, and climate change—focusing on macro-critical aspects and complementing partner institutions like the World Bank.
- Member-focus:
- Capacity building: provided support to 125 countries in the past six months.
- Expand scope and reach of online tools for training and technical assistance.
- Emphasize servicing low-income members and better mobilizing domestic revenues.
- Strengthen knowledge management to disseminate best practices.
- Institutional tone:
- Emphasis on staff capabilities and Executive Directors’ collective role in serving 188 member countries.
- Call for renewed multilateralism combining civil society, think tanks, unions, and reinvigorated international institutions.
Conclusion
- Call to action directed to youth and citizens: examples of young contributors (student essay, photo contest winners) embody confidence and inspire action.
- Reiteration of the central message: “Brothers and sisters, hermanos y hermanas—yes, together we can do it!”
Speech: Brothers and Sisters, There is Much to Do by Christine Lagarde, IMF Managing Director (2015 IMF-World Bank Annual Meetings Plenary, Lima, Peru, October 9, 2015).