Transcript of International Monetary Fund Managing Director Christine Lagarde's Opening Press Conference, 2019 Spring Meetings

April 11, 2019


Christine Lagarde, Managing Director, IMF

David Lipton, First Deputy Managing Director, IMF

Gerry Rice, Director, Communications Department, IMF

Mr. Rice - Good morning, everyone, and welcome to these Spring Meetings. It is lovely to see everybody here this morning. We are delighted to have with us this morning the Managing Director of the IMF, Madame Christine Lagarde. We also have the First Deputy Managing Director of the IMF, David Lipton.

I think you all have received the Managing Director's Global Policy Agenda. I will ask you this morning to be brief in your questions. Please stick to one question and identify yourself by name and affiliation. We will try to take as many questions as we can. With that, I would like to ask Madame Lagarde to make a few opening remarks.

Madame Lagarde - Thank you very much, Gerry. And good morning to all of you. Welcome to the 2019 Spring Meetings.

I would like, first of all, to congratulate David Malpass, who was with you a moment ago, who has just been appointed, elected, President of the World Bank. And we all look forward to continuing the good cooperation that we have had within the institutions, focusing on our respective goals.

Before I turn to a few words about the global outlook, I would like to just express, on behalf of the institution, our heartfelt condolences to the three countries that have been mostly hit by the recent cyclone Idai, Mozambique, Zimbabwe, Malawi. And I can tell you that the Government of Mozambique has submitted a request for the Rapid Credit Facility, which provides speedy access to concessional financing from the Fund. And we are moving forward as quickly as we can. It will not be pledges. It will not be promises. It will be prompt payment as soon as the Board has approved it.

I am also pleased to tell you that yesterday, our staff mission team announced that they have reached agreement with the Zimbabwean government on a new Staff‑Monitored Program, which will help them address deep economic problems and provide an important stepping stone to a more stable situation.

So with that, I would like to make a couple of comments on the global economic outlook that you have received a couple of days ago. And many of you have attended the press conference, organized under leadership of our new chief economist, Gita Gopinath. And I would like to also comment very briefly on our work going forward.

I was reminded by my staff of a lovely line by Mark Twain. Bear with me: “In the spring, I have counted 136 different kinds of weather inside of 24 hours.” I am not suggesting that the global economy is going through the 136 different iterations, from synchronized growth, to synchronized slowdown; but it feels a little bit like that at this point in time. And this uncertainty in nature that, by the way, will be commented upon by Sir David Attenborough at 12 noon, a moment that I encourage you to attend, where he will talk about not just the beauty, but the peril of nature and how much damage is inflicted upon nature.

But just like nature, the global economy is also currently quite uncertain. As I said a year ago, we were talking about synchronized growth. And 75 percent of the global economy was going through that phase. As you heard a couple of days ago, we are now talking about a synchronized slowdown by 70 percent of the global economy. So our forecast for growth this year is 3.3 percent, going back up, we hope, in 2020, based on our forecast, to 3.6 percent. But we contend that we are at a delicate moment. And this expected rebound, from 3.3 in 2019 to 3.6 in 2020, is precarious and is subject to downside risks, ranging from unresolved trade tensions, high debt in some sectors and countries, both public and corporate, to the risk of weaker‑than‑expected growth in some stressed economies, and, of course, the consequences of whatever Brexit will be.

So, in terms of policy recommendations, what can be done about this moment of uncertainty and precarious possible pickup?

I would suggest not a single policy but multiple policies, because it will have to be country‑specific, and there is no one‑size‑fits‑all. But we certainly would recommend two key principles. One is, do no harm. Second, do the right thing. So do no harm. The key is to avoid the wrong policies, and this is especially the case for trade.

We know that, for many decades, trade integration has helped boost productivity, innovation, growth, employment, and has reduced the cost of living, particularly for the low‑income people. At the same time, we know that the engine of growth needs to be fixed. We need to better address dislocations caused by trade and by technological innovation, however intertwined they are. And we need to do more for those who are left behind. We need to better address unfair trade practices and distortions in the system, including through a WTO system reform. And we need to avoid self‑inflicted wounds, including tariffs and other barriers. So that was for the do no harm.

Do the right thing. I would mention a few. First of all, when I said a year ago: The sun is shining, fix the room. Well, “fix the roof” is still needed. And there are still many reforms that are outstanding and should be the focus of policymakers because it would help boost potential output to prevent disappointing long‑term growth in advanced economies, and it would help developing countries catch up with their wealthier peers, which is a process that we see slowing down at the moment.

Second, create more room in order to resist the next crisis when the downturn comes. And that means enhancing resilience by making smarter use of fiscal policy and by strengthening financial sector policies and discipline.

So, the third one. Fix the roof, create more space for when the next downturn comes up, and tackle issues that have a high potential to boost not only revenue but also growth and inclusion. And such issues have been the focus of particular chapters in our publications in the last couple of days. They include reforming the international taxation system ‑‑ in particular, corporate taxation, which is the focus of our publication ‑‑ strengthening competition framework, and, above all ‑‑ and this is going to be a lot of work in the months to come for us ‑‑ fight corruption at both ends, supply and demand.

And in all of these efforts, we need stronger international cooperation. We need those policymakers who I would call “the women and the men for all seasons,” in order to resist that uncertainty that we have at the moment. And in I will quote Shakespeare now, in order to deal with the “uncertain glory of this April day.”

So with that, you have seen our Global Policy Agenda for 2019. And this is what I would like to finish with.

If you look at it carefully, it is much longer than what we normally do in the spring. In the spring, we do a GPA update, a Global Policy Agenda update, and the longer version of it is at the Annual Meetings. This one is longer because we tried to focus on the various layers of what I have called this “new multilateralism” that we are calling for, which has domestic implications, cross‑border implications, and an international cooperation imperative, with a strong focus on the people.

You will see that we are going to look at many of our policies, our guidelines, our methods, our operations in order to provide, in the next decade, the best possible services for the membership.

We are looking at our Debt Sustainability Analysis. We are looking at our conditionalities. We are looking at improving our low‑income country facilities. We are looking at a more comprehensive surveillance so that we can harness the benefits of technologies, best practices in all countries around the world, in order to provide the services that are expected by the membership.

Those are only some examples of the major work that we are anticipating in the months to come. And it is an investment that will deliver fruit in the next many years, we hope. Thank you very much.

Mr. Rice - Thank you very much, Madame Lagarde.

Let's begin with the questions. I want to start in the front row over here. Yes, CCTV. Thank you.

QUESTION - Thank you very much. Madame Lagarde, my question is to you. Good morning.

Madame Lagarde - Good morning.

QUESTION - How concerned are you that it looks like politics is playing an increasing role in contributing to global policy uncertainties? By politics, I mean both domestic politics and global geopolitical rivalries.

Also, could you, secondly, comment on China's recent stimulus measures? Thank you.

Madame Lagarde - Many of you know me. I try to look at the half full glass, not the half empty. And what should give us hope and what should renew our energy is the fact that many of the risks that I have mentioned, many of the clouds on the horizon can actually be addressed effectively and positively, precisely by politics at home and by international cooperation at the international levels. So it is a question of what people want in order to fix some of those issues.

So I am more concerned about making sure that the facts, the numbers, the interconnection between policies and consequences are actually properly documented and evidenced. And that is where I see that we have a role to play.

On the Chinese stimulus, as you know, our forecast for growth is 6.3 [percent] this year, 6.1 [percent] next year, a regular anticipated slight moderation year after year, as we have observed it, and certainly, a shift towards quality growth.

The recent stimulus that was decided by the Chinese authorities, actually, as it is, as it stands, has been welcomed. And we thought that it was the right approach under the circumstances. And it goes together with those fundamental policies that have been enacted now for semesters after semesters of keeping the credit mechanisms and flow under control in order to rein in excessive investment.

Mr. Rice - Thank you. Staying over on the right, in the second row. Financial Times, please.

QUESTION - Madame Lagarde, you used language like the global economy is at a delicate moment. The recovery is precarious.

Financial markets are seeing this more as something that was happening last year and that a lot of the risks have dissipated this year. Do you think financial markets are now complacent?

Madame Lagarde - Well, we see the financial markets as having taken a lot of energy out of the change of monetary policy ‑‑ change of monetary policy as broadcasted in a clear communication and on the basis of data by quite a few central banks, including the Fed, including the ECB {European Central Bank], including the Bank of England, and a few others. So they have taken comfort from that change of monetary policy. And they are probably pricing in, as well, a few of those man‑made solutions that we all hope for, including possibly on the trade tension front.

Mr. Rice - OK. Thank you very much. I am going to swing around here and take the lady on the left here. I think it is Russia, is it not?

Madame Lagarde - We cannot see you very well because it is all dark.

QUESTION - I am in the red.

Madame Lagarde - Well done.

QUESTION - Thank you so much.

First of all, thank you for doing this. I am with Russian News Agency.

And the IMF did not change the forecast for Russia. And by using your words, why? Is it a bright future or still cloudy? Thank you.

Madame Lagarde - Well, certainly, spring is in the air, and winter is not coming, right? In terms of the calendar.

I think we have slightly downgraded both for 2019 and 2020 ‑‑ not a lot, but we have downgraded relative to our previous forecast for Russia, as we have for many other countries. You know, we cannot have 70 percent of the global economy decelerating without having a relatively widespread downgrade across the spectrum of countries. And just like for many other countries, we have Russia going up a bit in 2020 because we believe that it will benefit from that same momentum.

But the fiscal, monetary, and, generally, the macro situation of Russia is pretty healthy when you look at numbers, whether it is debt, current account surplus, fiscal surplus, and what have you. We still think that more in‑depth structural reforms are needed in order to make sure that the growth potential of Russia is increased because, you know, with 1.6, 1.7 [percent] growth, Russia is not, you know, moving very high in terms of GDP.

Mr. Rice - Thank you. I am staying over here. And we are still in the dark but with the lady in white.

QUESTION - (Inaudible) … right now, risk for the global economy and for the eurozone. So I would like to ask you, what urgent measures the Italian Government should undertake right now? And at the same time, you know that the Italian Government would like to cut taxes, if this could be part of the solution, according to you, or not? Thank you.

Madame Lagarde - Well, first of all, I am reassured by a process that has taken place in the banking sector and, I think, under the leadership of the central bank, the fact that the nonperforming loans' volume is gradually declining and more so than is reported. So I am pleased to say that. There is more work to do. But, certainly, the work has started, and there is a real decline, which is necessary in order to strengthen the banking system.

On the fiscal front, we read the statements. We appreciate the intention. I think what is really needed is some identifiable, measurable, credible measures that will deliver on the intention of the authorities. You know, we like to see hard real measures and understand exactly how they can be measured against the intentions.

Mr. Rice - OK. I want to take an Africa Question. Nigeria here in the front, please. Thank you.

QUESTION - Thank you. Madame Lagarde, good morning.

In your recent staff Article IV consultation report on Nigeria, one of the recommendations was that the fuel subsidy should be removed. For us, it is a very sensitive issue because we think that at the present rate, the subsidy ‑‑ it made the price too high. So why would you recommend the removal of the subsidy from the fuel price? Thank you.

Madame Lagarde - I will give you the general principle. For various reasons ‑‑ and as a general principle ‑‑ we believe that removing fossil fuel subsidies is the right way to go.

If you look at our numbers from 2015, it is no less than about $5.2 trillion that are spent on fuel subsidies and the consequences thereof. And the Fiscal Affairs Department has actually identified, you know, how much would have been saved fiscally but also in terms of human life, if there had been the right price on carbon emission as of 2015. The numbers are quite staggering.

If that was to happen, then there would be more public spending available to build hospitals, to build roads, to build schools, and to support education and health for the people.

Now, how this is done is more complicated because there has to be a social protection safety net that is in place so that the most exposed in the population do not take the brunt of the removal of subsidies principle. So that is the position we take.

I would add as a footnote, as far as Nigeria is concerned, that with the low revenue mobilization that exists in the country in terms of tax-to-GDP, Nigeria is amongst the lowest. A real effort has to be done in order to maintain a good public finance situation for the country and in order to direct investment towards health, education, and infrastructure.

Mr. Rice - Thank you, Madame Lagarde. I am going to take The Times of London. Thank you.

QUESTION - Good morning, Madame Lagarde.

The inevitable Brexit question: we have just had a six‑month extension given to the U.K. by the EU, or agreed by both bodies. I just wondered if you thought that this is a great relief both for the U.K. and Europe, or whether you are concerned that all this does is kick the can down the road, it just prolongs uncertainty and that it does not really resolve the whole issue?

Madame Lagarde - Well, again, having my positive hat on, it removes the risk of the no‑deal Brexit on April 12, which was one of the options that was considered. So at least the U.K. is not leaving on the 12th of April without a deal.

On the other hand, it gives time for continued discussions between the various parties involved in the U.K. It probably gives time to the economic agents to better prepare for all options. And, you know, I am particularly thinking of the industrialists and the workers in the U.K. in order to try to secure their future, that that gives a bit more time.

On the other hand, it is obvious that it is continued uncertainty. And it does not resolve, other than by postponing what would have been a terrible outcome because we believe that, in terms of economic consequences, the no‑deal Brexit would have been a terrible outcome.

Mr. Rice - Thank you, Madame Lagarde. I think there is a question from Egypt. Yes, ma'am.

QUESTION - First of all, thank you for this conference. And you all know that Egypt has an Extended Fund Facility from the IMF. So I need your opinion or your comments regarding the Egyptian status, the situation in Egypt now, and your evaluation according to the program.

And the second question is, do you think that Egypt needs a [new] Fund program? Thank you.

Madame Lagarde - You know, Egypt has delivered under its program. And I think that what is remarkable is that there has been real ownership on the part of the Egyptian people, who have made huge sacrifices in order to restore a more stable situation and in order to align the Egyptian pound, for instance, with what we regarded and what the markets regarded as its real value, relative to the economy.

We are getting close to the end of that program. And we very much hope that the next review, yet to come, will be completed satisfactorily. I have received assurances from President el‑Sisi, as you know, whom I saw earlier this week with David Lipton, that they will stay committed in order to complete the program, in order to deliver on their commitment. And I have assured him that we remain available to continue to help going forward in order to maintain stability and in order to make sure that growth continues to support the Egyptian economy, to create jobs.

I have raised specifically the issue of the entrepreneurship of young people and how they need a space and the freedom to operate in order to contribute to the economic developments in Egypt. And he has offered that we help in that respect as much as we can.

Mr. Rice - Thank you. I will swing back around but staying with the MENA region. I think it is Tunisia in the front row.

QUESTION - [Through interpreter] An IMF mission has just come back from Tunisia. What were its conclusions? What will be the follow‑up? And what message would you like to deliver to Tunisia?

Madame Lagarde - [Through interpreter] The mission has just come back, and the Tunisian authorities have just arrived. So the work is ongoing.

I read the report from the team. There are some specific points that remain to be mentioned, such as pricing. Discussions will continue and will be finalized in the days ahead so that we can complete the Tunisian program. Thank you very much.

Mr. Rice - Bloomberg, please.

QUESTION - I am just wondering to what extent you are concerned about sort of this addiction that the global economy has and policymakers have to monetary policy stimulus.

It seems that, you know, markets were selling off very sharply in December. Then we got a pause in central banks across the board, including the Fed. We are seeing in the U.S. more pressure on the Fed to cut rates. To what extent do you think the world is looking too much to central banks at this point?

Madame Lagarde - We have repeatedly said that policies should use all the tools in the toolbox and that that should be done by the respective authorities in charge of those tools.

In our fiscal recommendation, we strongly urge many countries ‑‑ not all, but many countries ‑‑ to rebuild their fiscal buffers. That is certainly the case with many of the developing countries. It is the case in ‑‑ as I said, in many countries, not all. Those that are in a situation of fiscal surplus at the moment should certainly make use of it and have the space to invest and to participate in the economic development and growth. But not enough has been done on that front, and that is what markets are seeing. So they expect that the only tool in town, if you will, is going to be, for a long period, monetary policies. And as we have said as well, monetary policy has been extremely efficient but has also not run its course but has, as we stand now in many countries, very low interest rates and not much room to maneuver unless they were going to explore yet again more traveling into negative territory. And their balance sheets are quite large. So our recommendation to monetary authorities is: Please stay accommodating for many of you. Facilitate the fiscal measures that need to be taken.

Mr. Rice - Thank you, MD. Just behind Bloomberg is Reuters.

QUESTION - Good morning. Bonjour.

I would like to ask you about your thinking and the thinking of the [Fund’s] shareholders on Venezuela. It has been a long time that you have been considering what to do and have been waiting for some clarity there. What kind of changes from the situation now do you need to see in order to recognize Juan Guaidó as the leader of that country and to really start to get involved financially? Thank you.

Madame Lagarde - Well, let me say, first of all, that we are really very, very concerned about the humanitarian crisis that is unfolding in front of our eyes in Venezuela. And although we do not have information from the field in Venezuela ‑‑ because we are persona non grata and have been for the last 15 years or so ‑‑ but we hear enough from our Colombian colleagues and friends and from others in the region who are on the receiving end of that flow of refugees out of Venezuela. So this is a very high concern for us. Point number one.

Point number two. In terms of membership, we are guided by our membership. So it is for our members to indicate which authority they are recognizing diplomatically so that we can then follow through. This is the way it has always worked at the IMF. So we are waiting to be guided by the membership. And I know that it is in process at the moment as we speak from quite a few members. And as soon as that happens, we will, as I said, follow through.

Number three. We have done as much preparatory work as we could, drawing on the information that is out there, in order to be prepared to act as quickly and as swiftly as we can. And it will require, given the size of the humanitarian crisis and the massive economic crisis that the country is in, a multitask and multipronged effort on the part of many. We stand ready to do that as well.

Mr. Rice - Thank you, MD. I am staying, please, in the front row.

QUESTION - Good morning.

Madame Lagarde, I wanted to ask you about the reform agenda, the Global Policy Agenda, and two aspects.

One, the debt transparency and your concerns about Chinese lending, especially in Africa and other resource‑rich countries. Are you concerned that lending by China can create an actual debt crisis in those countries?

Also, you mentioned the reform of surveillance. Could you give a little guidance on what exactly you are looking to change or strengthen? Particularly with regard to currency policy and foreign exchange rates. Thank you.

Madame Lagarde - On the debt issue, as you probably know, both the Bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there, terms and conditions, volumes, and maturity. And this is an endeavor that we will pursue together and which the G20 has actually asked us to develop. So we are doing that, number one.

Number two, we are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles that have been approved by the G20 and that we have endorsed internally and developed ourselves. It is clear that any debt restructuring programs going forward in the years to come will be more complicated than the debt restructuring programs that were conducted 10 years ago, simply because of the multiplicity of lenders and the fact that not all public debt is offered by members of the Paris Club, for instance ‑‑ which does not mean to say that any debt from a lender outside the Paris Club is an issue. As long as the principles are adhered to, the work that we eventually have to do with countries is then facilitated. There is also a myriad of nonpublic lenders that complicates the matter seriously, but that is another story.

In terms of surveillance and the comprehensive surveillance that we have identified, it is a combination of two things. It is, one, trying to harness all the competencies that we have, focusing on delivery of services for a country. To give you an example, when we do an Article IV, which is clearly the typical bilateral surveillance product that we have with countries, we are determined to organize us in such a way that we bring together the country teams, the fiscal competencies, the market and monetary policy competencies, but also the capacity development programs that will be needed and helpful in order to deliver on the policy recommendations that we discuss with the authorities. So it is sort of bringing in, harnessing, all the resources of the institution together on delivery of services for the country.

It is also leveraging on knowledge management, on data, analytical work that will be better leveraged by the technologies that we are currently assessing and, for some of them, already implementing. So hopefully we will have speedier delivery, more online services, if you will, to use, you know, sort of a common analogy, and being all together, as an institution, on those services.

QUESTION – On the currency?

Madame Lagarde - Well, currency: we constantly improve our External Sector Report. I do not know if you have seen the latest format of it, but it is published in a very respectable and high‑level way. We will continue doing so. And that is going to be part of the work that we continuously develop. You know that we have moved from one particular model to another. And under the leadership of David Lipton, it is work that is constantly under review and is probably the best that is available in that respect at the moment because it is a comprehensive system.

Mr. Rice - Thank you, MD. We will try to squeeze in just two more. I think it is Argentina, way, way over there on the right.

QUESTION - Good morning. I wanted to know what your message is for the Argentine people that are going through some hard times and face an election year. And also, what your message is for the Argentine candidates, the presidential candidates in terms of the continuity of the program with the IMF.

Madame Lagarde - All right. On Argentina, I would like to give you two good news because we are now beginning to see the program actually work. And our assessment is that the Argentine economy is at a point where it is going to bottom out. Second, I would say, now that so much hard work has been done, in a program where social protection has always been one of our three key priorities, it would be foolish on the part of any candidate to turn their back to the work that is underway. Those are the two key messages.

Mr. Rice - Thank you, MD. The last question is going to go to Japan. Right here in the center.

QUESTION - Thank you very much. My question is about the Modern Money Theory (MMT).

Madame Lagarde - It applies in Japan as well?

QUESTION - We do not have much inflation ‑‑ United States, Europe, basically zero growth, low inflation. If we have low inflation, we can have much more debt. No problemo. No problem. How convincing is that theory to you? Is that OK to have more debt in the name of filling the gap between the poor and the rich? Thank you very much.

Madame Lagarde - We do not think that the Modern Monetary Theory is actually a panacea. There are very, very, very limited circumstances where it could work. We do not think that any country is, you know, currently in a position where that theory could actually deliver good value in a sustainable way.

So while it is tempting, when you look at the sort of mathematical modeling of it, and it seems to stand, there are big caveats about it, such as, if the country is in a liquidity trap, such as if there is deflation. Well, then in those circumstances, it could possibly work for a short period of time, probably, because interest rates stay low until such time when they start going up. And then it is a bit of a trap. So that would be our view.

All right.

Mr. Rice - Merci, Madame Lagarde.

Madame Lagarde - See, this is the International Monetary Fund.

Mr. Rice - Thank you, everyone. We will see you over the next few days.

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