The IMF’s Purpose: Delivering for People

IMF News, October 18, 2019

Source details

Speaker: Kristalina Georgieva, IMF Managing Director.
Occasion: 2019 World Bank Group - IMF Annual Meetings Plenary, October 18, 2019.
Audience: governors of the IMF's 189 member countries.
Key framing:
- Quotation from John Maynard Keynes: “Economics is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value.”
- The IMF as a “transmission line” of knowledge, financial resources, good policies, and capacity development to help countries embrace change and reduce risks.

Findings and key statistics:

After a synchronized upswing, the world is facing a synchronized slowdown.
A deceleration in nearly 90 percent of the world[i].
Growth this year is expected to reach only3 percent[ii] — its lowest rate since the beginning of the decade.
Drivers of slower growth: trade tensions reducing business confidence and investment; increased uncertainty (Brexit, geopolitical tensions); demographic pressures; record-high debt levels.
Medium-term outlook is troubling, especially for countries already facing difficulties, including some Fund program countries.
An estimate: 45 developing countries, a total of nearly 1 billion people, will grow more slowly in per capita terms than the advanced world.[iii]

Policy implications and recommendations:

Step up cooperation within and across borders to prevent spillovers into currencies and technology.
Move from a “trade truce” to “trade peace”; build a trade system that is fairer, more innovative, and more inclusive.
Maintain supportive monetary policy given slower growth, recognizing monetary policy cannot do the job alone.
Where space exists, fiscal policy must play a more active role.
Commit to structural reforms to boost productivity and resilience:
- Lower barriers to entry in service sectors.
- Tackle gender discrimination in the labor market.
- Modernize legal frameworks to reduce red tape and fight corruption.
Pay careful attention to impacts on vulnerable groups when implementing reforms.

Three priorities identified:

(a) Economic fundamentals

Emphasize sound economic fundamentals as the starting point; policies are a means to build more prosperous societies.
Personal testimony: Bulgaria’s currency crisis in the 1990s—mother lost 98 percent of her life savings to hyperinflation.
Jamaica example: two IMF-supported programs delivered tangible results:
- Reduction in public debt by 50 percent of GDP.
- Historically low unemployment.
- Inflation stability.
Fund progress in approach:
- Improving design of lending programs, including expanding support for low-income countries at zero interest.
- Upgrading surveillance to enhance traction.
- Further integrating capacity development with surveillance and lending.
Need to go further given precarious outlook:
- Focus more on countries most affected in a downturn, including fragile states.
- Use tools more effectively, including precautionary instruments.
- Make efforts more attuned to individual country circumstances.

(b) Inclusive growth

Focus on what matters to people: better jobs with higher wages, greater access to finance, more opportunities for women and young people.
Emphasize public and private investment to boost competitiveness and inclusion.
“If you want to be wealthy tomorrow, invest in your people today.”
IMF engagement on social spending has stepped up:
- Ghana: helping to create fiscal space for more education spending.
- Georgia: supporting efforts to increase the minimum public pension.
- Egypt: helping to expand a cash transfer program for poorer households.[iv]
Supporting increased public revenue is essential for progress on the Sustainable Development Goals.
Leverage IMF’s global membership and 75 years of experience for cross-country and over-time perspective.
Strengthen partnerships, including with the World Bank; commit to work with David Malpass to expand collaboration in key macro-critical areas and on the ground in program countries.

IMF’s role in building bridges between nations is crucial as global economic interdependence rises.
Priority areas requiring international cooperation:
- Action on climate: continuing work on mitigation and adaptation, especially carbon pricing and building resilience.
- Action on trade.
- Corporate taxation.
- Financial regulation.
- Fighting money laundering and the financing of terrorism.
Need for a strong global financial safety net with a well-resourced IMF at its center.
Safeguarding the IMF’s financial strength is a top priority, paired with governance reforms to reflect dynamic membership.
IMFC endorsement (earlier the same morning) of a package to ensure the Fund will continue to have sufficient resources and that quota and governance reforms will continue under the 16th General Review.
Modernization priorities: streamlining systems, leveraging new technology, increasing staff diversity.

Serving the IMF’s 189 member countries is described as the speaker’s greatest honor.
Personal reflection: journey from growing up behind the Iron Curtain to leading the IMF underscores the message: “Nothing is impossible. Change is unstoppable. We can build a better world.”

Source: “The IMF’s Purpose: Delivering for People” — Kristalina Georgieva, 2019 World Bank Group - IMF Annual Meetings Plenary, October 18, 2019.