Restoring Sustainable Flows of Capital and Robust Financing for Development

IMF News, July 8, 2020

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Speech by Kristalina Georgieva, IMF Managing Director.
High-level conference, organized by the Paris Forum and the Saudi G20 Presidency.
Date: July 8, 2020.
Key projection: From the start of the crisis until the end of 2021, the world economy is projected to face a cumulative loss of more than $12 trillion—equivalent to the combined annual output of Japan, Germany, Italy, and Spain.
Current state: Three-quarters of economies reopening, although gradually and with some necessary reversals; projection of only a partial recovery in 2021.

Global policy response:
- Fiscal measures amounting to nearly $11 trillion globally.
- Central banks providing massive liquidity.
Emerging market capital market access:
- In the first six months of this year, emerging market governments issued $124 billion in hard currency debt—two-thirds of that came between April and June, after the stop in debt issuance in March.
Uneven impact and vulnerable countries:
- No market-access or unaffordable access for emerging markets with weak fundamentals, especially those with high debt levels, dependence on hard-hit sectors, or affected by conflict.
- Regions explicitly noted: Sub-Saharan Africa, Latin America, the Middle East.
- Special concern: Sub-Saharan Africa was on the move before the crisis; now faces a tough situation but should not lose the chance of continuing its transformation.

IMF operational response:
- Provided 72 financial lifelines in less than three months.
- Total exposure of $250 billion, with more than one-third of that committed in these three months.
- Received strong support for:
- A doubling of access to emergency facilities.
- A tripling of concessional financing capacity.
Priority actions and proposals:
- Tune up instruments further for low-income countries and tourism-dependent small island economies.
- Engage membership to use SDRs of advanced economies to help highly vulnerable countries (described as relatively low-cost for advanced economies and high-impact for countries in need).
- Continue focus on countries with high debt levels; prepare for next steps after the Debt Service Suspension Initiative (DSSI), including country-by-country debt restructuring for those who cannot stay afloat without determined action.
- Promote creditor–debtor cooperation that is rational and mutually respectful; IMF and World Bank to promote debt transparency and prudent debt restructuring.
Specific country mention:
- Argentina: critical that the country and the creditors come together.

Framing: Expand the concept of resilience beyond banking-sector strengthening to a broader "new religion of the IMF" with three dimensions:

1. Fiscal accountability and digital transformation

Governments expanding fiscal support must remain fully accountable to the taxpayer: "spend but keep the receipts."
Use digital transformation to move governments to e-platforms to ensure efficient and transparent public spending, cut red tape, and help private businesses flourish.

2. Environmental sustainability

Policies must be environmentally sustainable.
Support low-carbon and climate-resilient growth and be smart about allocating additional public spending.

3. Investing in people

End goal: If opportunities are seized, emerge with a global economy that is more resilient, more efficient, more inclusive, and more sustainable.

Restoring Sustainable Flows of Capital and Robust Financing for Development — Kristalina Georgieva (Speech, July 8, 2020).