Transcript of the Managing Director's Virtual Media Roundtable with The Washington Post, Nikkei, Press Trust of India, Business Day, and Le Figaro
IMF News, January 13, 2021
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- Published: January 13, 2021
Opening assessment and projections
- 2020 is described as "the worst year since the Great Depression."
- The IMF is "updating our 2020 growth estimates and growth forecasts for 2021" and will publish new projections on "the 26th of January."
- Reasons why "it is less bad" as we step into 2021:
- "decisive and sustained monetary policy and fiscal measures in advanced economies" raised to Mario Draghi’s “whatever it takes” level.
- countries adjusting measures to rapidly changing circumstances (example: Japan and U.S. new fiscal stimulus).
- improved handling of the pandemic over time (digital adaptation, micro measures, vaccines and mass vaccinations starting).
IMF priorities for 2021
- Three key priorities:
- Pursuing a durable exit from the health crisis.
- Pursuing a sustainable and inclusive recovery.
- Arresting and reversing dangerous divergence between rich and poor countries.
- On vaccination and global recovery gains:
- Accelerating vaccination across the world could yield "$9 trillion" in gains between now and 2025.
- Of that $9 trillion, "60% would go to low income countries and emerging markets and 40% would go to advanced economies."
Policy guidance: vaccines, cooperation, and resource allocation
- Vaccination will be "an uneven process across countries, across regions."
- International cooperation needed to:
- Ensure vaccines cover low- and middle-income countries.
- Fully fund COVAX ("We [the international community] have yet to bring full funding for COVAX. We must do that.")
- Redistribute vaccine capacity from countries that "have booked for their population multiple times than the size of their population" to countries in need.
Fiscal and monetary policy stance and advice
- IMF advice: "Yes, we do need more stimulus."
- United States:
- "Fortunately, there is fiscal space to do so."
- U.S. has relatively more fiscal space and need to act to provide balance to accommodative monetary policy, support low skilled workers, women, young people, and health coverage for those who lost employer-linked coverage.
- Support recommended for infrastructure, education, and transition to the new climate economy.
- China:
- "There can be also more to be done, specifically in the direction of this transition to the low carbon economy."
- On size of packages: the size "is for the U.S. authorities to decide" but "a sizable support" is advocated that helps with the pandemic and pre-existing problems.
Sustainable, inclusive recovery and structural transformation
- Continue "sustained policy support until the recovery is firmly underway" with gradual targeting to the most vulnerable.
- Advocate coordinated fiscal stimulus aimed largely at "green and digital investment."
- Support reduction of high debt burdens and coping with volatile capital flows.
- Help workers transition from shrinking to expanding sectors.
- Promote resilient economies by accelerating the transition to the digital and climate economy with public investment plus incentives for private investment and forward guidance on carbon price.
Inequality, social safety nets, and labor market impacts
- IMF research on prior pandemics (SARS, H1N1, Zika) shows "during and after a pandemic, inequality goes up."
- Key actions to address inequality:
- Strengthen social safety nets; value of social safety nets for resilience.
- Address "inequality of opportunity"—access to quality education, financial inclusion, access to assets.
- Invest in job-rich green activities: reforestation, mangroves restoration, land degradation, buildings’ renovation, solar energy, resilient infrastructure.
- Concerns about gender:
- Women are disproportionately affected (frontline workers, contact-intensive industries, informal economy).
- "Labor market participation in India for women has been low. It is shrinking"—need attention to tap into productive and entrepreneurial potential of women.
Debt, insolvency, and the Common Framework
- Advanced economies deployed "the equivalent of 20% of GDP" in support; low-income countries deployed "2% of GDP."
- Timing for consolidation: "the time to take action on debt and deficit is when we have a durable exit from the health crisis."
- It would be "very problematic" to broadly question debt repayment obligations; market economies rely on repayment norms.
- Need careful assessment of who borrowed for what within countries; strong insolvency frameworks are necessary as support is withdrawn and bankruptcies may rise.
- For developing countries with unsustainable debt, IMF focus is case-by-case work "towards debt reduction and debt sustainability" to prevent national-level insolvencies.
- Common Framework: press private and public lenders to engage on debt restructuring when necessary; provide more grants and concessional finance for digital infrastructure and climate resilience.
IMF operational response in 2020 and readiness for 2021
- In 2020 the IMF provided "$102 billion in new financing to 83 countries."
- The IMF "provided debt service relief to 29 countries."
- The IMF positions 2020 as the first half of a game and 2021 as "the second half" where final outcomes matter; the IMF stands ready to support via policy advice, programs and financing, and capacity development.
Country-specific notes
- South Africa:
- Deeply impacted by the pandemic; central bank actions and IMF emergency financing have been used.
- "From what I recall, 31 percent unemployment" with particularly dramatic youth unemployment.
- Policy guidance: prioritize limited fiscal space, undertake reforms (including on SOEs), and consider tapping international lower-rate financing.
- India:
- Population noted as "1.3 billion people."
- IMF update expected on January 26 will show a picture "less bad"; reasons include decisive lockdown and targeted restrictions plus policy support.
- India’s policy response: "slightly above" the emerging market average support level; emerging markets on average "have provided six percent of GDP. In India this is slightly above that."
- Mobility indicators "we are almost where we were before COVID in India," indicating revitalized economic activity.
- Encouragement to pursue structural reforms to improve competitiveness and productivity; concern about declining female labor force participation.
Special Drawing Rights (SDRs) and liquidity support
- SDRs are "one of the instruments that can be applied against divergence."
- No consensus yet for a new SDR allocation; membership has asked that it "not be taken off the table."
- The IMF has facilitated reallocation mechanisms:
- Re-lending of unused SDRs to countries in need on concessional terms, with about "$20 billion" of that reallocation completed.
- Common critique: "60 percent of it goes to countries that don't need it"—creates inefficiency.
- Proposed handling for new allocation: redirect resources on concessional terms, provide massive fiscal space injections conditioned on good governance, structural transformation, and dealing with inequalities.
- IMF will engage with incoming U.S. administration and other members on the topic.
Transcript published January 13, 2021 — IMF Communications Department