Transcript of Health Security Summit

June 9, 2021

Hosts: Ian Bremmer, Founder, Eurasia Group, Noubar Afeyan, Flagship Pioneering

Moderator: Shery Ahn, Bloomberg


Kristalina Georgieva, IMF Managing Director (MD)

Matthew Hancock, UK Secretary of Health

INTRODUCTION: I want to welcome two guests who are leaders of recovery efforts globally. Kristalina Georgieva is the managing director of the International Monetary Fund and Matt Hancock is the secretary of state for health in the United Kingdom, where, of course, the G7 will convene in just two days. Thank you both for joining us today. Let me start with you, Kristalina, because I want to talk about the upcoming G7. The World Health Organization's Dr Tedros warned of this two-track pandemic and warned the G7 that this is a critical meeting. What do you hope to see this weekend?

MD: Great to be with you. I expect this to be a consequential summit in the fight against the pandemic. The ministers of finance of the G7 met last weekend, put the marker on international taxation, on fighting the climate crisis. They also had a discussion on the way we can bring the pandemic to an end everywhere. We presented the plan that the IMF has developed and endorsed by WHO, by the World Trade Organization, by the World Bank and many others. And I want to share the parameters of this plan but then tell you what I expect the summit to be.

The parameters of our plan start from the premise that a two-track pandemic means a two-track recovery, and that would hold the world economy back. If we want to see progress on the economic front, it has to be on the back of vaccinations. Vaccine policy is the most important economic policy. We believe strongly and we presented the evidence that it is achievable to vaccinate the world to 40 percent by the end of this year, 60 percent by mid next year. If there is strong coordination, we lift up financing. We have a 50 billion dollar price tag on this plan, and we also accelerate production, secure more than is necessary so we can actually deal with downside risks and we help the developing world to get to a point of vaccinations. This has taken quite a lot of traction.

So what do I see? I see the G-7 coming up with upfront commitments in terms of financing as well as early reallocation of vaccines they booked but they don't need. It can lead to about a billion doses this year redirected from advanced economies to the developing world.

I also expect there would be strong commitment to that very simple message: ‘Vaccinate the world not in 2023, not 2024, but in 2022 to so we can bring the pandemic to an end and the recovery to be on sound footing. Simply put, I want a summit that is the Fair Shot Summit: fair shot in the arm, fair shot at the future.

QUESTION: Yeah, that two track recovery has been a key issue and something that really policymakers have been concerned about. One is the danger of that, because I remember in your spring speech, you talked about Tolstoy and all the variety of life being made up of light and shadow. And that divergence in the recoveries was a threat. Therefore, advanced economies, especially when it comes to spill over

MD: The threats to advanced economies are three-fold.

One: big loss of outcome of output that would have been achieved if we accelerate vaccinations. We judge it to be nine trillion dollars between now and 2025, 40 percent of this would occur in advanced economies. They would lose one trillion dollars of tax revenues because the rest of the world is being dragged into a pandemic.

Secondly, we know that mutations are now on a very fertile ground and mutations can push again to stop and go type of economic performance in advanced economies.

And three, when we have the advanced world moving fast with growth jumping up, then we would see, of course, withdrawal of accommodative policies faster. If that happens and interest rates go up while the emerging markets are still bogged down because of the pandemic and their growth falls behind countries with high debt levels, especially dollar denominated debt, would see trouble that can then hit back at the advanced world.

QUESTION: So do you buy into the inflation narrative right now? Because that's a key concern, right? Why countries could move faster. Do you buy into the transitory rhetoric?

MD: For now, the data shows that inflation is due to primarily supply disruptions that are likely to be overcome. Of course, for this, we need the whole world to be functioning well, because if it is not, we can have supply chain disruptions in the future.

We also see more the positive of fast growth in the United States spilling over to other countries. But we are watchful because we have never experienced in the past a

recession that was self-inflicted. And coming out of it with demand picking up is something that, of course, we have to be careful about.

But I want to stress again, my main point is we have to overcome this dangerous divergence, because if one part of the world goes fast and the other one goes slow, then we would see, of course, the dangers of this transmission a ricochet back from the emerging markets to the advanced economies.

QUESTION: Kristalina, how are wealthier nations and poorer nations coming together on the special drawing rights? Is the IMF still on track when it comes to issuing six hundred and fifty billion dollars in reserve assets by the end of August?

MD: We are very much on track. The G7 finance ministers confirmed that from the perspective of this very sizable group of countries. This is going forward. Not only that, we are looking into ways in which we can direct some SDRs from wealthier nations to those that need help. We expect by mid-August to have the governors voting on six hundred and fifty billion dollars.

For those who may not have heard much about a SDRs, this is a reserve asset we create on the strength of our membership. And it is the largest in the history of the IMF issuance by far, and rightly so, because we are dealing with the worst recession we have experienced that in peacetime since the Great Depression,

QUESTION: Something that some have criticized as the SDRs would be used to pay off the debts owned by developing nations to China. And this rivalry really on the world stage seems to be becoming worse right now. How is that affecting the job that you're doing?

MD: Let me first stress that we provide very detailed guidance to countries on how best to use SDRs. And it is not in the interests of any nation that has large level of debt to use SDRs to pay rather than restructure this debt. Remember, we had the common framework. We want the common framework to be the door to resolve debt issues. And we also are increasing the transparency of how a SDRs are being deployed by countries as a way to encourage the prudent deployment of this very valuable reserve asset.

One positive piece of news is that China actually would like to make sure the SDRs work as intended, and they are indicating interest to contribute some of their new SDR issuance to a pool of funds at the disposal, or actually the management of the IMF, to be directed to support countries in need, so the exact opposite of trying to use the SDRs for the payment service of debt to China.

QUESTION: Kristalina, if you don't mind, is in the context of that. And congratulations to both of you for getting this done truly. But I am wondering, there's been a big political football in the United States about to what extent these vaccines should be delivered through COVAX multilateral global facility, going to where the need is greatest or whether it should be done bilaterally by the United States. And then, of course, political and economic and other transactional benefits can accrue. Does the IMF have a view as to whether or not it really matters where the US comes out on that on that political issue?

MD: We are very keen to see upfront commitment to reallocate vaccine doses and upfront financing the best public use of money in history, very likely. Just imagine 50 billion vs. nine trillion. We want to see these upfront commitments done. We hope the G-7 would step forward. We hope the G20 will follow in the same spirit. We would like to see as much coordination on the allocation of vaccines as possible.

We are putting together a task force between the World Bank, the World Health Organization, the World Trade Organization and IMF with the objective to closely monitor how production translates into contracts, how contracts translate into delivery, and to what extent we are matching the needs and the distribution.

Let's remember that we had in COVAX initially the noble intention to deliver to everybody 20 percent. But not all countries are suffering the same way from the pandemic at any one time. COVAX does have an exception of this rule. So to answer your question concretely, COVAX is there. It is functional. It can play a big role, but we should not underestimate the logistical pressure on COVAX.

So all hands on deck, as long as there is transparency on production contracts, distribution, and we can see that we are in the speediest possible way vaccinating the world, I think we would be in a in a very good place. And I can tell you that I'm very encouraged that more and more countries are saying, look, we want most of what we do. We want to do it multilaterally, not bilaterally, and to the extent that we have high trust in some bilateral deliveries that can be expedited for highly vulnerable countries, we should not say, oh, no, please don't do that. Don't save these lives.

QUESTION: Sure. Can I take any follow up for me? I just wanted to ask as well. I mean, you're so right, 50 billion dollars in the context of what that will unlock for the rest of the world is absolutely nothing. We're talking about three trillion or more for US infrastructure. I mean, Jesus, this is not a big ask from the G7. You told us about a billion vaccines being reallocated by the end of the year from the G7. Do you have any orientation you can give us in terms of the numbers we're talking about for financing commitments at this point? Is that in the two trillion? Is that the time? And two billion, 20 billion if you're asking for 50. Can you give us any color there?

MD: My expectation is that we would see in the tens of billions, not in the couple of billions. And already there is a very constructive discussion that that that took place with the G7 finance ministers as to how, for example, the replenishment of IDA, this is the concessional grant-lending arm of the World Bank, how that can step up very significantly in the next months as discussions around the replenishment are ongoing.

And let me clarify, our analysis shows that there are one billion doses that are booked in excess of what is necessary in advanced economies. All advanced economies, not just G7. And the G7 has to decide what they do. But very clearly, by the end of this year, there can be one billion doses redirected from where they are more than necessary to where the needs are just terrible.

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