Transcript of IMF Managing Director Press Briefing on the Global Policy Agenda
IMF News, October 13, 2021
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- Published: October 13, 2021
Global outlook and key statistics
- Global growth forecast for this year revised to 5.9 percent, a 0.1 percent downgrade.
- Projections for next year unchanged at 4.9 percent.
- By 2024, nearly 160 economies will still face output losses relative to prepandemic trends.
- If COVID‑19 has a more prolonged impact, this could lead to a 5.3 trillion in global GDP losses over the next five years.
- IMF emergency support during the crisis: $118 billion provided to 87 countries plus debt service relief to poorest members.
- $650 billion equivalent of special drawing rights (SDRs) issued; of those, 275 billion went to emerging and developing economies.
- Aspiration for voluntary on‑lending of SDRs: $100 billion target referenced.
- Poverty Reduction and Growth Trust access levels increased by 45 percent.
- Tunisia has received nearly $750 million equivalent of SDRs.
Global Policy Agenda: three priorities (Vaccinate, Calibrate, Accelerate)
- Vaccinate
- Priority to step up vaccination efforts everywhere.
- Target: vaccinate at least 40 percent of people in every country by the end of this year and 70 percent by mid‑2022 (shared target with World Bank, WHO, WTO).
- Actions: send more vaccines to developing countries; remove trade and financing constraints; improve transparency in contracts and delivery schedules.
- Risk: failing to achieve targets could contribute to the projected 5.3 trillion global GDP loss over five years.
- Calibrate policies to country circumstances
- Expectation: price pressures to subside in most countries by the middle of next year; central banks can generally look through transitory inflation pressures but must be ready to act if inflation expectations rise.
- Some emerging and developing economies are already experiencing more persistent price pressures, with higher food and energy prices hitting poorer families hardest.
- Policy implications: some countries have already raised interest rates; transparent and clear communication of monetary plans is critical to limit cross‑country spillovers.
- Fiscal constraints: prolonged pandemic tightens fiscal space, forcing difficult trade‑offs and requiring credible medium‑term frameworks, especially for countries with no fiscal firepower (most low‑income nations).
- Accelerate structural reforms (sustainability and resilience)
- Climate action: the right green policy package, robust price on carbon, and substantial scale‑up of green investments can create 30 million new jobs in this decade.
- Digital investment: connect the other half of humanity not yet online to boost productivity and living standards.
- New technologies (cryptoassets, central bank digital currencies) must be carefully managed worldwide.
- Global tax cooperation: historic G‑20 agreement on a global minimum corporate tax and redistribution of taxing rights cited as evidence of cross‑border cooperation.
Financing, SDRs, and new instruments
- SDRs
- $650 billion equivalent allocation; 275 billion went to emerging and developing economies.
- Some countries using SDRs to raise official reserves and for priority needs like vaccine imports and lifeline spending.
- IMF working to increase transparency in SDR use.
- Call for better‑off countries to voluntarily on‑lend part of their SDRs; $100 billion on‑lending aspiration noted.
- Resilience and Sustainability Trust (RST)
- Purpose: support policy choices in low‑income and vulnerable middle‑income countries to underpin economic transformation and avoid future balance of payments crises.
- IMF Board discussion: positive membership support; interest from potential contributors.
- Design: close Bank‑Fund collaboration envisaged; World Bank sectoral skills to provide inputs; some members interested in engaging in design.
- RST seen as part of solutions for long‑term transformation on climate and resilience.
- Poverty Reduction and Growth Trust (PRGT)
- Reformed to provide more concessional financing; access levels increased by 45 percent.
- Potential conduit for voluntary SDR on‑lending to deliver zero interest loans to low‑income countries.
Bank‑Fund collaboration and crisis responses
- Collaboration examples:
- Multilateral leaders task force on the pandemic including David Malpass, Ngozi Okonjo‑Iweala, Dr. Tedros, and the IMF Managing Director, focused on vaccine delivery transparency.
- Work to improve the Common Framework for debt restructuring as the Debt Service Suspension Initiative ends.
- Longstanding cooperation on Financial Sector Assessment Programs.
- Membership difference: Andorra participates in the Fund but has not joined the Bank.
Regional focus: Africa
- Vaccination gap: Africa at 4 percent vaccinated versus 60 percent in advanced economies.
- Economic impact:
- Africa contraction in 2020: 1.7 percent (worst on record).
- Growth recovering to 3.7 percent this year and next year.
- To catch up, Africa needs sustained growth rates substantially higher than 3.7 percent.
- Financing needs:
- IMF estimate cited: $245 billion needed until 2025 to help Africa overcome the COVID‑19 economic crisis.
- If Africa is to catch up on the Sustainable Development Goals, financing needs would need to be doubled.
- IMF actions for Africa:
- Tackle debt issues: making the Common Framework work; encouraging debt transparency for better restructuring prospects including private sector participation.
- Expand IMF concessional financing via PRGT reforms and voluntary SDR on‑lending.
- Support structural reforms and capacity development to strengthen institutions and resilience.
Country engagement highlights
- Argentina
- No decision made yet on surcharge reduction for over‑quota loans; informal Board discussion in September showed reservations and support for periodic review.
- IMF teams engaged with Argentine authorities to design a credible program that supports private sector‑led growth and job creation; mutual commitment to constructive dialogue noted.
- Tunisia
- Technical engagement and capacity development support ongoing.
- Policy recommendations: well‑targeted economic reforms to stabilize the economy, put public finances on a sustainable path, and support private‑sector job creation.
- Tunisia received nearly $750 million equivalent of SDRs to help near‑term fiscal pressures.
Inflation, financial conditions, and risks
- Current assessment: inflation pressures expected to subside in most advanced economies by the middle of next year; viewed as likely transitory if vaccinations accelerate and supply bottlenecks ease.
- Risks and channels:
- Demand–supply mismatches (advanced economies recovering faster) driving price pressures.
- Supply chain interruptions and more frequent natural disasters elevating food prices.
- Tighter financial conditions (higher interest rates) could put pressure on stretched asset valuations and spill over to emerging markets and developing countries.
- Policy advice: central banks should look through transitory pressures but be prepared to act quickly if inflation expectations become unanchored; fiscal credibility and medium‑term frameworks are essential.
Institutional lessons and staff engagement
- Investigation and Board review
- IMF Executive Board conducted a comprehensive review and concluded it has full confidence in the Managing Director’s ability to lead the Fund.
- IMF Board explicit recognition of IMF staff excellence and integrity of IMF research and data.
- Lessons emphasized by Managing Director
- Importance of ensuring staff feel included and empowered to express concerns through institutional channels.
- Commitment to engage directly with staff in candid discussions and to consider steps to strengthen avenues for raising concerns.
- Reference to prior experience improving staff morale and trust in senior management in previous roles.
Climate action priorities and role of youth
- Four global priorities (highlighted for Asia and broadly applicable):
- Put incentives in place for the low‑carbon transition: eliminate harmful subsidies and put a price on carbon.
- Global average carbon price example: from $3 a ton today to $75 a ton in 2030 cited as the transformational signal needed.
- Proposal for an international carbon price floor among big emitters, allowing different approaches (tax, trade, regulatory equivalency).
- Invest in green infrastructure and green mobility; public sector investment should support the transition.
- Ensure a just transition: protect workers and communities affected by the shift (e.g., coal miners) with viable alternative livelihoods.
- Prioritize adaptation and resilience: Asia can lead on adaptation given existing innovations and acute exposure to climate shocks.
- Role of youth:
- Young people encouraged to speak up, engage, and advocate for climate action.
- IMF engagement: initiatives such as a new climate challenge to involve youth and broader engagement on climate priorities.
Transcript of IMF Managing Director Press Briefing on the Global Policy Agenda — October 13, 2021