Transcript of IMF Managing Director Press Briefing on the Global Policy Agenda

October 13, 2021

Kristalina Georgieva, Managing Director, IMF

Moderator: Gerry Rice, Director, Communications Department, IMF

Mr. RICE: Hello everyone, and welcome to this Annual Meetings Press Conference on behalf of the International Monetary Fund. I am Gerry Rice of the Communications Department. And I am delighted that you are able to join us today. Thanks to everyone for coming. I see many colleagues on screen. And we will take some questions online as well. We will take as many as we can this morning. If you can keep them short and sweet, that will be terrific.

I am also delighted to have with us this morning the Managing Director of the IMF, Kristalina Georgieva. I think you already have the Global Policy Agenda with you. It was sent out in advance. Kristalina is going to talk a bit about that this morning, and then we will turn to your questions. Managing Director, Kristalina, please.

Ms. GEORGIEVA: Thank you. Thank you very much, Gerry. Good morning to those who are in Washington and to those elsewhere, good day, good evening.

Looking back on the past couple of weeks, I want to start by thanking the IMF Executive Board for a comprehensive and impartial review of all the evidence surrounding the problematic World Bank report and for giving me an opportunity to answer all their questions. On this basis, the Board concluded it has full confidence in my ability to lead the Fund, and it feels great to be able to focus exclusively on the work in hand. So let me go straight to it.

As you know, yesterday we slightly reduced our global growth forecast to 5.9 percent for this year, just a 0.1 percent downgrade. And we left our projections unchanged for the next year, at 4.9 percent. That on its own is good news. The economic recovery continues. Because of the extraordinary policy measures, because vaccines continue to save the lives of millions of people and lift up economic performance, but this is not the whole story. The path ahead is more challenging. What we face is more uncertainty in inflation prospects, elevated debt levels, and a persistent economic divergence. Why the latter? Low vaccine access, limited policy space, they are holding back the recovery in many emerging and developing economies. We estimate that two years from now, in 2024, nearly 160 economies will still face output losses relative to prepandemic trends. They still will have not caught up to 2019.

How do we move past these obstacles to a stronger recovery? We have released our Global Policy Agenda, and it is a clear, straightforward focus on three priorities: Vaccinate, calibrate, accelerate.

First, vaccines. It is paramount to step up vaccination efforts everywhere. We can send more vaccines to developing countries, and we can remove trade and financing constraints for vaccinations there to accelerate. If we do, we can still reach the target we have set to vaccinate at least 40 percent of people in every country by the end of this year and 70 percent by mid‑2022, a target we embrace with the World Bank, WHO, and WTO. If we do not, and the COVID‑19 situation has a more prolonged impact, this could hold back the recovery and lead to a 5.3 trillion in global GDP losses over the next five years.

Second, we are now at a point when policies need to be calibrated to very different country circumstances, to the differences in where the pandemic is and what is the available policy space. We expect price pressures to subside in most countries by the middle of next year, and we know that central banks can generally look through transitory inflation pressures, but they cannot let their guard down. They should be prepared to act quickly if risks of rising inflation expectations become tangible.

What is more concerning is that, for some emerging and developing economies, price pressures are already more persistent, and among those, higher prices for food and energy are already hitting poorer families the hardest. As a result, some countries have already had to increase their interest rates. And when we look forward, transparent and clear communication of monetary plans is critical to limit negative cross‑country spillovers.

Obviously, the longer the pandemic persists, the tighter fiscal constraints become. They are going to force difficult trade‑offs, and they will require policy credibility. We have to believe in the medium‑term frameworks, as businesses and as households, to ensure that we have the right balance between providing support now and reducing debt over time. And this is imperative for countries with no fiscal firepower left. And that, unfortunately, includes most low‑income nations. They need more help.

Let me go to the third priority: accelerate fundamental reforms to boost sustainability and resilience. And in this, climate action is absolutely essential. The right green policy package for each nation, robust price on carbon, substantial scale‑up of green investments, they can create 30 million new jobs in this decade. And then, of course, we have to be sure that digital investment is available everywhere to get the other half of humanity online that is not today, to boost productivity and living standards. And new technology, like cryptoassets, central bank digital currencies must be carefully managed worldwide.

As we pursue major reforms, the historic agreement that the G‑20 managed to achieve on a global minimum corporate tax and redistribution of taxing rights shows we can work together across borders to make everyone better off. This spirit of standing by our members in times of need has always been at the heart of what we do at the IMF. As you are well aware, during this crisis, we have provided $118 billion to 87 countries and debt service relief to our poorest members. We issued $650 billion equivalent of special drawing rights (SDRs); of those, 275 billion went to emerging and developing economies. And countries that are already benefiting from those SDRs, they see their official reserves going up. Some are looking at the use of SDRs for priority needs, like vaccine imports, lifeline spending. And from our side, we are putting in place measures to increase the transparency in SDRs' use.

And we aim to magnify the impact of the SDR allocation. So what we do is we call on better‑off countries, and they are responding to voluntarily on‑lend part of their SDRs so they can do more for countries in greatest need. We can use our Poverty Reduction and Growth Trust for that. It provides zero interest loans to low‑income countries. And we are working on a new Resilience and Sustainability Trust to support policy choices in low‑income and vulnerable middle‑income countries that would underpin the transformation of their economies and avoid future balance of payments crises.

To conclude, we are launching our Annual Meetings at a particularly challenging time, when policymakers are grappling with both the immediate policy objective to overcome the pandemic‑induced crisis and sweeping pressures to transform economies, to make them stronger, greener, fairer. We are faced with some of the most complex policy choices, the most difficult trade‑offs in decades. How we make them will have profound impact for years to come.

To use the words of Eleanor Roosevelt, "The world of the future is in our making. Tomorrow is now." And this is why the discussions taking place during this week are so important. I look forward to your questions. Thank you.

Mr. RICE: Well, thank you very much, Kristalina. I am going to turn to colleagues on screen straight away. So if you have a question, please raise your hand, or indicate you would like to speak. And if you can keep it short and succinct, we will try to get through as many as we can.

QUESTION: Good morning. Thank you so much. Kristalina, I wanted to ask about the RST program that you proposed. It's taken a bit of time to move forward on that, and I know that, for instance, in his IMFC statement, the German Finance Minister also set pretty strict parameters for what that can and cannot do. There's a lot of concern that it's sort of going beyond the scope of what the IMF should be doing. People have raised those questions. So can you tell us whether you think you will get support from the IMFC on that program?

And then the other question I had for you has to do with the investigation that has just concluded. Are you concerned at all that this saga will have an impact on the ability of the Fund and the Bank to work together? These two organizations have been working very closely. Is this going to have any sort of lasting impact? Thank you.

Ms. GEORGIEVA: Thanks very much, great questions.

On the Resilience and Sustainability Trust, we had a Board meeting on Friday, almost four hours, and it was so uplifting to hear the support from the membership for the creation of this Resilience and Sustainability Trust. Our staff answered multiplicity of questions around eligibility, what are the criteria that we would apply, what are the financial arrangements for it, how it is going to work, and what is the main objective of it. To sum it up, what we want is to be a part of the solutions policymakers have to make about this long‑term transformation, both on climate but also beyond climate, to have more resilient economies. And we were so encouraged that that resonated across the board, and some of our members in strong position started indicating interest to contribute to this new trust. It will be very interesting to hear more at the IMFC (International Monetary and Financial Committee) tomorrow, but to give you an indication, I think we will have countries in a position to contribute being very interested to also be engaged in the design so when we cross the T's and we dot the I's, it is an instrument that makes a difference for the membership.

That actually takes me straight to your second question, because one of the interesting features of how we work on the RST is that it is a very close Bank‑Fund collaboration. In fact, our first presentation was to the World Bank's Board on how we are thinking about it for the Fund. This is a policy transformation instrument. Of course, the Bank has all the sectoral skills that can provide valuable inputs. And when we had our discussion at the Fund, there was a large Bank team also there. So when I look at the collaboration between the Bank and the Fund, it has been strong for decades. I love the Bank, and I love the Fund.

Now my colleagues would say, you love the Fund more. But this is a twin institutional setup that has delivered for the members. We have only one difference in membership. Andorra, that joined the Fund, has not yet decided to join the Bank. And we have major, major challenges where our institutions are best at addressing working together. Three examples. On the pandemic, we have created a multilateral leaders task force that is David Malpass, Ngozi (Okonjo-Iweala), Dr. Tedros (Adhanom), and myself, with our staff, and that task force is making a difference. We are seeing the impact in more transparency on the delivery of vaccines. We have the incredibly difficult issue of debt. David and I have talked many, many times, how can we improve the Common Framework? Because remember, we are going to see the Debt Service Suspension Initiative ending at the end of this year, but debt levels going up, so the Common Framework, debt restructuring has to deliver for countries. And, thirdly, we have a long tradition on collaborating on financial sector assessment reports, and this tradition is very alive and very vibrant.

Mr. RICE: Thank you very much, Kristalina.

Do you want to come in?

QUESTION: Yes. Thank you for taking my questions. I have a question on Africa, but first I want to ask the Managing Director, the headline this week went from, will she stay, will she go, but in the end, the IMF Board was able to vindicate you and clear you and say you did not do anything wrong. But I was just wondering if there is a lesson you learned from that whole saga, investigation, and how will that make you a better Managing Director? And how will that make the IMF a better institution? Will you be more careful when you (inaudible). What did you learn from it?

And then on Africa, yesterday during the release of the World Economic Outlook, the IMF said Africa will need roughly $250 billion in investment in the next five years to be able to overcome the COVID‑19 pandemic economic crisis. I want to talk a bit about the debt sustainability and how will those investments—what type of shape will those investments take and how will the IMF be able to come in and help Africa during those years? Thank you.

Ms. GEORGIEVA: Thank you. Great questions. To your first question, I first want to remind everybody that the problem was with one specific, rather controversial report at the World Bank, not with the research and data at the IMF. And I want to stress that our Board was very explicit in recognizing the excellence of IMF staff and the integrity of IMF research. We have internal systems in place that provide multiple checks of every product, and we also have an ongoing review process that makes sure that what we do is to the best of service requirements of the membership.

This being said, I always look at every opportunity to draw lessons for myself and for the institutions I lead. In this particular case, the most important lesson is that, in large organizations, we have to be always mindful that there may be people that are not feeling entirely included, and I am not seeing the doors through which they can express concerns, whatever their concerns are.

I think that, at the Fund, we have a strong internal justice system. There are many avenues for people to introduce their concerns. I can tell you, when I sit in meetings, there is a lot of debate and disagreements that are ultimately sorted out through this debate. But I do want to be the one that says, OK, let's continuously look at what we have and how we can make it better. And it is a process that I embrace, actually, wholeheartedly before this experience, and I embrace it even more as a result of that.

To your question on Africa, we know that what has happened hurts everybody everywhere, but it has been hurting Africa particularly hard. Why? Because Africa still finds itself holding the short end of the stick on vaccinations. You know it. We are only at 4 percent in Africa. We are at 60 percent in advanced economies. And Africa finds itself in a very tough place with limited fiscal space and increased debt levels in so many countries. And then on top of it, we have insecurity and conflicts in so many parts.

Some countries in Africa are doing really well. They are coming with strong growth and recovery, but by and large, as your question indicated, we see a difficult time for Africa.

We estimated the contraction in Africa to be 1.7 percent in 2020, worst reading on record, and growth is recovering to 3.7 percent this year and next year. But for Africa to catch up, it has to grow at 6, 7, 8, 9, 10 percent, not at 3.7. So for that reason, we have been ringing the bell that we have to mobilize financing to help Africa go over the impact of COVID‑19. You quoted the exact number we came up with, $245 billion needed until 2025.

If we are to see Africa catching up on the Sustainable Development Goals, we have to double this number. So what is the Fund doing? We are tackling three problems. One, debt. As you know, the three cases, countries asking for Common Framework are all from Africa. Chad, Ethiopia, Zambia. We want to make them work so more countries step forward for debt restructuring. And we are working with African countries on debt transparency because, if you are transparent about your debt, it is more likely it will be restructured, including with private sector participation.

Two, we are working hard to expand our own contribution to financing in Africa. We reformed the Poverty Reduction and Growth Trust so it can provide more concessional financing. We increased the access levels by 45 percent. And we are now seeing a great deal of interest to contribute on‑lending of SDRs voluntarily to the Poverty Reduction and Growth Trust so we can do more for Africa.

Three, we are working with African countries on their structural reforms. With some we have programs. With others we only have—we have capacity development, technical assistance because, what is the big lesson of this pandemic? Countries that stepped into the crisis with strong fundamentals are coping much better than those that stepped in the crisis with weak immune systems. And that building the immune system of the African institutions is a central part of our work. Our commitment to Africa is strong.

Mr. RICE: Thank you very much, Kristalina. Let me take a few more from colleagues on the screen. And then I am going to go to take some questions online.

I am going to go to our colleagues from Argentina.

QUESTION: Do you hear me?

Mr. RICE: Yes, loud and clear.

QUESTION: Thank you. Good morning, Gerry. Good morning, Ms. Kristalina. My question is, has the IMF decided to not reduce the surcharge of the over‑quota loans? And could you tell us, if Argentina and the IMF will sign a new agreement this year? Thank you.

Ms. GEORGIEVA: Thank you. We have not made a decision one way or another. We had an informal discussion at our Board in September. So what the discussion indicated was that at that point, when we had this discussion, there were reservations about freezing surcharges, mostly driven by a genuine concern about the financial strength of the IMF at this time of crisis, but that was not conclusive one way or another.

There was also support for the Fund to do what we periodically do, and it is review of surcharges. So in that sense, the story probably has to be defined with, to be continued.

On the second part of your question, our teams are working, and that work has been, over the time they have engaged, concentrated exactly on debt, to find a pathway in which we can support Argentina and Argentina can support itself with strong policies that are going to be helpful to induce private sector‑led growth, create more jobs for people, and provide good use of public resources to target those that are most in need of support.

We have the Minister of Economy here. I met with him last evening, together with my team, working on Argentina. And what I can tell you is that the commitment on both sides to work constructively is there. We will continue to pursue that dialogue. We have to find a good place where a program of Argentina is one that we see as credible and helpful to the people of Argentina that we can support.

Mr. RICE: Thanks, Kristalina.

QUESTION: Sure. Absolutely. Thank you so much for taking our questions. I want to ask about the WilmerHale report here, just given that it raised questions about your management style and about the Fund's credibility more broadly. I am just wondering about what steps you have in mind or are willing to take in order to fix that.

Ms. GEORGIEVA: Well, thank you. The Board of the IMF did a very credible and serious job. We had twice a chance to appear for long sessions with the Board, and when we presented, finally, the two sides of the story next to each other, there was no "there" there. And it is in the conclusion of the Board. But that is not to say that I do not take the broader message of, make sure that the staff always can reach out to superiors or through institutional channels to signal discontent, disagreement. And in all my professional life, I have been striving for that. I am, actually, in the history of the World Bank, interestingly enough, I was called to come back to the Bank in January 2017. Why? Because the World Bank was in turmoil. Staff morale was very low. And there was an atmosphere of fear. Nine months later, in September of this year, staff survey at the World Bank demonstrated remarkable turnaround in morale, significant increase in trust in senior management. And the staff association called this the Kristalina factor.

Obviously, at that time, there was a corner at the Bank that, a part of the report says, there were people who did not feel empowered to speak up. I wished I knew. Looking back, I wished I had a meeting with these people.

Looking forward, to answer your question, the very first thing I am going to do, now that I followed due process and I presented my case to the IMF Board, where I should present it, I so much look forward to meeting with our staff and have a very candid, open discussion. That is going to take place on Monday. And, of course, we will look into ways in which we turn this into a good learning opportunity. Institutions always have to strive to do better, even if they are excellent, as it is the case with the IMF. And I, again, want to repeat. The IMF staff is exemplary in the way they carry out their work. And there is no doubt in the credibility of the IMF or our data or our research. So the problem, look for the problem. It is on the other side of 19th Street.

So when we have this discussion, I would, on that basis, inclusively, with input of staff, I will answer this question of steps to be taken and, of course, I will engage with our Board, so we own it, all of us.

Mr. RICE: Thanks very much, Kristalina. We have got a number of questions online, and I am going to turn to them and then come back in the room briefly at the end, hopefully. If it's OK with you, Kristalina, I am going to take maybe three of these online, just take them at once just because of the time constraint.

The first one is asking about inflation. "Rising inflation implies higher interest rates and that could mean a problem for stretched financial valuations. Do you have a comment on that, Madam Georgieva?" (Another question) is asking, "Advanced countries have talked a good game about donating vaccines, providing money for developing countries coping with climate change and said they will recycle their SDR allocations. Do you think it's about time their words were put into action?" And let me just take one more online from Tunisia, asking, "Economic experts have reported that negotiations on a new IMF program between the Fund and the Tunisian authorities will start in the coming days. Can you confirm? What are your policy recommendations to the new government to overcome the economic crisis?" So I am sorry about clustering those, Kristalina.

Ms. GEORGIEVA: That's OK. Good to get as many as we can.

To the question on inflation, we are watching it very carefully. At this point, our expectation is that, in advanced economies, by the middle of next year, inflation would retreat, and that would be good news for everybody because it would then be less pressure to normalize monetary policy and less pressure to increase interest rates in a way that, as your question indicates, can have spillover impact on assets, on these stretched valuations, but also spillover impact over emerging markets and developing countries.

What is it that we are watching very carefully? First, whether the mismatch between demand rapidly growing in advanced economies recovering faster on the back of vaccinations and more policy support, not facing the increase in supply with the same level. So this mismatch between demand growing and supply falling behind, of course, creates pressure on prices.

Let me go to my main message from the beginning of my presentation. Why we should care about this divergence in economic fortunes between advanced economies, some emerging markets, and the rest of the world? Because as long as it persists and especially if it widens, this risk of interruptions in global supply chains is going to be higher and, therefore, the pressure on prices, the pressure on inflation will be higher. And let's remember that we are watching also other factors that can hit on prices and leave them up, such as more frequent natural disasters that have lifted up food prices in so many places.

Again, I repeat, at this point, we expect to be transitory, but that hangs on an expectation that we will accelerate vaccinations and accelerate recovery, where it is falling behind.

On stretched valuations, your question is correct. If there would be tightening of financial conditions, there could be impact on valuations.

To the (second) question, I could not agree with you more. We do have to be much more determined in helping developing countries with vaccines and also helping them with fiscal space so they can cope with the impact of this crisis. And we have to do it because it is morally right. We have to do it because it is in our own interest everywhere. I talked about inflation and how the interruption in supply chains may be impacting prices. Beyond that, we leave the pandemic to linger. We are creating breeding space for more and possibly more dangerous variants. What we have seen, fortunately, is a bit of an acceleration in action. We see more is being done to deliver on commitments for vaccine donations, and more is being done on a very, very important topic, which is transparency in contracts and delivery days for vaccines.

In fact, in terms of overall capacity, we can have the vaccines to get 40 percent of people everywhere vaccinated, but if there is mislocation of delivery, then it's not going to happen. So we have been engaging‑‑and I want to praise especially Dr. Ngozi, the head of the World Trade Organization, for that, with the manufacturers, not only with the funders, but also with the manufacturers so we can have more transparency on their production schedule and their delivery schedules. It makes a world of difference if an advanced economy that is expecting to get doses in October but does not need them swaps the delivery date with a developing country, so the advanced country gets the doses in February or March and the developing country gets them now.

I am, on the SDRs, I am very, very encouraged by what I hear from members. If you will recall, there was this aspiration set for $100 billion of on‑lending on concessional terms from countries that got SDRs, do not need them, to countries that need them. And I think we are going to hit that number. But since you put the question to me, ask everybody you can. Please elevate this. We not only have to do it. We have to do it fast.

On the question about Tunisia, we have been engaged quite extensively at a technical level, and we have been also providing capacity development support to the Tunisian authorities so we can work out together toward what a program for the country itself could be and how we can amplify priority actions that help Tunisia. We are so clear in our message that the country needs well‑targeted economic reforms urgently to stabilize the economy, to put the public finances on a sustainable path, to create impetus for private sector jobs, to come and make growth higher and more sustainable.

We have been helping Tunisia, as we have been helping all our members, with the new SDR allocation. They have received nearly $750 million equivalent of SDRs. This is helpful for the near‑term fiscal pressures, and we very much look forward to hearing from the authorities, what their policy priorities are, to engage into what could be eventually supported through a Fund program.

Mr. RICE: Thanks very much, Kristalina, for taking those three in a clutch. Let's come back into the room and take the last question. We have covered Africa. We have covered the Middle East a bit, Latin America. I want to take a question from Asia, please.

QUESTION: Thank you, Gerry. And thank you, Madam Managing Director. Our question is on global climate action. Many say 2021 is a catalyst year for climate action, and we have seen many major economies taking up efforts to tackle this challenge. I wonder, from the IMF's perspective, what are the major climate action priorities right now? And on a more specific note, there are a lot of young people trying to get into this climate action as well, and I wonder, how does the IMF see the role of young people in global climate action, and how is the IMF empowering the youth to take climate action? Thank you very much.

Ms. GEORGIEVA: Thank you for this question. We have been working very hard on policy priorities for climate action. Why? Because, very clearly, the risks of a changing climate are macro‑critical and the responses offer opportunities for green growth and green jobs that we would like to see and support.

From our perspective, there are four priorities for Asia. Actually, these are priorities that are global, but Asia being a high population region, high economic output region, and, therefore, very important in terms of CO2 emissions and in terms of resilience to climate change. It is a critical, critical part of the world.

What we recommend is, first, to urge policymakers to put incentives in place that underpin the transition to a low‑carbon economy. There are two incentives that economies embrace, and we embrace them at the Fund. One, eliminate harmful subsidies. Two, put a price on carbon. And, actually, putting a price on carbon in a sense adds to eliminating subsidies just by making full cost assessment in production and a signal to consumers in that regard. What are we talking about? We are talking about carbon price going‑‑global average carbon price going up from $3 a ton, where it is today, to $75 a ton in 2030. And I welcome very much steps that have been taken in Asia toward putting a price on carbon. I just heard from Sri Mulyani, the Finance Minister of Indonesia, that in this crisis, Indonesia has taken steps in the direction of pricing carbon, and so have done many other economies, including China, with carbon trade recently. But that price has to go up to the right level if it is to be a powerful transformational signal.

We are also proposing an international carbon price floor for big emitters. So when big emitters agree among themselves on a price that respects their different levels of development, that allows different pricing approaches—it can be a tax, it can be trade. It can be even regulatory equivalency that provides that same price signal—they can drive this transformation forward.

Second, invest in green infrastructure, green mobility. Public sector investment cannot ignore the transformation our economies have to take.

Three, do that, recognizing that the transition to low‑carbon economy does hurt some people and some businesses. If you are a coal miner, society owes you a pathway to this New Climate Economy that guarantees you a job, [making a living], and that just transition within countries also has to be happening across countries.

Last, but not least, and in Asia—and I am thinking of the Philippines—I mean, actually, all over Asia—climate shocks are already a huge, huge economic distress. Adaptation, resilience to future shocks is where Asia can lead the world.

I remember being in Japan, in one of their flood management infrastructures—they called it the flood cathedral—there is so much Asia has invented that has to be applied in agriculture, coastal development, everywhere in Asia, but Asia can help the rest of the world because you are ahead. Being hit the hardest, you can help the rest to adapt.

And for young people, speak up. Engage. What we do at the Fund, we have a new climate challenge, and it is amazing how young people are the first to step forward in it.

It is your future. I look at you. You want to live on a planet that is resilient, beautiful, this little blue dot, the only home we would ever know. Speak up. Stand up. Advocate for what is right.

Mr. RICE: Kristalina, that is a great note on which to end this press conference. Thanks to all for joining. Thanks to the Managing Director. I look forward to seeing you over the next couple of days. And we will have another press conference actually tomorrow for the conclusion of the IMFC, the International Monetary and Financial Committee. So I look forward to seeing you all again there. And, again, warm welcome to our Annual Meetings. Bye, everyone.

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