Transcript of IMF Media Roundtable on Ukraine

March 10, 2022




IMF Managing Director


First Deputy Managing Director


Director, European Department


Director, Communications Department

MR. RICE: Hello, everyone and a warm welcome to this briefing on behalf of the International Monetary Fund. I’m Gerry Rice of the Communications Department. We thought it would be useful to have a briefing today on how the IMF is responding to the war in Ukraine and our analysis of the situation. So, we have with us this morning to do that, the Managing Director, Kristalina Georgieva; our First Deputy Managing Director, Gita Gopinath; and the Director of our European Department, Alfred Kammer. We have a very good selection of journalists from all around the world with us today. Thanks, again, for joining us. We’ll try and come to your questions. If you can keep them as succinct as possible, we’ll try and do the same, and take as many as we can; and I believe we have an agreed embargo time this afternoon of [3:00 p.m.], Washington time.

With that, let me turn to the Managing Director for some opening remarks and then we will come to your questions. Kristalina?

MS. GEORGIEVA: Thank you, Gerry, and many thanks for all of you for joining us today to reflect on the dramatic consequences of Russia’s invasion of Ukraine—first and foremost, in Ukraine, itself, but also in the region and the world; and I would take those in turn, starting from Ukraine.

You all see the horrific toll on people, loss of lives, human suffering, massive increasing refugees. But there is also a significant economic toll. Already damages on infrastructure are massive. We have shortages of food, medicine; in some parts of the country electricity running short; and the most valuable part of Ukraine’s richness—its human capital—is leaving in numbers we have not seen in Europe since the Second World War.

Even if hostilities were to end right now, the recovery and reconstruction costs are already massive.

President Zelensky, in our phone call, actually zeroed in on that, calling on the Fund to be ready to help mobilize financing and work with others for the rebuilding of the country.

IMF staff has been in constant contact with their Ukrainian counterparts from February 24 onward, and they have provided for Ukraine two very important support functions: one, work with Ukraine on crisis management measures that the Central Bank and the finance authorities had swiftly introduced; and two, coming up with very swift response to the request for emergency financing. Yesterday, our Board approved it, $1.4 billion; and one minute to close of business yesterday, this money was disbursed in Ukraine’s SDR account.

This comes on top of the $2.7 billion in SDR allocation issued to Ukraine that came so handy right now, and the $700 million was disbursed in December under our, at that point, existing program.

We have been very impressed by the determination of the Ukrainian authorities, and my colleagues were telling me that as they are discussing matters, they can hear the air raid sirens. And yet, work goes on.

Of course, we stand ready to do more. As the conditions in the country evolve, we will do our best to be of service.

Let me now turn to the impact on the region, starting from Russia. Unprecedented sanctions have led to abrupt contraction of the Russian economy, moving into a deep recession. We are mindful that massive currency depreciation is driving inflation up. It is denting severely the purchasing power and standards of living for a vast majority of the Russian population.

Spillovers to neighboring countries are also significant. In particular, countries that are more closely integrated with the Ukrainian and the Russian economy. The main channels of this spillover is to the neighborhood—Central Asia, the Caucuses, Moldova, the Baltic countries—are trade, the interruption in remittances, and influx of refugees. And that is demonstrably affecting the outlook for the immediate neighborhoods.

Let me express my respect for all the countries that are receiving Ukrainian refugees—mostly women and children, many elderly—for what they have done to cushion the tragedy that they are experiencing. And so, we need to be aware that the number is now 2.1 million, but it can get much higher. Not surprisingly, some of the countries in the neighborhood are already discussing with us, possibly, the need of support. More specifically, Moldova, that has a program with the Fund and is asking for an augmentation of this program. We work very closely with our partners, with the World Bank and other institutions to make sure that the response is as effective as possible.

Let me now talk about the spillovers, globally, for the rest of the world. The economic fallout of the work is being transmitted through three key channels.

First and most impactful: higher commodities prices. Second: impact on reducing real income because also of inflation and how that reflects in the real economy. And three: impact on financial conditions and business confidence.

So, let me elaborate a bit on these three transmission channels. The surging prices for energy and other commodities—wheat, corn, metals, inputs for fertilizers, semiconductors—they are coming in many countries on top of already high inflation and are causing great concern in so many places around the world. It’s especially dangerous for families that are living in poverty, for whom food and fuel are the higher proportion of their expenses. When we look at the real economy, clearly we see contraction in trade, but also, a dent on consumer confidence and purchasing power.

And that takes me to the third and also quite significant channel, financial conditions and business confidence. Financial conditions have been already tightening in many countries with this pressure from especially oil and gas prices.

On inflation, we might see those tightening measures go faster and go further. And that is obviously mostly worrisome for countries that are in a tight place to begin with. And particularly troubling for emerging markets that may see the combined impact of a dent on business confidence and tightening conditions putting them in a more troubled place.

So, to sum it up, we have tragic impact of the war on Ukraine. We have contraction on a significant basis in Russia. And we see the likely impact on our World Economic Outlook [that] we will come up with next month to be a downward division of our growth projections. So, we got through a crisis like no other with the pandemic, and we are now in an even more shocking territory. The unthinkable happened: we have a war in Europe.

MR. RICE: Thank you very much, Kristalina. Let's turn to your questions. And again, we're trying to take as many questions as we can. I see your hands raised there. Thank you so much. I think it might be appropriate to begin with Yarolsave Govdopol from Ukraine. Yaroslav, would you like to come in?

QUESTIONER: Thank you. Thank you for doing this.

First, as a citizen of Ukraine, I want to thank the IMF and the international community for supporting Ukraine. It's really very important for the country, for the Ukrainian people, for my family as well, which has been hiding in a bomb shelter for two weeks now.

So, I would like to start with the question about the RFI program with one 1.4 billion US dollars for Ukraine. Can you give us some more details about the program, when and how you can go and see this money? What are the conditions, and what's next. It's how different the economy considering current matters that the Government takes. Thank you.

MS. GEORGIEVA: Yaroslav, my heartfelt sympathy to you and your family. It is the bravery of the Ukranian people that impresses me the most, and the suffering of Uranian people that is so heartbreaking to witness.

We have provided the $1.4 billion emergency financing according to the policy we have for emergency financing and that means that it is swiftly disbursed. As I said, already in the Ukrainian account with the objective to support the functioning of the Ukrainian economy and especially the ability of the Ukrainian authorities to pay salaries, pensions,provide the necessary funding for basic services. We had a very good experience with emergency financing for Ukraine, for the Covid crisis. Ukraine has audited how the money was spent and has provided a very good account on the role this emergency financing played. And we will be doing the same this time around. We will work with Ukrainian authorities, as the funding has been provided for vital functions of the State, that we can, in the end, take stock of how this money helped Ukraine in this very, very difficult moment.

We are also discussing with Ukraine what may be necessary further as support and at this point, the most significant and relevant call from Ukraine is on the crisis management side. How to make sure that the functioning of the Ukrainian economy, the Central Bank, the Ministry of Finance, the key authorities is best tuned to the current crisis' circumstances. We are ready to provide additional financing should that be necessary. At this point, as I said, the most critical ask from us is to make sure that Ukraine functions.

MR. RICE: Thank you, Kristalina. A wonderful mix of global journalists today, as I mentioned. Let's come to Lalit Ja of Press Plus India.

QUESTIONER: Hi. Thank you for doing. You rightly explained how this war is going to have an impact on it globally. So, you know that the Prime Minister of India was talking a few hours ago abought India's dependence on natural resources and how the prices of energy and ga, or the other like, oil prices going up and it's causing Indian people about this would have an impact on the economy. I just wanted to ask you about how this war, Russian invasion the global, the U.S. got an extensions on the struggle to be guided is going to have an impact on countries like India, developing economies at all the levels in particular, and what is the matters to these countries, how they can advance the challenges in global economy?

MR. GEORGIEVA: Well, clearly, the multi-difficult channel of impact on the Indian economy is as your question indicated energy prices. India is, I mean, portal and the increase in energy prices is going to have a negative impact. India has been very good in managing its finances. There is some, not a lot, but some fiscal space to be able to respond and our advice to our members is first and foremost, make sure that you protect the most vulnerable populations from the shot up of prices about energy, but also, food prices for countries where this is going to be a significant factor. Target your fiscal space to those that are in greatest need to be supported.

And we also would be looking into monetary policy responses. How could they be calibrated appropriately to what is happening? I actually can ask Gita,

Gita, would you like to add to that?

MS. GOPINATH: I think you covered the main in aspects. India relies heavily on energy imports and with prices going up the way they are, that has implications for purchasing power of Indian households. And also, for just if you're looking at headline inflation numbers, of inflation in India is close to around 6 percent range, which is at the upper end of the inflation band of the Bank of India. So, this obviously has implications for monetary policy in the country. And it is a challenge to recovering many parts of the world, not just India.

MR. RICE: Thanks very much, Gita. Thank you, Kristalina. Let me go to Abrahim Mamoon of MENA News. And again, folks, I see your hands raised. We'll try and come to every one, okay? But let's go to Abrahim Mamoon, please. Abrahim, are you there?

MR. RICE: I'm not hearing Abrahim. Let's come back to Abrahim. And in the interim, let's turn to Andrea Shalal Reuters. Andrea, do you want to come in?

QUESTIONER: Sure, thank you so much. Really appreciate you're doing this and express my support too, to Yaroslav and so sorry to hear about your family. I just wanted to ask, we've talked about the massive reconstruction cost. This morning, the chief economic advisor to President Zelensky, said that costs already at a $100 billion. Could you have any, can you kind of give us some details about that? Is there a cost of reconstruction and recovery. And then, just as an adjacent question to that, your statement yesterday, you talked about at 1.4 billion mobilizing additional support, can you say a few more words about what you expect? My understanding is that under the RFI, Ukraine can come back and ask for more money under the RFI.

MS. GEORGIEVA: thank you for this question. It is too early to have any assessment of damage, costs, and reconstruction plans. The Ukrainian authorities being on the ground, they had some senses to where the most dramatic destruction has occurred. But for us, the IMF, or the World Bank, we need to see the end of hostilities to be able to assess what would be required for reconstruction.

This being said, the order of magnitude is going to be quite large. We're talking about the large country, 44 million people, population with massive destructions seen in the key cities, Kiev, as well as massive destruction of transport infrastructure. So, all the magnitude may be around what Ukrainian authorities are flagging, but for us, we need to get to a point when we can work the World Bank and other institutions to assess what exactly the reconstruction is going to be.

To your second question, we have been discussing the possibility of mobilizing financing in a more coordinated manner. This is what President Zelensky asked us for. He had this vision for specific funding channels to help the population, to help businesses and to direct the reconstruction and at this point, we are preparing ourselves to present to others who are there willing to help Ukraine a funding mechanism to do so. It is always the case that when the IMF provides significant financing, that anchors some of the dollars into coming to the help of the affected country, in this case, Ukraine. And I am sure this would be the case this time around.

MR. RICE: Thanks very much, Kristalina. Let me turn to the FT and Colby Smith. Colby?

QUESTIONER: Thank you so much for taking my question. I just wanted to follow-up on what Andrea just asked. Is additional SDR allocation to Ukraine under discussions at all and to that point, what ability, if any, will Russia have to access its SDR allocation from last year and are there any efforts underway as well to block that? Thank you.

MS. GEORGIEVA: So, let me step back and say that we have no program relations, or policy relations with Russia at this point and our Moscow office is not operational. When it comes down to the use of SDRs, those of you that are familiar with the SDRs know that to be converted into currency, that has to be done with the involvement of financial intermediations, financial institutions and there has to be a willing party and at this point, given the sanction regime that is really unprecedented on Russia. This is highly, highly, highly improbable. Alfred, do you want to add to that? Alfred is our director for the European Region.

MR. KAMMER: Yeah, in a nutshell, it's the issue Russia has and SDR account here at the Fund and the question, of course, then given the sanction is, how to access these SDRs. But that is a membership issue and we are not involved in this.

MR. RICE: Okay, thanks very much Alfred and Kristalina. Let me turn to Alan Rappaport in New York Times. Alan, can you come in?

QUESTIONER: Thanks very much for taking my question. I wanted to ask what you see as a likelihood of a Russian default and what some of the ramifications of that would be for the global economy.

MS. GEORGIEVA: Well, the Russian default is no more an improbable event. Let me answer it in this way. We, obviously, have to see what is the prospect for peace and secondly, what is the prospect for allowing service of debt obligation. Because in this case, with Russia, it's not that Russian doesn't have money. Russia cannot use this money. So, I'm not going to speculate what may or may not happen, but just to say that no more we talk about Russian default as improbable event.

MR. RICE: Thanks very much, Kristalina. Let me turn to Delphine, Delphine with AFP, come on in Delphine, if you can.

QUESTIONER: Thank you everyone. I have a question -- actually, a follow up on Russia, So, does it mean that you don't have any resident representative in Moscow and and can you just give us when the sense of the scale of recession in Russia?

MR. RICE: The first question was, do we have a resident representative. And the second one was, do we have a sense of the scale of recession in Russia?

MS. GEORGIEVA: To your first question, no, we do not have resident representative in Moscow. And as I said, our office is not operational. To you second question, we are currently, carefully assessing data to be able to answer in a more prudent way what is going to be the size of Russian contractions, but the Russian economy is contracting and

that the recession in Russia is going to be deep, that is already clear. The factor that is going to be most significant is the duration of the war and the duration of the sanction regime on Russia. And whether or not this sanction regime may get even deeper with spillover on energy exports from Russia. But I can say categorically the Russian economy is experiencing a sharp contraction.

MR. RICE: Thanks, Kristalina. Alfred, do you want to add?

MR. KAMMER: So it's the sanctions for Russia really have been extremely far reaching and we saw their impact in terms of impacting financial markets, impacting the equity market, impacting the foreign exchange market already when they were announced. They are very complex, they are still developing so we'll need to see how that is going to develop.

But the bottom line is that they are making it more difficult to pay for financing. This will make it more difficult to pay for imports, to get export receipts. These sanctions will also impact on consumer confidence. They will increase uncertainty and therefore when we are looking at the Russian economic developments, we are expecting a deep recession to materialize this year.

MR. RICE: Thanks very much Alfred and Kristalina. Let me turn to Bloomberg, Eric Martin. Come on in, Eric.

QUESTIONER: Yes, thank you so much Managing Director and Gita and Alfred. I wanted to ask you about Russia's current status with the Fund. We understand there has been some effort by some Fund members to punish Russia for this unprovoked invasion. And I wanted to ask about the -- whether there is any discussion or if any decision has been taken or discussed to suspend Russia's Fund membership or penalize Russia in any way regarding Russia's status at the Fund. And whether Russia will be allowed a standard in full participation in the upcoming Spring Meetings next month.

MS. GEORGIEVA: As I said in operational terms, we don’t have any engagement with Russia. In terms of membership, it is defined for Russia, and many other members of the Fund, by the Funds Articles of Agreement. And the Articles of Agreement do provide a pathway for a country to be excluded on the basis of this country violating its Article of Agreement obligations.

They are economic obligations, and in that sense is Russia current on its economic obligations? The situation is such that they are. Is the membership highly concerned about the war, yes. When we had the discussions at our board of directors, it is very clear that the membership condemns the war. Beyond that condemnation, there have been no discussions at this point around Russia's membership at the Fund. We are in a fast-evolving situation and we will see whether events in Ukraine take a turn for the better or not.

MR. RICE: Thanks, Kristalina. Let me turn to Nikkei and Masahiro Okoshi. Can you come in?

QUESTIONER: Yeah, hello. I'd like to follow up actually report a question about the SDRs. What (inaudible) so it is important to make reveal to provide SDRs to China --

MS. GEORGIEVA: We do have a very complex and severe sanction regime on Russia. And that makes financial transactions either prohibitive or severely restricted and that applies to the SDR allocations of Russia. At this point, no clear pathway to use the SDRs is on the way and I do not see any easy way to overcome the comprehensive sanctions imposed on Russia. So whether the account can be used is a very questionable matter.

MR. RICE: Thanks very much, Kristalina. Let me turn to Marc Arcus of EFE. Hi Marc, see you there, come on in.

QUESTIONER: Yeah, hi, thank you. So you described the three effects for the global economy of the war in Ukraine. I'm particularly interested in knowing what the Fund sees for the region of Latin America and the Caribbean given its, you know, strong ties to the Russian economy that have strengthened in the last few years and given also the region is already suffering from very high inflation.

MS. GEORGIEVA: Well for Latin America and the Caribbean, certainly the war is bad news. It is for everybody but also for the Latin American countries. Why, because Latin America has been struggling to recover from the COVID induced recession. As you know in quite a number of countries, inflation has jumped up even before the Ukrainian crisis, Ukrainian war.

On top of it comes pressure on energy prices. For some of the Latin American countries that are either oil exporters or food exporters, there could be a silver lining because they would have more opportunities to raise revenues. But even for the food exporters, there are concerns around the availability of fertilizers, the functioning of the global trade system under the very deep and heavy cloud of war in Ukraine.

So when we look -- and then you have the Caribbean region that has been looking for a post-COVID tourism recovery. What we are likely to see is high inflation eroding real incomes and therefore suppressing somewhat demand for goods and services including for tourism. And, of course, for some countries where Russian and Ukrainian tourists were a reasonably high share of the tourism revenues, that source of revenue has abruptly dried up.

We are very keen to work with our members from Latin America and the Caribbean on the policy front to make sure that policies put in place in this situation are actually helpful to steer through. And in some countries, that also means being a bit braver on undertaking structural reforms and makes some of the issues they had been experiencing before like the need to deal with energy subsidies even more pressing.

MR. RICE: Thanks, Kristalina. Look, we're fast running out of time. I want to suggest we take a clutch of questions, just do a little bit of tour de monde and then Kristalina and Gita can come back. But I want to take Reed Kramer. Reed if you have a quick question on Africa. Pan Gao, Pan if you have a question on China, Asia. And then Abrahim Mamoun, Abrahim, we missed you earlier on MENA region. So let's do these quickly if we can and then Kristalina and Gita will come back. Reed, you're up first, Reed Kramer on Africa.

QUESTIONER: Yes. Could you elaborate on how the Fund plans to assist the African countries. And specifically the role you envision for the resilience and sustainability trust that is mentioned in your statement in yesterday's meeting with African Ministers and central bank governors.

MR. RICE: Thanks, Reed. Let's go to Pan Geo.

QUESTIONER: Yes, thank you. I'm wondering if you think oil prices and Ukraine crisis will impact China economy and for the Asian economy. And what's your take on the impacts for the Ukraine crisis on the global economic integration in the long term. Because that discussion among developing countries about international reserves to avoid (inaudible) on western finance which is needed to assist the global economy. Thank you.

MR. RICE: Thanks, Pan. Abrahim, can we hear you? Try again, please sir.

QUESTIONER: Yeah, sorry for the first time and allowing me to ask my question. My question is, the supply chain of grain has pushed the price higher and affected the inflation targets of MENA countries. So how do you think the IMF will help encounter including Egypt?

MR. RICE: So let me just try and repeat the broad questions. The first one was relating to impact on Africa. The second one was related to the impact on China, Asia and more broadly on the global. And then Abrahim was asking about the impact of the war broadly on Middle East supply chains and particularly Egypt. So Kristalina, perhaps between yourself and Gita.

MS. GEORGIEVA: We will cover it. I will give some answers. Gita then is going to fix whatever I have left out and we will wrap it up. So on Africa, let's remember that Africa is struggling to recover still falling behind in terms of growth rates to the rest of the world since countries were hit by the COVID induced recession.

Fiscal space - very limited. Quite a number of countries under a very high burden of debt. And now they are experiencing the shock, the spillovers from the war in Ukraine. For Africa, there are four channels that are hitting them in this crisis. First, energy prices - we have 12 countries in Africa that are energy exporters, 42 that are energy importers. With the limited fiscal space they have, this is a real shock.

Second, food prices. Quite a number of African countries already see food insecurity on a very large scale. Sudan, Ethiopia, probably the Horn of Africa region already in difficulty and now food prices are shooting up. Some of these countries import with corn from Russian and Ukraine and that is going to be a dramatic difficulty for them.

Three, they have been struggling to overcome the precious debt service with financial conditions starting to tighten. This is now going to be even more dramatic.

Four, for the countries that are relying on tourism, Ukrainian Russian tourists were a big part. Think of Egypt, for example, now they're going to be hit. So for Africa, the African ministers were telling me that it is really crucial to find a way to buffer their economies. And also, many of them are thinking what can we do to put us on a sounder footing? In other words, thankfully there is more appetite for reforms.

On the RST- Resilience and Sustainability Trust- we will have the design approved by our Board by the Spring Meetings and it will be in implementation by the Annual Meetings. Many African countries are interested in it. Those that have either financial or non-financial arrangements with the Fund are likely to be eligible and candidates for it. And what I encouraged the ministers yesterday was work early on your plans so you can benefit from the Trust once it becomes available.

On the question of China, broadly Asia, there are a number of countries in Asia where the energy price shock is going to be felt. That also applies to China. China does have more policy space than many other countries so there can be actions taken to cushion the impact on the economy and try to sustain a growth rate around the 5 percent in China. They're aiming for 5.5 percent within that. That may be hard to achieve but in this order of magnitude, of course, China growing, good for China but also positive spillovers for other countries.

When it comes down to diversification of reserves, let's remember every time there is a shock, countries draw lessons out of the shock and they work on protecting themselves for the future. What is truly concerning is that if we are in a situation in which we cannot overcome tensions rapidly, if the war doesn't go in history fast, we may see some negative impact on the multilateral capacity to cushion countries against crisis.

In other words, more reliance on bilateral or regional arrangements which is less effective than when we have a global safety net with the Fund at the center, regional financial arrangements serving regions accordingly and national buffers built with the strength to withstand shocks.

So our job at the Fund is to make sure that we keep the membership together because we live in a more shock prone world and we need strength of the collective to deal with shocks to come.

On MENA, partially what I said about Africa applies for the MENA region. Of course, we have a part of MENA that are energy exporters and their fiscal position improved with the price of oil and gas shooting up. But for countries in the region overall, uncertainty, tightening of financial conditions, that caused a problem and for those that are energy and food importers, the pressure that is coming from developments globally will be felt locally quite severely.

I worry for Egypt. If we have a sustained high food and energy prices, how this is going to impact people in Egypt. And in that sense, we are already engaged in discussion with Egypt on how to target vulnerable populations and vulnerable businesses. How to soften the impact that is hit in these countries. Gita, anything I missed or misspoke, you now are the last word from our side.

MS. GOPINATH: Kristalina, you covered it all. I will just make one point on the question on globalization and whether the Russian invasion of Ukraine and the sanctions that came as a consequence will at this time trigger deglobalization that we've been worrying about.

I would say firstly that a lot depends on the duration of this war and therefore, consequentially the severity of the sanctions and how long it lasts. But it is fair to say that the global system will change in important ways. It's quite clear that when it comes to the energy sector, you're already hearing about diversification away from Russia in terms of the source of supply of energy. A move towards, you know, a push that this is the time to make the transition to renewables that has been talked about and maybe this is the moment to seize.

So as you can see the change in the energy sector and you are seeing changes happening in terms of payment systems around the world, I think that the current events will accelerate most of the transitions including changes we might see in terms of digital currency, central bank, digital coin. And again, when it comes to reserves, I think again events of this kind can have important implications of what reserve countries decide to hold. So it's too early to tell how all of this will play out but I think it's fair to say that there are some important consequences for the global economy.

MR. RICE: Thank you, Gita, thank you Kristalina, thank you Alfred. Thanks to all of you for joining us today. Sorry we can't go longer but we will do this again soon. And remembering the embargo of 3:30 and wishing you all the very best and see you again.

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