Transcript of IMF Press Briefing
IMF News, March 18, 2022
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- Published: March 18, 2022
Overview & context
- Date: March 18, 2022.
- Moderator: Gerry Rice, Communications Department.
- Press officer contact: Ting Yan — Phone: +1 202 623-7100Email: MEDIA@IMF.org.
- Briefing embargo: embargoed until 10:30am (Washington time).
- Upcoming IMF events announced during the briefing:
- Managing Director Kristalina Georgieva to speak at a high-level panel on strengthening support for fragile and conflict affected states — live on imf.org tomorrow at nine o'clock.
- Live stream conversation with Kristalina Georgieva and First Deputy Managing Director Gita Gopinath with Foreign Policy editor Ravi Agrawal — live Tuesday, March 22, at 11am.
Immediate IMF response to the war in Ukraine
- Humanitarian and economic concern:
- The IMF has expressed "profound concern about the humanitarian suffering" in Ukraine and the broader global economic impact.
- Emergency financing and analysis:
- The IMF approved emergency financing for Ukraine of $1.4 billion, "money that's disbursed immediately to help with urgent needs in Ukraine."
- IMF staff analysis and management statements (including by Kristalina Georgieva and Gita Gopinath) and a blog by five area heads of department discuss the global impact of the war.
- A one stop-shop landing page on imf.org consolidates IMF actions on the war in Ukraine.
- Expected revisions and publications:
- IMF staff expect the growth forecast "as likely to be revised down next month" in the World Economic Outlook and subsequent regional economic outlooks.
IMF-administered account and SDRs for Ukraine
- Purpose and function:
- The IMF is exploring creation of an IMF administered account to allow interested donors to pool and channel resources (loans and/or grants) to assist Ukraine in meeting extraordinary balance of payments and budget needs arising from the war.
- Funding and disbursement mechanics:
- The administered account could receive loans and/or grants in either SDRs or reserve currencies and disperse these resources to Ukraine upon meeting specific disbursement conditions established by lenders and donors for the account.
- Resources lent through this administered account can be deposited in the SDR account at the Fund to help safeguard use of the resources.
- Precedent:
- The IMF has used single or multi-donor administered accounts before to channel resources to countries in need.
Global and regional economic impacts highlighted
- General:
- The war is described as "a major blow to the global economy" that "is going to hurt growth and It's going to raise prices."
- Vulnerable countries, particularly in the developing world, will face steeper price increases for food and fuel and be hit more seriously.
- The severity and duration of the conflict are key factors determining the economic impact.
- Asia, China, and India:
- Asia: The crisis adds to existing tradeoffs—rising inflation, limited fiscal space, and the prospect of rising global interest rates amid high public and corporate debt.
- China:
- The immediate impact on China is "likely to be relatively small."
- "Overall, Chinese exports to Russia are a relatively small share of exports."
- China would be affected if trade partner growth slowed significantly, serious supply-side disruptions emerged, or global financial markets were more severely impacted.
- India:
- The global fallout is expected to negatively impact India through multiple channels differing from COVID-19 effects.
- The sharp rise in global oil prices represents "an important terms of trade shock" that will lead to higher inflation and current account deficit.
- Potential partial offsets include favorable movements in prices of commodities India exports (for example, wheat).
- The negative impact on US, EU, and Chinese economies could dampen external demand for India's exports; supply chain disruptions could affect import volumes and prices.
- Tightening financial conditions and heightened uncertainty can affect domestic demand and the fiscal position via higher borrowing costs and reduced confidence.
- Outlook for India described as having "a great deal of uncertainty" that is "elevated" and dependent on magnitude and persistence of the shock and policy responses.
Country-specific dialogues and program updates
- Lebanon:
- Discussions with Lebanese authorities are continuing and included a recent staff visit.
- IMF expects another staff mission to Lebanon "before the end of this month."
- The IMF seeks to work with authorities to formulate a reform program addressing Lebanon's severe economic and financial challenges; "discussions are progressing well" but "extensive work is needed."
- Sri Lanka:
- The IMF concluded Article IV consultation (Board meeting late last month) and highlighted the urgent need for a credible coherent strategy to restore macroeconomic stability and debt sustainability while protecting vulnerable groups through strengthened well-targeted social safety nets.
- IMF "stands ready to discuss all options for Sri Lanka."
- Argentina:
- Staff-level agreement reached earlier this month on a program to be supported by the IMF, envisaged as a 30-month extended fund facility arrangement.
- Program goals: strengthen macroeconomic stability, address deep-rooted challenges to sustainable growth, provide balance of payments and budget support, stabilize the economy, promote growth, and protect essential social programs.
- Inflation and policy approach:
- Argentina recorded inflation of 52% in the last year.
- Program seeks to reduce persistent high inflation via a multi-pronged strategy including reduction of monetary financing of the fiscal deficit and a new framework for monetary policy implementation to deliver positive real interest rates to support peso asset demand.
- Inflation target range referenced in questions: "between 38% and a 48% this year."
- Board timing and legislative requirement:
- The Staff-level agreement requires IMF Executive Board approval.
- The Board is expected to discuss the program after the Argentine National Congress approves the economic and financial program (legislative consideration required by Argentina's domestic law).
- No date for the Board meeting was provided.
- On potential new IMF facilities:
- If the Executive Board were to establish any new facility (e.g., Resilience and Sustainability Trust) for which Argentina were eligible, IMF staff would work with authorities to facilitate a request; any request is subject to Board approval.
- Political economy:
- IMF does not comment on domestic politics but notes broad political and societal support in Argentina would be critical to program success.
- Pakistan:
- The IMF Board concluded Article IV consultation and completed the sixth review under the financing program, allowing for disbursement "of about a billion dollars" under the program.
- Discussions with Pakistan are characterized as constructive; detailed specifics were not provided publicly in the briefing.
- South Africa:
- IMF engagement focuses on reigniting growth, creating jobs, and reducing inequality; IMF stands ready to engage with political stakeholders including the Economic Freedom Fighters on implementation of economic reforms.
- Tunisia:
- Tunisia has requested an IMF-supported program.
- A small IMF staff team plans to visit Tunisia "later this month" (March) for further discussions to build on progress in understanding reform policies.
IMF governance, Board matters, and membership issues
- Dean of the Board:
- The Executive Board decided to temporarily suspend the role of Dean of the Board "given Russia's role in the ongoing war in Ukraine" and its potential impact on the ability of the executive director for Russia to carry out this task effectively.
- Clarification: This is not a suspension of the executive director for Russia, but temporary suspension of the honorary title of Dean (ascribed to the longest-serving executive director).
- Communications and publications:
- IMF published a blog by five area heads of departments on the global impact of the war and a recent blog earlier in the year on risks for emerging markets related to Fed policy.
Risks, global financial environment, and policy advice
- Fed normalization and emerging markets:
- The Federal Reserve is moving to a less accommodative stance, beginning increases in the Fed funds rate and signaling a higher future rate path; the decision referenced occurred "yesterday" (relative to the briefing).
- Faster Fed normalization increases risks for countries reliant on dollar funding, especially emerging and developing economies.
- IMF advises evaluating impacts case-by-case given differentiation across countries and the added impact of the war in Ukraine.
- IMF guidance (referenced blog): actions to strengthen policy frameworks and reduce vulnerabilities across monetary policy, fiscal policy, and financial support for business; importance of the global financial safety net and appropriate access to IMF support.
- Geopolitical fragmentation and long-term risks:
- IMF blog commentary highlights that increased geopolitical tensions could raise the risk of economic fragmentation—affecting trade, technology, payment networks, and reserve currency holdings—and could alter global economic and geopolitical arrangements.
Key statistics and program figures (as stated in the briefing)
- Emergency financing for Ukraine: $1.4 billion.
- Argentina program envisaged term: 30-month extended fund facility arrangement.
- Argentina inflation in the last year: 52%.
- Argentina inflation goal range referenced in questions: "between 38% and a 48% this year."
- Pakistan disbursement under program allowed: "about a billion dollars."
Source: IMF Communications Department, Transcript of IMF Press Briefing, March 18, 2022.