Transcript of IMF Press Briefing (March 31, 2022)

IMF News, March 31, 2022

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• Published: March 31, 2022

IMF communications, upcoming events, and publications

• Briefing led by Gerry Rice, Communications Department; embargo until 10:30 a.m. Washington time.
• Upcoming public events and releases:
  • April 5th, 9 o’clock: Press conference with Gita Gopinath in collaboration with the Global Fund, Wellcome Trust, and CEPI on building resilience to long-term Covid-19 (paper by Gita Gopinath and Ruchir Agawal).
  • April 6th, 8:30 a.m.: Panel moderated by Ceyla Pazarbasioglu on shoring up debt sustainability (panelists include John Lipsky, Ken Rogoff, Jason Rosario Braganza).
  • Curtain-raiser speech April 14th (with the Carnegie Endowment for National Peace).
  • Spring meetings: Monday April 18th though April 24th; all press events will be virtual while meetings are hybrid.
  • Analytical Chapters release timing corrected: April 11th reference corrected to Tuesday, April 19th for the World Economic Outlook (WEO) and Flagship Documents (WEO, Global Financial Stability Report, Fiscal Monitor, Global Policy Agenda).
  • Pierre-Olivier Gourinchas to participate in a Peterson Institute panel on a staff paper “Labor Market Tightness in Advanced Economies” at 1 p.m. Washington time.

Global supply disruptions, inflation, and policy guidance

• Key impacts and transmission channels:
  • War-induced supply disruptions, notably for food and energy, will increase the cost of living, particularly for low-income households.
  • These disruptions add to preexisting inflation pressures and can amplify supply-demand imbalances and commodity price increases.
  • Integration of Russia and Ukraine into global value chains extends beyond commodity linkages; disruptions can cascade across sectors (examples cited: production of neon gas, global car production, Ukraine’s production of electrical wiring systems, export disruption of fertilizers from Belarus affecting food production).
  • In the near term, limited scope for downstream producers to substitute alternative inputs leads to rapid amplification across sectors and borders.
• Distributional impacts:
  • Within countries: low-income households are most affected due to larger shares of expenditure on essentials like food and fuel; agricultural communities face conflicting effects (higher input costs vs. higher output prices).
  • Across countries: vulnerability depends on the food share of household consumption and types of food consumed; low-income countries and some emerging market economies (including in the Middle East and Central Asia) face inflation almost wholly driven by rising food prices.
  • Fuel and other commodity exporters may benefit somewhat from higher commodity prices, but the negative impacts predominate for the majority.
• Policy recommendations and cautions:
  • Targeted fiscal support can cushion the impact on low-income households.
  • Avoid policies with knock-on effects on supply and prices, e.g., commodity hoarding, export restrictions, and price controls.
  • Resist adding to existing trade disputes that risk global economic prospects.
  • If inflation risks un-anchor expectations and appears likely to be high over the medium term, central banks may have to raise interest rates faster than anticipated; policymakers should communicate clearly the inflation outlook and monetary policy stance.

Ukraine: emergency IMF support and donor channeling

• Immediate IMF financial actions and past support:
  • Executive Board approved emergency financing of $1.4 billion earlier in March; funds dispersed immediately.
  • Prior program support included a recent disbursement of $700 million.
  • As part of the SDR allocation, Ukraine received $2.7 billion.
• Work underway on donor vehicle:
  • IMF staff are preparing a proposal to establish an IMF-administered account to provide a donor-funded vehicle to channel loans and/or grants from interested donors to assist Ukraine.
  • No firm timing provided for when the administered account will be operational; updates expected in the lead-up to the Spring Meetings.

Country-specific engagement and program status

• Sri Lanka:
  • Sri Lankan authorities have expressed interest in IMF support and a financial program.
  • Program discussions are planned to be initiated, including during the Finance Minister’s visit to Washington in April (expected during the spring meetings).
  • Referenced published Article IV staff report and statement of February 25th for detailed analysis and selected indicators; an updated macroeconomic forecast will be included in April Flagship publications.
• Haiti:
  • IMF remains engaged and has been a main source of external financing to Haiti since 2019.
  • Recent IMF assistance to Haiti equivalent to about $365 million under the rapid credit facility, the containment and catastrophe containment and relief trust (debt relief), and an SDR allocation.
  • IMF staff held discussions this month with Haitian authorities on a Staff Monitored Program (SMP) that does not come with specific financing but aims to mobilize revenues and address reforms in key sectors.
• Lebanon:
  • An IMF staff team led by Ernesto Ramirez Rigo is visiting Lebanon (team arrived March 28) to discuss latest economic developments and possible IMF support.
  • Managing Director met Prime Minister Mikati; “extensive work is underway to complete a comprehensive reform program.” Discussions characterized as progressing well but extensive work remains.
• Tunisia:
  • IMF recent visit and staff statement indicated “further progress in the technical discussions with the Tunisian authorities.”
  • IMF stands ready to support Tunisia; technical discussions are ongoing and will continue actively in the coming weeks.
• Argentina:
  • Executive Board approved a new IMF financing arrangement for $44 billion under an Extended Fund Facility; there was an immediate disbursement related to that of $9.65 billion roughly.
  • Program objectives: provide balance of payments and budget support; strengthen public finances; reduce monetary financing of the fiscal deficit; enhance monetary and exchange rate policy framework; strengthen domestic peso debt market; improve effectiveness of government spending; labor and gender inclusion; increase competitiveness of key sectors.
  • Risks characterized as “exceptionally high” because of Argentina’s fragile economic and social situation (three years of recession 2018–2020, high poverty, persistent high inflation) and new global shocks related to the war in Ukraine.
  • Emphasis on implementation: success depends on ownership and effective implementation by Argentine authorities.
  • Surcharges: applicable only to countries with particularly large outstanding loans; policy is uniform for all Fund members and no country-specific exemptions are permitted; Executive Board recently reviewed the policy and no specific follow-up discussion is scheduled at this time.
  • Query noted about a $2.8 billion payment by Argentina due March 31; IMF to confirm payment status after the briefing.
• United States:
  • US economy described as “remains strong.”
  • Bringing inflation down will require concerted policy effort by the Federal Reserve; the Fed needs to calibrate policy to bring inflation back to 2% while achieving a soft landing; achieving a soft landing is challenging and comes with significant downside risks.
  • WEO update will provide further IMF views and forecasts for the US.
• Egypt:
  • Egyptian authorities have requested a comprehensive program that might include financial support; Kristalina Georgieva met Finance Minister Mohamed Maait.
  • IMF will support a program that helps buttress reserves, protect the vulnerable, and strengthen private sector-led growth; staff are preparing for program discussions.
  • No decision yet on program size or modalities; discussions are at an early stage.
• Ecuador:
  • No substantive update provided in the briefing; a query noted that a review was expected to end on the 18th (no further detail in this transcript).

Media engagement and next steps

• IMF staff will provide follow-up confirmations (e.g., on Argentina’s $2.8 billion payment) after the briefing.
• Further IMF communications and updates will be provided in the coming weeks, notably around the WEO/Flagship publications and Spring Meetings.

Transcript: IMF Press Briefing, March 31, 2022. International Monetary Fund.

References

• https://www.imf.org/sitecore/service/notfound.aspx?item=master%3A%7B8D1E6EAB-2E82-47BE-B9FE-258FFB4CBC4A%7D%40en
• Arab Republic of Egypt and the IMF
• Argentina and the IMF
• Haiti and the IMF
• Lebanon and the IMF
• Sri Lanka and the IMF
• Tunisia and the IMF
• Ukraine and the IMF
• Transcripts
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