Transcript of April 2023 MD Kristalina Georgieva Press Briefing on GPA
IMF News, April 14, 2023
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- Published: April 14, 2023
Opening remarks — global outlook and risks
- Global growth projection: slow down to 2.8 percent in 2023 and remain weak at around 3 percent over the next five years.
- IMF characterization: "the weakest medium‑term forecast in decades."
- Underlying inflation: described as "stubbornly high."
- Geopolitical factors: contribute to economic fragmentation, affecting trade and capital flows and increasing downside risks.
- Recent banking sector pressures: make fighting inflation and safeguarding financial stability more complex.
- Vulnerability of low‑income countries: high levels of debt and lagging per capita income growth make catching up harder.
Three priorities of the Global Policy Agenda
- Priority 1 — Restore price stability and safeguard financial stability:
- Central banks: expected to "stay the course" and hold a tight stance to prevent de‑anchoring of inflation expectations.
- Fiscal policy: "Further efforts to reduce budget deficits" to support inflation fight and reduce debt, while protecting the most vulnerable.
- Financial stability monitoring: vigilance on risks hidden in banks, non‑bank financial institutions, and sectors such as commercial real estate.
- Priority 2 — Rebuild foundations for future prosperity:
- Structural transformations: accelerate digital revolution, improve business environment, boost human capital and inclusion, and advance the green energy transformation.
- Investment need for renewable energy: "We estimate $1 trillion a year needed just for renewable energy."
- Costs of fragmentation:
- Trade fragmentation long‑term cost: "as high as 7 percent of global gross domestic product (GDP)."
- Technological decoupling potential loss: "some countries could lose up to 12 percent of GDP."
- Fragmentation of capital flows, including FDI, would further hit global growth.
- Priority 3 — Solidarity with the most vulnerable countries:
- IMF financing since pandemic start: "nearly $300 billion in new financing for 96 countries."
- Recent Board approvals: "Just in the six months since our Annual Meetings in October, our Board has approved 23 new borrowing arrangements."
- Precautionary facilities: "Nearly half of our financial commitments in the last three years has been done through our precautionary facilities."
- Resilience and Sustainability Trust (RST): "We have five countries already benefiting from the RST. We have 44 expressing interest in it."
Sovereign debt restructuring and the global sovereign debt roundtable
- Roundtable co‑chairs: World Bank, IMF, and India as G20 Chair; first time public, private creditors and borrowers sat together.
- Outcomes and agreed actions:
- Improve information sharing on macroeconomic projections and debt sustainability assessments at an early stage of restructuring processes.
- Common understanding on the role MDBs can play, notably through provision of positive net flows of concessional finance.
- Establish a clear workstream, including a workshop on how to access and enforce comparability of treatment, with the main purpose to accelerate restructuring.
- Timelines and comparability of treatment:
- Need to define principles and parameters for setting timelines; recognition that decisions will be case‑by‑case but within defined timelines.
- Lending into arrears policy:
- Policy exists and was applied in the case of Suriname.
- Rationale: allows IMF support when a creditor has not provided assurances; risks include "kicking the can down the road" and potential moral hazard if a country later pays a holdout creditor.
- Position: it is "an option that we will use when we believe there is no way to do the best one, to be in plan A" — where plan A is debt restructuring.
IMF concessional financing and PRGT funding appeal
- Concessional financing growth: "has increased more than four‑fold since the onset of COVID."
- IMF funding request coming into the Spring Meetings: "we have been calling for $4.7 billion in additional loan resources and $1.6 billion in additional subsidy resources to maintain interest‑free support."
- Recent pledges: five countries — "Ireland, Japan, Portugal, Saudi Arabia and the U.K." — have come forward with substantial new pledges or contributions.
- Call to members: successful completion of the Review of Quotas this year to sustain IMF capacity.
Country‑specific updates and program implementation
- Argentina:
- Executive Board completed the fourth review of the program on March 31.
- Authorities faced a severe drought; IMF partially accommodated impacts in modification of the net international reserve accumulation target.
- IMF emphasis: continued commitment depends on policy implementation.
- Ghana:
- IMF team has been working to put in place "a 3 billion support program for Ghana."
- Expectation of creditor discussions "next week" and optimism that creditors will move swiftly; program described as a "bridge" for Ghana to return to markets.
- China:
- Managing Director visit noted meetings with Premier Li Qiang and other leaders; impressed by China's continuing reopening and reforms.
- IMF projection for China in 2023: "5.2 percent growth."
- Domestic Chinese projection cited as "about 5 percent."
- Role in global growth: "China this year is going to contribute about one third of global growth."
- Spillovers: "1 percent more growth in China translates into 0.3 percent more growth for the economies that are connected to China."
- Challenges flagged: handling real estate and redirecting growth toward domestic consumption.
- India and G20:
- India praised for focusing the G20 on key global economic challenges, digitalization, and active engagement on debt issues and the sovereign debt roundtable.
- Pakistan:
- Climate vulnerability stressed; recent floods described as "much more dramatic" than 2011.
- IMF working with authorities under current program to avoid debt becoming unsustainable; discussing financial assurances with supporters to complete the program.
- Egypt:
- Extended Fund Facility (EFF) program elements: exchange rate liberalization; increase private sector role; moderate timing of long‑term investment projects to protect macro stability.
- Review process: teams preparing to carry out the review following the program approved last December; the first review had been planned for "the 15 of March."
- IMF role: anchor debt resolution through programs and support for inclusive and effective debt resolution processes.
IMF operational stance and institutional role
- IMF as convenor: emphasized as an institution that "bring everybody around the same table" to build common understanding and trust amid fragmentation pressures.
- Financing support rationale: IMF programs "anchor debt resolution," highlighting the need for IMF financial capacity to contribute to debt restructuring efforts.
Fragmentation, friend‑shoring, and supply‑chain security
- Drivers: COVID and Russia’s invasion of Ukraine have elevated security of supplies and reliable supply chains to higher priority.
- Concern: risk of a new "cold war" style split would cause loss of talent and contributions and harm global welfare.
- Cost estimates of fragmentation referenced from IMF analysis:
- Trade fragmentation costs between "0.2 percent and 7 percent."
- Technological decoupling could produce larger losses (see earlier: "up to 12 percent of GDP" for some countries).
- Policy prescription:
- Enhance security of supplies without pushing the world into deep fragmentation.
- Use institutions (like the IMF) and cooler‑headed policymaking to keep fragmentation costs low and defend citizens’ interests globally.
Transcript of April 14, 2023 press briefing with Kristalina Georgieva, Managing Director, IMF.