Building Bridges to Future Growth | 2023 Annual Meetings Curtain Raiser Speech

IMF News, October 5, 2023

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Bibliographic details

• Authors: IMF Managing Director Kristalina Georgieva Abidjan
• Published: October 5, 2023

Context and opening themes

• Speech delivered by IMF Managing Director Kristalina Georgieva, Abidjan, Côte d'Ivoire, October 5, 2023.
• Emphasis on Africa as both a mirror of global challenges and a source of opportunity: abundant resources, creativity, energy, and the world’s youngest and fastest-growing population.
• Political and symbolic references: half a century since the Annual Meetings were last held in Africa (Nairobi in 1973); solidarity with Morocco following a recent earthquake.
• Framing objective: build bridges to strong future growth that is sustainable and inclusive.

Global outlook: resilience, weak growth, and divergence

Findings and key statistics:

• Annual Meetings will bring together finance ministers and central bank governors from 190 countries.
• World growth pace remains quite weak, "well below the 3.8 percent average in the two decades before the pandemic."
• Cumulative global output loss from successive shocks since 2020 amounts to $3.6 trillion as of 2023.
• The U.S. is the only major economy where output has returned to its pre-pandemic path; the rest of the world remains below trend, with low-income countries being hit the hardest.
• Stated risks: slowdown in most advanced economies; China’s economic activity below expectation; economic fragmentation threatening emerging and developing economies, including in Africa.

Observations on inflation and monetary conditions:

• First half of 2023 showed stronger-than-expected demand for services and tangible progress in the fight against inflation.
• Inflation is going down in most countries but "is likely to remain above target, for some countries all the way until 2025."
• New IMF analysis highlights the growing importance of inflation expectations as a driver for price increases.
• Winning the fight against inflation requires interest rates to remain higher for longer and clear communication of goals.

Financial stability and fiscal pressures:

• Risk of sharp tightening of financial conditions if inflation resurges; pressures on commercial real estate in the U.S. and Europe; continued stress in China’s property sector; high leverage in parts of the non-bank sector.
• Significant fiscal risks: many countries need to rebuild budgetary room for maneuver, often implying tighter fiscal policy and clear medium-term fiscal plans.
• Debt burdens have risen in many countries, including in Africa, leaving little or no fiscal space and increasing debt servicing costs.

Policies for stronger future growth — three priorities

1) Reinforce economic and financial stability

• Fight inflation via sustained higher interest rates and clear communication to shape inflation expectations.
• Safeguard financial stability against tightening credit and sector-specific stress.
• Rebuild fiscal space: prioritize spending and communicate medium-term fiscal plans to build credibility and reduce debt levels.
• Domestic revenue mobilization: IMF support to about 150 member countries over the past two years to improve tax design, administration, institutions, and develop local capital markets. Examples cited: Mozambique, Nepal, Rwanda.
• Energy subsidy reform example: "Nigeria, for example, recently removed fuel subsidies that cost about $10 billion last year—four times the amount spent on health."

2) Lay foundations for inclusive, sustainable growth through transformational reforms and strong state institutions

• Three pillars: invest in people, address infrastructure gaps (physical, green transition, digital), and improve governance and state capacity.
• Education and healthcare investments to prepare young populations for future jobs.
• Infrastructure investments should embed adaptation and green transition requirements; digitalization is highlighted as pivotal for 21st-century progress.
• Examples of digital and technology-enabled innovations: Kenya’s M-PESA expansion, “Hello Tractor” platform, Togo’s Novissi digital-payment emergency cash transfers.
• IMF analysis: a package of reforms focusing on cutting red tape, improving governance, and reducing trade restrictions could lift output in emerging and developing countries by 8 percent in four years.
• African Continental Free Trade Area potential: removing trade barriers and improving the trade environment could raise per capita income of the median African country by more than 10 percent and transform Africa into the world’s largest free-trade area if fully implemented.

3) Boost collective resilience through international cooperation

• Concern that cooperation is weakening while trade and investment barriers are rising; fragmentation would disproportionately harm emerging and developing countries and the African continent.
• Climate change: need to stand with vulnerable countries; IMF created a new $40 billion Resilience and Sustainability Trust (RST) providing longer-term affordable financing for climate reforms.
  • RST status: approved eleven programs, six of them in Africa.
• Debt challenges:
  • One-fifth of emerging economies and more than half of low-income countries remain at high risk of debt distress.
  • Common Framework progress described as "starting to deliver, even if still too slowly."
  • Global Sovereign Debt Roundtable established with the Indian G20 presidency and World Bank to bring together public and private creditors and debtor countries.
  • Recent examples of time to secure creditor assurances after staff-level agreement with the IMF: Chad 11 months, Zambia 9 months, Sri Lanka 6 months, Ghana 5 months.
• Global financial safety net and IMF role:
  • About 100 vulnerable emerging and low-income countries lack sufficient reserves and access to swap lines and therefore rely on IMF support.
  • Since the pandemic, IMF actions:
  • Deployed $1 trillion in global liquidity and reserves through lending and the allocation of Special Drawing Rights (SDRs).
  • Provided around $320 billion in financing to 96 countries.
  • Increased five-fold interest-free financing to 56 low-income countries through the Poverty Reduction and Growth Trust (PRGT).
  • Worked with stronger members to channel around $100 billion in new financing through IMF Trusts such as the PRGT and RST.
  • Concern: IMF’s lending capacity as a share of global external liabilities has diminished; the share of borrowed resources has gradually increased.
  • Calls to action:
  • Bolster the IMF’s quota resources.
  • Encourage stronger members to provide more financing for the PRGT and RST.
  • Further strengthen the IMF toolkit, including precautionary facilities.
  • Expand the voice of emerging and developing countries (proposal for a third African Chair at the IMF Executive Board).
  • Increase IMF presence on the ground via Resident Representative offices and Regional Capacity Development Centers, including in Abidjan.

Conclusion and call to action

• Historical parallel to 1973 Annual Meetings in Africa: shared challenges such as high inflation, conflicts, and economic shifts.
• Invocation of cooperation mottos: Kenyan President Jomo Kenyatta’s call for "effective cooperation" and the word "Harambee" meaning "pulling together in full cooperation."
• Closing message: with the right policies—and Harambee—"we can build a bridge to a more prosperous and peaceful future" and lay groundwork for a more impressive next half century. "On est ensemble!"

Source: IMF Managing Director Kristalina Georgieva, "Building Bridges to Future Growth," 2023 Annual Meetings Curtain Raiser Speech, Abidjan, October 5, 2023.

References

• https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva
• PRESS CENTER
• [[i]](https://www.imf.org/EditorPage.aspx?da=core&di=0&ed=FIELD930710738&fbd=1&fld=%7B1DC78734-EC8A-44EB-B9C6-BF7935BA25BB%7D&hdl=H930710832&id=%7B22A05837-E580-43A5-A4D3-3D4F0CC89DFF%7D&la=en&mo=&pe=0&so=%2Fsitecore%2Fsystem%2FSettings%2FHtml+Editor+Profiles%2FRich+Text+Full&vs=)
• [Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and

Support the Green Transition in Emerging Market and Developing Economies](https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2023/09/21/Structural-Reforms-to-Accelerate-Growth-Ease-Policy-Trade-offs-and-Support-the-Green-538429?cid=bl-com-SDNEA2023007)

• https://www.imf.org/en/home