Transcript

Transcript of IMF Press Briefing

February 22, 2024

MS. KOZACK: Good morning and welcome to this press briefing of the IMF, both for those of you here in person and those joining us online line, I am Julie Kozack, Director of the Communications Department. As usual, this briefing is embargoed until 11:00 a.m. Eastern time. I will start with some announcements, and then we will get to your questions in person on Webex or via the press center.

So, first, the Managing Director will travel to Brazil next week to attend the G-20 Finance Ministers and Central Bank Governors Meeting, which is taking place in Sao Paulo February 28th and 29th.

The First Deputy Managing Director, Gita Gopinath, is currently in Buenos Aires, where she is scheduled to meet today with President Milei. Yesterday, she met with the President's economic team, including Finance Minister Luis Caputo, Central Bank Governor Santiago Bausili, and Chief of Staff Nicolás Posse. During her visit to Argentina, our FDMD also held meetings with academics, civil society, and the private sector.

From February 25 through March 1, Deputy Managing Director Bo Li will be traveling to Fiji and Papua New Guinea. During his visit, DMD Li will participate in the Pacific Islands high level conference. He will meet with authorities and various stakeholders and take part in the 30th anniversary celebration of the Pacific Financial Technical Assistance Center, which is a capacity development center run by the IMF. He will also inaugurate the IMF's Resident Representative Office in Port Morrisby, Papua New Guinea.

Last but not least, press registration for the 2024 Spring Meetings is now open. You can now register to attend the meetings in person through imfconnect.org.

And now I will be very happy to take your questions.

QUESTIONER: Good morning. I've got a couple for you. So, we had news, of course, about Britain and Japan falling into recession. And simultaneously our survey closes to it, we found out that inflation in the U.S. is running a little hotter than expected. Can you give us a quick update on your thinking about both--- the global economy, do these two major economies slipping into recession change the forecast that you just released? And on the inflation front, monetary policy, you have been saying to monetary authorities to hold off until the second half of the year. Is there some thinking about encouraging, perhaps even a longer wait until the third quarter?

And then do you want to do that -- and then I just have another one on Ethiopia. So, Ethiopia and Zambia had both sought treatment under the common framework. There is a lot of concern about Zambia's debt treatment being stalled, and I am wondering if you have any thinking or anything that you can give us, any color on what is happening with that, and on Ethiopia, if you can walk us through what you see happening there, it's been going on forever. Thank you.

MS. KOZACK: Okay, good. So, why don't I divide these into two groups? So, why don't we start with global economy, monetary policy. I can take any other questions on that and then we can move to Africa, because usually we have quite a number of questions on Africa.

So, let's start with global economy U.S. monetary policy. Any other questions on this? If anyone online has questions on global economy or monetary policy, jump in. Okay, let me start with these ones then.

So, maybe just stepping back to give the big picture on our view on the global outlook. The global economy, as we've been saying for quite some time, has been surprisingly resilient. A growth is now projected on the basis of the January WEO update at 3.1% in 2024 and 3.2% in 2025. For 2024, we did slightly upgrade the forecast from our October WEO, and that was largely due to the resilience in the United States and several large emerging markets and developing countries. We have also been saying consistently that this forecast is well below the historical average for growth of 3.8%, which prevailed in the previous decades, essentially in the run up to the pandemic. That's 2000 to 2019. At the same time, inflation has been falling faster than expected in most regions, and that is thanks to the easing of supply constraints and the impact of restrictive monetary policy. So, what does all this mean?

Well, let me get to the UK and Japan. So, when we look at the UK and Japan, so starting with Japan, the country had a weaker than expected outturn in the second half of 2023, and this was driven by weak domestic consumption and investment. But growth in 2023 remained robust, thanks to strong export performance. So, what does this mean for 2024? We see that the weaker performance in 2023 may add to downside risks to the Japan’s economy in 2024.

For the UK, growth was negative in the fourth quarter of 2023. However, high frequency indicators are pointing 2024. So, we will be taking all of this new information into account as we begin the process to upgrade the global forecast for individual countries and also, obviously, for the world. And those forecasts will be released in April at the time of the WEO.

With respect to monetary policy, broadly speaking, because inflation has been coming down, but it's not yet at target or near close enough to target, our line, or our view remains the same, which is the job is not yet done on monetary policy. We are urging central banks to guard against a premature easing of monetary policy. And yet, where underlying inflation and inflation expectations are clearly and decisively moving towards target consistent levels, some adjustments of monetary policy may be warranted.

Maybe one final point on monetary policy, it is becoming a bit less synchronous across countries, and this is a point we’ve also been making. Some emerging economies have begun to reduce policy rates from already high levels as inflation pressures have eased more rapidly. And some advanced economies need to retain a restrictive rate to ensure that inflation pressures abate.

Now, we had two questions on Africa, Ethiopia, and Zambia. So, why don't we see if there's some other questions on Africa now?

QUESTIONER: So, I have a couple of questions. If Ghana President recently reshuffled his cabinet and replaced the Finance Minister, Ken Nana Yaw Ofori-Atta, given the nation's ongoing debt relief negotiation with creditors, what impact do you see this having? Is dismissal having on the current negotiation? And what implication do you see on the implementation of the current IMF program as well as the monetary policy and FDI?

My second question is on Kenya. This week, President Ruto announced that Kenya has set to 1.5 billions of his 2014 Eurobond debt. Can you comment on what this means for the Kenya economy? Also, the President announced that the government will cut food imports by 50% in the next 5 years and by 100% in the next 10 years. Given a similar move was made by Nigeria during the Buhari administration, can you give us a sense of how you see this, the implication that we have for the Kenya economy. And what lessons that you learn from the Nigerian situation as we know it turn out to have a negative impact on Nigeria economy that you can share. And if you can provide updates on Senegal also, and the current political situation, the postmodern of the election and what implication do you see this having; as we know, Senegal is considered one of the most stable democratic nations. So, what implication do you see for the economy.

MS. KOZACK: Thank you. Anyone else in the room?

QUESTIONER: Yes, I wanted to ask on Tunisia, the IMF reached an agreement on a program with a preliminary agreement back in October of 2022 for 1.9 billion that was conditional on Tunisia presenting reforms. And I was curious to see if you could give an update on the status of the relationship with Tunisia.

And on Zambia, if you see the possibility for the IMF to be able to disperse to Zambia despite delays in the restructuring there.

MS. KOZACK: Anyone online have questions on Africa?

QUESTIONER: Thank you. Two questions. One is a piggyback on Kenya. So, Kenya went to market last week, but at a very punitive cost. The coupon was a staggering 9.75%. Do you think this kind of jeopardizes the chances for any other frontier markets to make a return to the market?

And secondly, on the back of the Eurobond announcement in Kenya, we saw the shilling rally by about 12% in just four days. The IMF program has been very consistent about the shillings depreciation to act as a shock absorber in the context of global shocks. Do you think this complicates that scenario? Thank you.

MS. KOZACK: Thank you. Any other questions from online on Africa?

QUESTIONER: Guinea obviously had a kind of de facto authorities, but they've now dissolved the government this week and I just wanted to -- I don't know what the status of your program is there, but anything you can say on the IMF in Guinea, I would appreciate it. Thanks.

MS. KOZACK: Thank you.

QUESTIONER: One follow up, on Ethiopia, there was a visit to Addis Ababa that was planned for earlier this month. Our understanding is that that was delayed and if you might be able to get into the reasoning for the delay and if there's any new trip date that you have to share?

MS. KOZACK: Anyone else online on Africa?

QUESTIONER: Julie, I would want to ask some questions on Ghana.

MS. KOZACK: Yes, please go ahead.

QUESTIONER: Okay, so 2024 happens to be an election year and Ghana has been noted for some expenditure escalations during an election year. What are some of the potential risks that the IMF foresees in the upcoming 2024 elections, which are some of these areas of expenditure risk the IMF sees and what are the recommendations that the fund will give? I would also want to know, when will the second review of Ghana's program be done?

And lastly, what are the sentiments of investors amid the changes in the finance position in about 10 months to the president tenure to end.

MS. KOZACK: Starting with Ethiopia, so, stepping back to just give the lay of the land, we received a request for financial assistance from the Ethiopian authorities. The request was to help Ethiopia address significant challenges that it is facing, including food security, humanitarian needs, post conflict reconstruction, high inflation. The request was also to support Ethiopia's homegrown Economic Reform Agenda, which aims to fulfill Ethiopia's considerable economic potential. A mission in October made good progress on how the IMF could support the authority's economic program and the set of reforms that could underpin the requested program. Discussions with the authorities are ongoing and another mission to Addis Ababa is expected to take place in the coming weeks.

Let's turn next to Ghana. So, on Ghana, our Executive Board, just a few weeks ago on January 19th, completed the first review of Ghana's IMF supported program and that gave the country access to an additional 600 million U.S. Dollars, bringing total disbursements under the program to $1.2 billion.

The authorities’ strong policy and reform efforts under the program are starting to bear fruit. Signs of economic stabilization are emerging. Growth in 2023 proved to be more resilient than initially expected, and although volatile inflation has been declining rapidly, the fiscal and external positions have improved, and exchange rate volatility has declined in the country. The authorities are making good progress on their comprehensive debt restructuring. The domestic debt exchange was completed last year, on January 12th, the government reached agreement in principle with its official bilateral creditors, and Ghana is also engaging with its external private creditors to seek support.

Looking ahead, steadfast policy and reform implementation will be needed to fully and durably restore macroeconomic stability and debt sustainability in Ghana. It will be critical for the government to continue implementing the program as envisaged to ensure sustainable growth and poverty reduction.

With respect to some of the questions regarding other developments, I just want to emphasize that the IMF remains fully engaged and supportive of Ghana's efforts under the ongoing program and the debt restructuring negotiations. We have been in continuous dialogue with the Ghanaian authorities, including with the Minister Designate when he served as Minister of State for Finance, and our commitment to assisting Ghana remains steadfast and we look forward to continuing our fruitful cooperation with the new minister.

QUESTIONER: Julie, can I throw in just one quick follow up on Ghana? Does the IMF support Ghana's desire for a straightforward debt restructuring without any state contingent debt instruments, or do you see space for those in this situation?

MS. KOZACK: Well, what I can say about the IMF's role in debt restructuring is that we set the overall envelope for debt restructuring and then we do leave it to both the debtor and the creditor countries to agree the terms. On the details of your question, I don't have any details, but we can try to get back to you bilaterally.

Okay, let's go next to Kenya. So, there were a number of questions on Kenya on particularly the Eurobond issuance and some on the exchange rates and on a question about Minister Ruto's statements. So, Kenya is the latest Sub-Saharan African country to re-enter the international bond market. This is expected to help the country shift from relatively more costly domestic financing to external financing. It will help Kenya meet its gross financing needs, ease liquidity pressures, and demonstrate commitment to meeting its debt obligations.

With respect to the question on the exchange rate -- with respect to the shilling, having appreciated against the U.S. dollar, I would just note that we did recently assess Kenya's external position to be broadly in line with medium term fundamentals and desirable policies. And exchange rate flexibility should help to better respond to these shocks.

And on the question on food imports and President Ruto's statements, I would just say, broadly speaking, we know that food security is a challenge for many countries in Africa, and it's an issue where obviously country authorities and the IMF place quite a lot of a high priority to addressing food security issues. We don't have any details on President Ruto's proposal, so we're not yet in any position to provide any assessment.

On Guinea, I don't have anything for you right now on Guinea, but we will follow up with you bilaterally.

And now I will turn to Senegal. What I can say on Senegal is that we're actively monitoring the situation in Senegal. We're engaging with relevant stakeholders, and we certainly hope that there is a speedy resolution and to ensure continued stability and economic progress in the country.

On Tunisia, so the mission for the 2023 Article IV Consultation was originally scheduled for December 5th through 19th in 2023 and was postponed by the authorities. If I go back to 2022, this is the time when Tunisia developed a homegrown economic reform program, which formed the basis for a staff level agreement on a four-year EFF. Shortly thereafter, the authorities indicated that they were revisiting their reform program and would propose alternative reform measures. And these measures have not yet been shared with the Fund with IMF staff. The IMF does remain a strong partner with Tunisia and will continue to support the authorities in their reform efforts. Should the authorities express interest in the program, we stand ready to engage with them.

And then finally, Zambia. Okay. Zambia's economy is showing resilience. Real GDP is now projected to reach 4.3% in 2023 and 4.7% in 2024. But conditions do remain challenging. External and domestic conditions have put pressure on the external balance and the exchange rate, and they've raised inflation. The approval of the second review of the program took place in December 2023, and that gave Zambia access to an additional $187 million of financing, bringing total disbursements under the program to about $560 million. The completion of the review shows that Zambia's performance under the program remains satisfactory despite the challenging environment.

And going forward, Zambia should continue to implement reforms to restore fiscal and debt sustainability, raise and safeguard social spending, preserve financial stability, and unlock Zambia's growth potential.

A couple of points specifically on debt. First, the debt treatment that was reflected in the MOU agreed between Zambia and its official creditors in October 2023 is consistent with the objectives and parameters of the IMF supported program, and it provides sufficient assurances to support the completion of the second review.

Second, in line with our Lending into Arrears policy, Zambia is pursuing appropriate policies that are consistent with restoring macroeconomic stability and promoting growth. And this is what enabled us to go forward with the review. And the authorities are making a good faith effort to reach a restructuring agreement with external private creditors on comparable terms and consistent with program parameters. Ongoing discussions between the Zambian authorities, bondholders, and the official Creditor Committee are progressing and we hope an agreement can be reached soon.

Okay. I think I hit all of Africa, so let's move on.

QUESTIONER: So first on Ukraine, when the IMF mission is going to conclude its review of Ukrainian EFF, and when the Board decision on the next tranche should be made? Maybe just as a follow up, does the IMF expect that the current challenges of international support lead to any repercussions for the Ukrainian economy?

And the second question, it's about Russian assets. So, as we have already heard from the First Deputy Managing Director, Gita Gopinath, she has recently stated that the IMF will make its own evaluation, right, regarding potential seizure of Russian assets. But from the IMF perspective right now, if applied, what will be the consequences of such seizure for the financial system? For the global financial system, global stability, U.S., and allied economies? Thanks

MS. KOZACK: Okay, great. Yes. On Ukraine or Russia?

QUESTIONER: May I add one more on Russia? A short one. As the United States will announce a major package of sanctions against Russia on Friday, how effective the IMF estimates the West's previous sanctions have been? Thank you.

MS. KOZACK: Okay, let me start with Ukraine. So, on December 11, 2023, the Board complete the second -- our Executive Board completed the second review under the EFF, enabling a disbursement of about $900 million U.S dollars and taking total disbursements under Ukraine's program to about $4.5 billion dollars to date.

Our assessment at that time was that the authorities had made strong progress toward the EFF commitments under very challenging circumstances and that they had met all of the quantitative targets through end June. An IMF team is currently in Warsaw to conduct the third review under the EFF program with Ukraine, and the team will communicate its findings at the end of that mission.

With respect to the question on financing for Ukraine, as we have said previously, Ukraine's financing needs are substantial. For 2024, we estimate that the country will need about $42 billion in total financing, including official donor support of about $31.9 billion. And timely support from the international community, including the U.S., will be vital to ensure that the country remains on the path to fiscal and external viability.

Now, turning to Russia. On the issue of the Russian assets, as our First Deputy Managing Director recently noted, the decision of what to do with frozen assets rests with the countries who are holding the assets and the discussions among those countries. From our perspective, it is important that any actions have sufficient legal underpinnings to avoid potential risks. And these include risks of litigation, risks of countermeasures, and risks to the international monetary system.

With respect to the question on the Russian economy and sanctions, what I can say is that Russia's economy has indeed surprised in terms of the strength of growth so far. It's also clear that Russia is now in a war economy. It's a war economy, and that's because there's a large amount of military expenditure in the economy, which is boosting production. There's also quite a lot of social transfers which are helping to raise consumption.

We're also seeing in Russia signs of overheating of the economy. So we do see inflation rising, and we see this also through the shrinking of the current account surplus. So going forward, our expectation is that some of the -- that Russia's being cut off from the international financial system, also its reduced access to technologies, that this is going to weaken growth over the medium term, and that this is where we will see some of the negative impacts on the Russian economy.

I would also note that in terms of human capital, Russia has lost some highly skilled labor from the labor force. So we do expect that these effects will have an impact, a significant impact on growth and prospects for the medium term.

I see some questions online.

QUESTIONER: Thank you for taking my question. I have a question about Egypt. My question is about Egypt, what is the expected deadline for completing the first and second review for the Egyptian economic program, and what is the value of the loan increase? Thank you.

MS. KOZACK: Okay. Thank you. Any other questions on Egypt?

QUESTIONER: Egypt is facing potentially refugees, you know, there's the crisis in Gaza. The war in Gaza is stacked, millions of people in Rafah, very close to Egypt's border. There's just immense pressure building. What do you see, the need to provide extraordinary measures or help to Egypt at this time, in addition to what's going on with the program specifically? And can you say, I know that the West Bank and the Palestinians are not members of the IMF, but can you say anything at all about what the IMF sees as its role in helping in this crisis with that situation?

MS. KOZACK: Any other questions on Egypt?

QUESTIONER: Just a brief follow up, just to broaden it out a little bit more to the region. More broadly, can you speak about whether there's been any change in your assessment of the economic impact of the war in Gaza since your most recent update? Thank you.

MS. KOZACK: On Egypt, in terms of the status of discussions, we continue to make excellent progress on the discussions of a comprehensive policy package to reach a staff level agreement for the combined first and second reviews under the reform program supported by the IMF. The IMF team and the Egyptian authorities have agreed on the main elements of a program, and the authorities have expressed a strong commitment to it. These discussions are ongoing, so I will not get into the details of the discussions, but we certainly will update you once the discussions are finalized.

With respect to the question on the potential impact pressures from refugees from Gaza, what we do see in Egypt is that there is a need to have a very comprehensive support package for Egypt. And we're working very closely with both the Egyptian authorities and their partners to ensure that Egypt does not have any residual financing needs and also to ensure that the program is able to, you know, ensure macroeconomic and financial stability in Egypt.

Now, turning to West Bank and Gaza, starting maybe with the question on the economic assessment we released in late January, early February, a special update of the region. And in that update, we released some growth projections for the MENA region. We project for 2024 -- well, we downgraded our growth projection for MENA by half a percentage point relative to the projections from October, and that reflects the adverse economic consequences that the impact is having on the MENA region. And that, of course, is in addition to the very difficult and devastating humanitarian impact.

One piece of update is we do have our PortWatch platform, and this tracks the volume of shipping in many different areas of the world. We've been monitoring shipping volumes in the Suez Canal. Those have decreased by 55% year-over-year during the first seven days ending February 13. So, we've had a decrease of 55% of shipping volumes going through the Suez Canal, year-over-year-ending February 13, and while volumes going through the Cape of Good Hope have increased by nearly 75%. That's the latest we have on this issue.

And in terms of the IMF's role, the IMF does provide technical assistance and policy advice traditionally to the authorities in the West Bank and Gaza. And of course, we stand ready to continue to provide these as circumstances would allow.

QUESTIONER: Thank you, Julie. I would like to know if you have calculated how much could the farmers’ protests cost to Europe's economy and specifically how can it affect countries like Spain, where agriculture is so relevant? And apart from this, I would like to know any other updates on Argentina? Could you give us some details about Gita Gopinath’s trip? Also, we know that Milei is coming this weekend to Washington D.C. So does he have any meetings here with IMF authorities?

MS. KOZACK: On your first question on Europe and the farmer protest, right now, we expect that any impact on output, economic output, is going to be small, and that's because agriculture, the agricultural sector in most European countries, is relatively small. And this is even the case in a country like Spain, where agriculture is less than 3% of GDP. That said, there could be a more significant impact on prices if the protests persist for some time.

And then on Argentina. I suspect that there will be a few other questions on Argentina. If anyone online wants to come in on Argentina?

QUESTIONER: I was wondering if the IMF team and Gita Gopinath is analyzing the possibility of a new program for Argentina during this visit? And also, well, given the G-20 meeting this weekend, if the request of surcharges reduction will be on the agenda?

QUESTIONER: Yes, just following on the question regarding Gita Gopinath’s visit to Buenos Aires. If you could speak at all to the policy advice or request that she made while there, if any, including whether she was advocating for pressing for a devaluation or to speed up the crawling peg in Argentina, given how far behind inflation the current 2% peg has fallen.

QUESTIONER: Just one other question about Argentina. On the question of sort of protests, social unrest, how does the IMF sort of assess what impact that could have is having on some of Milei’s reform plans? Thank you.

MS. KOZACK: On Argentina, as I already noted, the FDMD Gita Gopinath is in Argentina. She is having a number of meetings with government officials and others. The purpose of her visit is to really hear firsthand from different stakeholders, including the authorities, of course, on Argentina's economic challenges and opportunities. Gita will be communicating at the end of her visit, and therefore, we will just wait to hear Gita’s own perspectives at the end of her visit.

On your question on the G-20 agenda, I would just say that this is something for, of course, the G-20 presidency to determine the agenda. And the IMF is closely engaged with the G-20 presidency. And we look forward to our Managing Director attending the G20 next week, to present her views on the global economy, and to discuss the challenges facing the G-20 countries and the global economy.

I see two hands up online. Maybe these will be the last two questions that we'll take.

QUESTIONER: I just wanted to check on two things. One is primarily post-election in Pakistan. Is Pakistan in line with all the requirements of SBA for its third trench, which is like $1.1 billion and which is due by end of the next month or beginning of April? And secondly, Pakistan's former prime minister, Imran Khan, has said he would write about elections and regularities and would ask for some kind of investigations on that. Would IMF actually entertain that letter and is like election audit, or that kind of thing, when it gets to the good governance that comes under IMF's purview and what exactly IMF would be doing about that?

MS. KOZACK: Any other questions on Pakistan before we wrap up? Stepping back on Pakistan. On January 11, the IMF Executive Board approved the first review of the Stand-By Arrangement, with Pakistan that brought total disbursements under the Stand-By Arrangement to $1.9 billion. The Stand-By Arrangement is supporting the authority’s efforts to stabilize the economy and to, of course, with a strong focus on protecting the most vulnerable.

During the period of the caretaker government, the authorities have maintained economic stability. This has been done through strict adherence to fiscal targets while also protecting the social safety net. It has been done by maintaining a tight monetary policy stance to control inflation and to continue to build up foreign exchange reserves. We look forward to working with the new government on policies to ensure macroeconomic stability and prosperity for all of Pakistan's citizens. And I am going to leave it at that.

QUESTIONER: Any comment on Imran Khan's letter by any chance?

MS. KOZACK: I’m not going to comment on ongoing political developments. So, I don't have anything else to add to what I just said.

QUESTIONER: Thank you.

MS. KOZACK: We've come now to the end of the briefing. The briefing, as you know, is embargoed until 11:00 a.m. Eastern Time. The transcript will be available on imf.org. In case of clarifications or additional queries, please reach out to media@imf.org.

Thank you all and I look forward to seeing you at the next press briefing. Wishing you all a wonderful day.