Transcript of IMF Press Briefing (July 11, 2024)

IMF News, July 11, 2024

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Published: July 11, 2024

Announcements, schedule, and outreach

Bretton Woods at 80 Initiative launched by the IMF and the World Bank; led by Sri Mulyani Indrawati, Patrick Achi, and Mark Malloch Brown; will work closely with Kristalina Georgieva and Ajay Banga.
World Economic Outlook (WEO) Update release and press conference: Tuesday, July 16th at 09:00 a.m.
External Sector Report release: Friday, July 12th.
Managing Director travel:
- Paraguay visit with IADB President Ilan Goldfajn: July 22nd and 23rd.
- G-20 Finance Ministers and Central Bank Governors Meeting (Rio de Janeiro): July 25th to 26th.
First Managing Director Gita Gopinath speaking at Reinventing Bretton Woods Central Bank of Peru Conference: July 19th in Cusco, Peru; fireside chat live streamed at 10:00 a.m. D.C. time on IMF channels.
IMF new presence on WhatsApp for news and updates.

United States: macro performance, inflation, monetary policy, and fiscal risks

Findings and assessments:

U.S. economic performance described as "remarkably strong"; both activity and employment have exceeded expectations.
Disinflation process is underway.
IMF supports the Fed's "data dependent and cautious approach" to monetary policy.
IMF expects "the Fed will be in a position to reduce rates later this year."

Fiscal and debt observations:

IMF has advised action to reduce "high fiscal deficit" and to put debt on a "decisive downward path."
Recent significant fiscal legislation in 2020 to 2022 had "lasting, positive impact" on reshaping the U.S. economy, but current fiscal deficit remains "too high."
Net interest payments of the federal government:
- FY 2023: 2.4 percent of GDP.
- Current FY (unnamed year): 3.2 percent of GDP.
IMF estimates net interest payments "are expected to remain elevated even in the medium-term" due to high primary fiscal deficits and resulting public debt.

Policy recommendation:

Implement a "broad set of fiscal measures" now—while the economy is strong—to place debt-to-GDP on a downward trajectory.
Full details of recommended measures will appear in the forthcoming 2024 Article IV Report.

Kenya: political disruption, tax measures, and IMF program engagement

Context and risks:

President Ruto dismissed most of his cabinet amid public reaction to proposed tax increases and suspension of the Finance Bill of 2024.
Kenya faces the common low-income country "funding squeeze" driven by tighter global financial conditions and reduced concessional financing.

IMF program goals and response:

Program objective: establish sound macroeconomic fundamentals to foster sustainable and inclusive growth and job creation.
Program includes initiatives to improve governance, transparency, and responsible use of public funds, with emphasis on protecting the most vulnerable.
IMF is in "active and constructive discussion" with Kenyan authorities; at each program review the IMF assesses developments and makes adjustments as warranted.

Policy emphasis:

Policies under discussion should undergo broad consultation to build public support and a balanced path forward will be sought.

Angola and The Gambia: recent developments and program status

Angola:

Executive Board concluded a Post Financing Consultation on July 3rd.
2023 challenges: weaker oil production and weaker oil prices.
Near-term outlook: economic growth expected to recover; inflation expected to remain "temporary, elevated in 2024" and then decline.
Recommendation: continue fiscal consolidation and growth-enhancing reforms with IMF technical assistance and capacity development.

Gambia:

Executive Board completed the First Review of The Gambia's Extended Credit Facility on July 9th.
Disbursement: "nearly $11 million U.S. dollars" for the First Review; total disbursements under the ECF about "$22 billion -- sorry, million -- U.S. dollars."
2023 economic growth: 5.3 percent.
Inflation: has come down but remains above the central bank's medium-term objective.
Recommendation: continue reforms to address medium- and long-term macroeconomic challenges and catalyze additional financing.

Argentina: program implementation, reforms, and potential future arrangement

Recent progress:

Since approval of the Eighth Review (July 13th), Congress approved critical fiscal and structural measures, notably reform of the personal income tax to bring more higher-income formal sector workers into the tax net.
Preliminary data: fiscal and reserve targets "continue to be met"; high-frequency data indicate further reductions in inflation and some stabilization of activity and demand.

IMF engagement and next steps:

Current framework: engagement remains within the EFF Arrangement.
Staff will engage on a potential new arrangement if the authorities formally request one; "no specific timetable" at this stage.
IMF underscores the inevitability of volatility during stabilization programs and stresses the need for policy agility to address underlying macroeconomic imbalances.

Leadership and negotiations:

Managing Director has "full confidence in Rodrigo Valdés and her entire Senior Leadership Team"; IMF engagement with Argentine authorities remains "active and constructive."
Formal G-20 bilateral meetings involving the Managing Director are not yet finalized.

Pakistan: program discussions and objectives

Status and objectives:

Staff mission visited Islamabad May 13th through 23rd; discussions on a medium-term homegrown reform program that could be supported under an EFF arrangement continue.
Aims of the proposed program: cement economic credibility, transition from stabilization to "strong, inclusive, and resilient growth," and improve living standards.
Recent 2023 Stand-By Arrangement helped return Pakistan to stability; goal is to maintain and broaden that stability.

Operational note:

Discussions between Staff and authorities are ongoing; IMF will communicate further details when available.

Egypt: Third Review timing, reform progress, and external shocks

Program status and conditional access:

Consideration of the Third Review scheduled for July 29th; Board approval would provide Egypt with access to about "$820 million U.S. dollars."

Reform outcomes and macro indicators:

Inflation fell for four consecutive months: from 35.6 percent in February to "under 28 percent in June."
Foreign exchange demand backlog eliminated; private sector activity showing signs of reversal after a three and a half-year contraction.

External shock and fiscal impact:

Suez Canal receipts have "fallen by more than half compared to a year ago," reducing a key source of foreign exchange and fiscal revenue.

Operational detail:

Postponement of Board consideration to July 29th described as related to finalizing details; IMF staff "confident on the path forward."

IMF surcharge policy review

Review process and aims:

A "comprehensive review of IMF surcharges" is underway as part of the Executive Board's work program for this fiscal year.
The review will:
- Take stock of experience since the last review in 2016.
- Present options for possible changes to the policy, weighing implications for borrowing members and the IMF's credit risk management framework.

Governance and consensus requirements:

Any changes to surcharge policy require a 70 percent majority of voting power in the Executive Board per the Articles of Agreement; building broad member consensus is essential.

Engagement status:

Staff engagement with the Executive Board has started; informal engagement with the Board occurs as part of the process.

Sri Lanka: program progress, debt restructuring, and social pressures

Program progress:

Executive Board completed the 2024 Article IV Consultation and the Second Review, providing access to about "$336 million U.S. dollars."
Positive indicators: real GDP growth resumed from Q3 2023, rapid decline in inflation, robust accumulation of international reserves, and improved domestic revenue mobilization.

Debt restructuring and assessment:

IMF staff "is in the process of assessing the agreed terms of the debt restructuring" and whether they align with program parameters; assessment pending.

Social and fiscal tradeoffs:

Government faces demands for salary increases; IMF emphasizes protecting the poor and vulnerable and restoring fiscal and debt sustainability to avoid recurrence of the 2022 crisis.

Policy measures noted:

Emphasis on ensuring taxes are paid by those who can afford them, improving tax administration, and limiting the size of tax exemptions.
Program includes anti-corruption and good governance measures and "a strong focus" on protecting vulnerable populations.

Ukraine: program performance, disbursements, and repayment capacity

Program status and disbursements:

Executive Board completed the Fourth Review of Ukraine's EFF on June 28th, enabling a disbursement of about "$2.2 billion U.S. dollars"; total disbursements under the program to date: "$7.6 billion U.S. dollars."

Macro outlook and risks:

Authorities' performance under the program remains "very strong" despite security challenges and attacks on infrastructure.
Growth projection: "2.5 to 3.5 percent" this year.
Inflation expected to "edge up"; risks remain "exceptionally high" due to war-related uncertainties.

Repayment capacity and use of IMF resources:

IMF assessment: "Ukraine has sufficient capacity to repay the IMF" supported by policy commitments to restore external viability and donor assurances regarding outstanding amounts and use of resources.
IMF resources are provided to address balance of payments needs and are "not directed toward any specific budgetary line item."

Global role and IMF policy priorities

IMF emphasizes its role as a convener of 190 members to foster international economic cooperation, provide policy advice, and deliver financial support when members face shocks.
Recognition of a "shock-prone world": climate shocks, conflicts, the Pandemic, food insecurity, and other crises require adapting IMF instruments and policies.
Recent IMF initiatives cited: emergency financing during the Pandemic, SDR allocation changes, access-level adjustments, fundraising for concessional financing, and quota reforms.
IMF commitment: continue adapting policies and instruments to meet evolving member needs.

Transcript of IMF Press Briefing, IMF Communications Department, July 11, 2024.