Transcript of October 2022 MD Kristalina Georgieva Press Briefing on GPA

IMF News, October 13, 2022

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The global economy has been hit by successive shocks: an unrelenting pandemic, Russia's invasion of Ukraine, climate disasters on all continents, and now a cost of living crisis.
The IMF cut its growth forecast for 2023 to 2.7 percent.
Uncertainty is exceptionally high: the World Economic Outlook shows a one in four chance, in other words, 25 percent chance that global growth could drop to a historic low of 2 percent next year.
The IMF’s Global Policy Agenda calls for steady hands on policy levers and coordinated international action to minimize policy missteps and poor communication.

Growth and inflation:
- IMF growth forecast for 2023: 2.7 percent.
- One in four chance (25 percent) global growth could drop to 2 percent next year.
- Risk of global recession assessed at 25 percent.
- One third of the world economy equivalent will experience two or more consecutive quarters of negative growth.
Inflation dynamics:
- Rising interest rates come at some cost to growth, but insufficient tightening risks higher rates for longer.
- Monetary policy must act decisively when necessary and communicate clearly to avoid de-anchoring inflation expectations.
- Fragmentation and shifts in supply chains may create more permanent cost-structure changes that monetary policy cannot address.

Bring inflation down:
- Central banks should take decisive action where necessary and communicate intentions clearly.
Responsible fiscal policy now:
- Prioritize protecting vulnerable households and businesses.
- Fiscal measures should be well targeted and temporary given high debt levels post-pandemic.
- Avoid across-the-board fiscal support that is neither effective nor affordable.
- Ensure fiscal and monetary policy go hand in hand; “When monetary policy puts a foot on the brakes, fiscal policy should not step on the accelerator.”
Safeguard financial stability:
- Macroprudential policies should be vigilant and proactively address pockets of vulnerability.
Support vulnerable emerging markets and developing countries:
- Higher borrowing costs, a stronger dollar, and capital outflows are a triple blow—especially for countries with high debt.
- Stronger international efforts are paramount for low-income countries, where over 60 percent are at or near debt distress.
Transformational reforms for the future:
- Address climate change, make digitalization work for people, and tackle inequality.
- Act with urgency and together.

Financial support since the pandemic:
- Financial support provided to 93 countries, some $260 billion.
Since the Russian invasion in February:
- Supported 18 new programs (new programs and augmentations) with close to $90 billion.
- There are an additional 28 requests for support from the Fund.
SDRs and on-lending:
- $650 billion SDR allocation noted.
- Ambition of mobilizing $100 billion in lending of SDRs for countries in strong positions.
- Progress: 80 percent to target; “We have just crossed over $80 billion.”
Resilience and Sustainability Trust:
- First-ever longterm financing instrument now operational.
- Pledges of $40 billion.
- Staff-level agreements for the first three countries: Barbados, Costa Rica, and Rwanda.
Food Shock Window:
- Emergency financing window opened to provide rapid financing to urgent needs.
IMF lending capacity and resources:
- Slightly over $700 billion available to lend.
- Lending capacity referenced as 1 trillion.
- On average around 20 percent of the SDRs strong economies have received; France indicated 30 percent.
- The IMF may appeal to members to do more if needed.

Debt challenges:
- Over 60 percent of low-income countries are at or near debt distress (also referenced as 60 percent of [low-income] countries are at or near debt distress).
Common Framework:
- IMF pressing for a more effective debt resolution mechanism.
- Goal: make the Common Framework more predictable with guidelines and equality of treatment for all creditors, public and private.
- Recent modest successes: Zambia and Chad.
- Need to draw lessons from Zambia and Chad to encourage other countries to use the Common Framework.
Donor coordination:
- Exploring ways to expand coordinated donor approaches to middle-income countries, e.g., Sri Lanka.

Food insecurity:
- 345 million people are acutely food insecure.
- 48 countries identified as particularly severely impacted by food insecurity; many in Sub-Saharan Africa.
Sub-Saharan Africa:
- Region in a precarious position due to pre-existing climate-related food insecurity and COVID scarring (including education disruptions).
- Positive developments: many countries increased tax-to-GDP ratios and built stronger fundamentals.
- Policy advice: stick to prudent macroeconomic policies, act early on debt problems, and use multilateral support (IMF, World Bank, WFP, FAO, WTO).
- Emphasized priority: implement major integration efforts such as the Continental Free Trade Agreement.
Lebanon:
- Inflation at extreme levels in Lebanon (example noted of inflation “at 200 percent or more” contextually discussed); IMF staff-level agreement exists but prior actions needed to move forward.
- A maritime border agreement with Israel is noted as potentially positive for energy prospects, conditional on political commitment to stability.
India:
- Described as a bright spot underpinned by structural reforms and digitalization.
- Anticipation that India’s G20 Presidency could focus on digitalization, digital money, cross-border payments, quota review, and renewables.

Global growth could fall to 2 percent next year: one in four chance (25 percent).
Risk of global recession: 25 percent.
One third of the world economy equivalent may face two or more consecutive quarters of negative growth.

On central banks (U.S. Fed and others):
- Central banks’ mandate is domestic price stability; communication and use of instruments like swap lines can mitigate spillovers.
- Recent Fed and U.S. Treasury actions noted as prudent; U.S. has supported food security and multilateral institutions.
On the pace of rate hikes:
- Acknowledged concerns about financial stability; emphasized need for clear communication and coordination with fiscal policy.
On IMF governance and quota review:
- Sixteenth General Review of Quotas is important for a financially strong and fairly representative IMF.
- Deadline for quota decisions mid December 2023; possibility of acceleration under G20 leadership.
On IMF flexibility:
- IMF programs are not set in stone; the Fund will monitor and act in the interest of member countries’ people.
On availability for members:
- Encouraged members to use IMF precautionary facilities if they need buffers; “we are far from being constrained.”

Transcript of October 2022 MD Kristalina Georgieva Press Briefing on GPA — October 13, 2022, IMF Communications Department.