Transcript of IMF Press Briefing

IMF News, May 16, 2024

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• Published: May 16, 2024

Announcements and Managing Director / FDMD travel

• Managing Director visiting Tajikistan today and tomorrow to meet authorities and stakeholders on Tajikistan's economy and IMF support.
• Managing Director schedule:
  • London on Tuesday, May 21st: press conference to present UK Article IV consultation findings; bilateral meetings with UK authorities.
  • Italy from May 21st to 23rd: participate in G-7 Finance Ministers and Central Bank Governors Meeting in Stresa.
• First Deputy Managing Director Gita Gopinath travel:
  • Beijing from May 26th to 29th for the 2024 China Article IV mission; media briefing on May 29th (further details to be provided closer to the event).
  • Geneva at end of month for UN's AI For Good Summit; speech on May 30th.

Global trade, tariffs, and fragmentation

• IMF position:
  • Supports an open and rules-based trading system.
  • Encourages U.S. and China to work together and urges all countries to resolve differences within multilateral frameworks.
• Recent trade-restriction trend:
  • 1,000 trade restrictions in 2019.
  • 3,000 trade restrictions in 2023.
• Estimated global losses from fragmentation:
  • Range from 0.2 percent of global GDP all the way up to 7 percent of global GDP.
  • 7 percent of global GDP described as the combined size of Germany's and Japan's economies.
• Policy emphasis:
  • Improve security of supply chains while avoiding fragmentation; seek balance through cooperation.

Ukraine, EFF program status, and debt sustainability

• March 21 of this year: Executive Board completed the third review of Ukraine's program; disbursement of $880 million enabled.
• Outlook: Ukrainian economy shows remarkable resilience but faces exceptionally high war-related uncertainty.
• Program implementation:
  • Authorities met all structural benchmarks and all but one quantitative performance criteria at the time of the third review.
• Next steps:
  • Mission expected in the coming weeks to conduct the next review.
  • IMF expects to bring that review to the Executive Board by the end of June.
  • The team will prepare an updated macroeconomic framework and an updated debt sustainability analysis, to be published with the Staff Report following Executive Board approval.

Argentina — program progress, policy evolution, and disbursement

• Recent action:
  • Staff-level agreement reached (this week) on the 8th review of the program; contingent on Executive Board approval in the coming weeks.
• Key outcomes and indicators:
  • First quarterly fiscal surplus in 16 years.
  • Rapid turnaround in international reserves and improvement in the central bank's balance sheet.
  • Rapid reduction in inflation: monthly headline inflation fell to 8.8 percent in April, from over 25 percent in December (month-on-month).
  • This will be the first review of this program where all quantitative performance criteria have been met.
  • IMF expects the economy to start growing again in the second half of this year.
• Policy guidance (three dimensions):
  • Fiscal:
  • Improve quality of fiscal consolidation to ensure durability and fairness.
  • Improve efficiency and progressivity of the tax system.
  • Ensure social assistance is sufficient and well targeted.
  • Monetary and FX:
  • Monetary policy must continue to evolve to anchor inflation and inflation expectations.
  • FX policy should become more flexible over time to safeguard further improvement in reserve coverage.
  • FX controls to be gradually eased as conditions allow; transition to a new monetary policy regime involving currency competition (peso and other currencies freely usable), similar to regimes in Peru and Uruguay.
  • Reforms:
  • Unlock barriers to entry for firms, promote formal employment, attract private investment, and broaden political support for stabilization and reform.
• Disbursement tied to review:
  • Disbursement in line with program: $800 million for completion of this review.
• IMF note: staff-level agreement was reached this week (correction to prior misstated timing).

Pakistan — Stand-by Arrangement and ongoing mission

• April 29 of this year: Executive Board completed the second review of the Stand-by Arrangement for Pakistan; disbursement of about $1.1 billion.
• Current status:
  • A mission led by Nathan Porter is meeting with authorities to discuss the next phase of IMF engagement and their request for a new program; IMF will communicate findings after mission concludes.

United States — inflation, Fed policy, and outlook

• IMF observations:
  • U.S. economy has been remarkably resilient despite shocks and sharp tightening in 2022 and 2023.
  • Recent inflation data are overall higher than desired; core PCE inflation was stable in March, while services inflation remained relatively elevated.
  • IMF advises the Fed to be cautious and data dependent in deciding policy in the coming months.
  • IMF Chief Economist previously noted possible rate cuts later this year, but recent data underscore uncertainty.

Russian assets — IMF stance

• IMF position:
  • Decisions on confiscation or use of assets are for relevant courts and jurisdictions to determine.
  • Any action must have sufficient legal underpinnings and must not undermine the functioning of the international monetary system.

Mexico and Ecuador

• Mexico:
  • IMF does not comment on elections; economy continues to expand and inflation is receding since early 2023.
  • Policy guidance: monetary policy should remain data dependent; fiscal consolidation plan needed to preserve fiscal sustainability; reforms to boost labor participation (including female labor force participation), tackle corruption and crime, and expand financial inclusion.
• Ecuador:
  • IMF staff and Ecuadorian authorities reached staff-level agreement on an EFF arrangement for about $4 billion (subject to Executive Board approval).
  • Authorities' measures:
  • Implemented a VAT rate hike of three percentage points.
  • Implemented transitory revenue measures.
  • Actions contributed to sovereign spreads falling from over 2,000 basis points in early 2024 to below 1,200 basis points.
  • Authorities have taken actions to stabilize the security situation.
  • Arrangement aims to strengthen fiscal sustainability, safeguard macroeconomic stability, and foster strong and inclusive growth.

Zambia and Ethiopia

• Zambia:
  • IMF team visited Lusaka from April 24th through May 7th.
  • Zambia has made commendable progress on reforms, including significant fiscal efforts while scaling up social spending.
  • Ongoing discussions focus on:
  • Assessing economic impact of the drought.
  • Agreeing policies to support completion of the third review amid difficult financing conditions.
  • IMF will communicate further when discussions reach fruition.
• Ethiopia:
  • IMF mission visited Addis Ababa from March 19th through April 2nd; discussions continued during the Spring Meetings and virtually thereafter.
  • Substantial progress made toward establishing IMF support for the authorities' economic program; virtual discussions are ongoing and updates will be provided as they evolve.

Kenya — 7th review and recent floods

• IMF regrets loss of life and property from recent heavy rains and floods in Kenya.
• Status:
  • Discussions on the 7th review of the EFF program are ongoing and include assessment of the economic impact of the floods.
  • Discussions will evaluate program performance to date and authorities' plans for policies and reforms.
  • IMF will provide further details as discussions continue.

Ghana, Cote d'Ivoire, and Mali

• Ghana:
  • April 13: IMF staff and Ghanaian authorities reached staff-level agreement for the second review.
  • Aim to bring the review to the Executive Board before the end of June.
  • Board approval would give Ghana access to about $360 million.
  • Signs of stabilization: 2023 growth higher than anticipated, rapidly declining inflation, improved fiscal and external positions, and reduced exchange rate volatility.
  • Progress on comprehensive debt restructuring: domestic debt exchange completed last year; January 12 agreement in principle with official bilateral creditors; engagement with external private creditors ongoing.
• Cote d'Ivoire:
  • Staff-level agreement reached on April 8 for:
  • Second review of the EFF/ECF program and first review of the RSF.
  • Arrangement sizes: 3.5 billion (EFF/ECF) and 1.3 billion (RSF).
  • Completion by Executive Board should lead to two disbursements under the EFF/ECF blended program of about $493 million and an additional $81 million under the RSF.
  • Authorities advancing reform agenda for macroeconomic stability, economic transformation, and climate resilience.
• Mali:
  • Staff-level agreement on emergency financing via the Rapid Credit Facility (RCF); Article IV concluded on April 30.
  • Mali has faced multiple shocks (spillovers from Russia's war in Ukraine, Red Sea disruptions, and a regional funding squeeze), contributing to higher import costs for food, fertilizers, and goods for displaced populations, straining the budget and raising cost of living.

Sri Lanka — second review, debt restructuring, and next steps

• March 21 of this year: IMF staff and Sri Lankan authorities reached staff-level agreement for the second review and concluded the Article IV mission.
• Program performance and economic indicators:
  • Rapid decline in inflation, robust reserve accumulation, initial signs of economic growth, and preservation of financial system stability.
  • Program performance described as strong.
• Debt restructuring and conditionalities for Executive Board completion:
  • Completion by the Executive Board requires implementation of agreed prior actions and completion of the financing assurances review (to confirm multilateral partners' financing contributions).
  • Financing assurances review will assess adequate progress with debt restructuring.
  • Next steps on debt:
  • Conclude negotiations with external private creditors and implement agreements in principle with official creditors.
  • Domestic debt operations largely completed.
  • Negotiations with external bondholders ended in mid-April without agreement; discussions continue aiming for agreement in principle.
• No Board meeting date specified in the briefing.

Closing, embargo, and contact

• Briefing embargoed until 11:00 a.m. Eastern Time in the U.S.; transcript to be made available on imf.org.
• Media contact: MEDIA RELATIONS PRESS OFFICER: Angham Al Shami; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.
• For clarifications or additional queries: media@imf.org.

Transcript of IMF Press Briefing — May 16, 2024. IMF Communications Department.

References

• Argentina and the IMF
• Ecuador and the IMF
• Ghana and the IMF
• Kenya and the IMF
• Mali and the IMF
• Mexico and the IMF
• Pakistan and the IMF
• Republic of Tajikistan and the IMF
• Sri Lanka and the IMF
• The Federal Democratic Republic of Ethiopia and the IMF
• Zambia and the IMF
• IMF Policy Advice -- A Factsheet
• Transcripts
• PRESS CENTER
• https://www.imf.org/en/home