How To Do Better
IMF News, October 25, 2024
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Bibliographic details
- Published: October 25, 2024
Opening and context
- Speech by IMF Managing Director Kristalina Georgieva at the 2024 Annual Meetings Plenary, October 25, 2024.
- Delivered alongside Annual Meetings Chairman Ahmed Munawar and World Bank Group President Ajay Banga.
- As prepared for delivery; remarks highlight IMF staff work, partnership with World Bank, and the Fund’s role in a fragile global outlook.
Global outlook: inflation, growth, and trade
- Inflation trajectory:
- From 5.7 percent in the fourth quarter of last year to 5.3 percent in the current quarter, and further to 3.5 percent in Q4 2025 [FIGURE 1].
- Faster decline expected in advanced economies.
- Growth projections and trend:
- World GDP projected to grow at an anemic average rate of 3.2 percent per year over the next five years.
- Forecasts have been revised lower over the years [FIGURE 2].
- Trade and integration:
- Global economic integration is retreating, with rising industrial policy measures, trade barriers, and protectionism [FIGURE 4].
Debt dynamics and spending pressures
- Debt outlook:
- Global public debt forecast to keep rising, with a risk that it could exceed the baseline projection by as much as 20 percent of world GDP in a severe but plausible negative scenario [FIGURE 3].
- "A hundred trillion dollars in government debt worldwide."
- Higher interest payments are consuming a growing slice of fiscal revenues, particularly in low-income and emerging market countries.
- Spending pressures by 2030 (IMF research):
- Advanced economies: adding some 7 percent of GDP to annual expenditure.
- Emerging markets: adding some 9 percent of GDP to annual expenditure.
- Low-income developing countries: adding some 14 percent of GDP to annual expenditure.
- Reserve concentration:
- Five countries own more than half of the world’s total reserves, leaving many countries relatively unprotected [FIGURE 6].
Policy recommendations and the fiscal “trilemma”
- Core policy message:
- First, shift toward rebuilding fiscal buffers.
- Second, invest in growth-enhancing reforms.
- Third, work together to tackle global challenges.
- Fiscal consolidation guidance:
- With monetary policy easing, fiscal consolidation should start now.
- Credibility requires persuasive communication with the public.
- Multi-year fiscal plans should lay out consolidation paths tailored to country-specific situations.
- The fiscal “trilemma”:
- Large spending needs, political redlines on taxation, and the need to rebuild buffers.
- Domestic revenue mobilization:
- Critical for many countries to reconcile the trilemma.
- More than 20 countries have been able to boost their tax revenues by over 5 percent of GDP in the past three decades.
- Protection of priorities:
- Growth-enhancing investments—especially in climate and technology—must be protected.
- Consolidation should not come at the expense of social protection and jobs.
- Growth-enhancing reforms (areas and measures):
- Labor-market measures: skills enhancement and job matching.
- Product-market: cut red tape and mobilize savings.
- Innovation and productivity: foster venture capital and capital market integration in advanced economies; improve governance and institutions elsewhere.
- Reforms are best developed through two-way dialogue with the public and measures to mitigate impacts on those who lose out.
IMF role: surveillance, capacity development, and lending
- Surveillance and advisory roles:
- Bilateral surveillance provides diagnostics and advice, supporting institutional development, capital flow management, and interest rate policy guidance.
- Multilateral surveillance synthesizes cross-cutting lessons in flagship reports: the World Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor.
- Capacity development:
- Thousands of technical assistance missions in the last five years, transferring knowledge and building goodwill.
- Lending and safety net:
- The IMF is the first responder in times of trouble, especially for the poorest and most vulnerable.
- Recent program successes include Barbados, Benin, Cabo Verde, Costa Rica, Moldova, Morocco, Suriname, and Sri Lanka.
- Since the pandemic:
- Stock of concessional credit outstanding from the Poverty Reduction and Growth Trust tripled to $28 billion.
- In less than three years since its launch, 20 countries have received long-term loans from the Resilience and Sustainability Trust.
- The 50 percent quota increase agreed last year in Marrakesh solidifies lending capacity [FIGURE 5].
- Fund actions strengthen lending role and precautionary credit facilities to bolster the global financial safety net.
- Recent Executive Board measures (on the eve of the Annual Meetings):
- Measures will: first, safeguard the Fund’s financial strength; second, reduce charges and surcharges on regular lending by an average of 36 percent; and, third, deliver a comprehensive reform and financing package that more than doubles concessional lending capacity and places support to low-income countries on a firm footing for years to come [FIGURE 7].
- The package secured unanimous support—no member objected.
Debt resolution and cooperation
- Debt treatment progress:
- The Common Framework delivered milestone achievements for Ghana and Ethiopia, though predictability and timelines need improvement.
- Enhanced cooperation at the Global Sovereign Debt Roundtable has built consensus on technical issues.
- Emphasis on cooperation:
- Despite high-temperature geopolitics, actionable cooperation is achievable and in members’ enlightened self-interest.
- Aggregating resources and building cooperative frameworks benefits all countries by reducing instability.
Representation, governance, and inclusivity
- Membership and representation:
- Welcomed the Principality of Liechtenstein as the newest, 191st member.
- Work ongoing with the Board and membership to develop, by June, possible approaches to better reflect members’ weight in the world economy, including through a new quota formula.
- On November 1 the Board will welcome a third Director for Sub-Saharan Africa to ensure more voice for the region.
- Institutional strengths:
- The Fund relies on its staff and institutional capacity to deliver tailored value to members.
Closing anecdote and outlook
- 80th anniversary of Bretton Woods:
- Leaders visited the birthplace for reflection, drawing inspiration from founders who shaped a new world during dark times.
- A double rainbow during the visit was described as an omen and a reminder that the founders’ legacy should be seen through difficult periods.
- Final note:
- Optimism that cooperation, reform, and institutional strength can help the world “do better.”
Speech by Kristalina Georgieva, IMF Managing Director — "How To Do Better", 25 October 2024.
Content in this bundle
- Fiscal Monitor: Fiscal Policy in the Great Election Year (April 2024)
- CHAPTER 3 UNDERSTANDING THE SOCIAL ACCEPTABILITY OF STRUCTURAL REFORMS