Transcript

Speakers:

Kristalina Georgieva, Managing Director, IMF

Mohammed Aljadaan, IMFC Chair, Minister of Finance, Saudi Arabia

Moderator:

Julie Kozack, Director, Communications Department, IMF

 

Ms. Kozack: Good afternoon, everyone. It is a pleasure to have you all with us here today at this IMFC press briefing. I'm delighted to be here with the chair of the IMFC, His Excellency Mohammed Aljadaan, Minister of Finance of Saudi Arabia, and also Managing Director of the IMF, Kristalina Georgieva. Both of them will share a few takeaways with you from the IMFC meeting that just concluded, and then we will have time for your questions. We have 30 minutes for this press briefing, and I will first turn to His Excellency for opening remarks.

Minister Aljadaan: Thank you very much, Julie, and good afternoon, everyone. First, I would like to thank all the IMFC members for their strong and focused collaboration. I would also like to thank Kristalina for her guidance and wisdom, as always, and for all of the IMF staff. Incredible work. At this time, the global economy is undergoing a profound transformation, bringing uncertainty and challenges, but also offering tremendous opportunities. In this environment, we need to work closely together as a multilateral institution to adapt sound policies that boost their confidence, build resilience. And safeguard microeconomic and financial stability. Risks to the outlook are tilted to the downside with low growth and excessive global imbalances. Importantly, it is imperative that we work towards a lasting peace around the world to support sustainable growth and long-term stability.

I am increasingly concerned about the global implications of high and rising sovereign debt for countries of all income levels. Advanced and emerging market economies are approaching debt levels that are concerning, and which requires serious attention. In some countries, many of them unfortunately in Africa, this debt is having serious effects, and lives, and livelihood. Addressing these challenges will require strong vision, leadership, and determination, indeed with a lot of courage. We will continue to advise and support governments to make productive investments, pay down their debt in a timely manner, and when needed, restructure debt in an orderly fashion, supported by the common framework for debt treatment.

Turning to the IMFC deliberation, I would like to report a few developments. All members agreed on the economic issues reflected in the chair's statement. I would focus on a few of them for the sake of time.

First, members look forward to the ongoing review of the program design and conditionality, which will help strengthen the effectiveness of the IMF programs to restore external viability and build resilience. Members also call for the timely and full implementation of the poverty reduction and growth trust reforms to ensure its self-sustained lending capacity. Second, the commitment to a strong quota-based and adequately resourced IMF is essential. The members look forward to the finalization of the process under the 16th General Review of Quotas and appreciate the advancement and development of principles to guide future discussions on the IMF Quotas and governance, as called for in the Diriyah Declaration.

Third point is members support the critical efforts to further strengthen capacity development in line with the 2024 strategy and to ensure sustainability of financing. Fourth, members welcome the progress made on debt treatment under the G20 Common Framework and the Global Sovereign Debt Roundtable. It is essential that we address global debt vulnerabilities in an effective, comprehensive, and systemic manner, including further stepping up the Common Frameworks implementation in a predictable, timely, orderly, and coordinated manner. And finally, members welcome the ongoing streamlining efforts at the IMF to deliver efficiency gains and best value to the members. Now I'll hand it over to you, Kristalina.

Managing Director: Thank you very much, Minister Aljadaan. Every time we come out of our meetings, and I reflect on your chairmanship and your leadership between the meetings, I recognize that the IMFC and we, staff and management of the IMF, we are very lucky here in the chair. You bring the spirit of collaboration for 191 members to bear in this complex time. So thank you.

When I look back to April, I vividly remember sitting in this chair in this room and answering the question, what is my biggest takeaway from the meeting then? My answer was, “our members came very anxious; they leave less anxious.” And the question is... Six months on, what is the mood in the room? And I can say that there is a sense of relief that the world economy is holding. It has done better than we feared then in April, but there is also still a sense of anxiety because the performance of the world economies, less than we need it to be and because there is a very dark cloud of uncertainty still holding over our heads. And that uncertainty has become now the new normal. What I also find very positive from the meetings is that there is a sense of looking forward. It may be difficult, but we need to roll our sleeves; we need to navigate through this fog of uncertainty.

So let me highlight three areas where our membership agrees we need to make it a priority for the work ahead. First, strengthening fundamentals. This means rebuilding fiscal buffers, bringing down debt levels, and investing in strong institutions and policy frameworks so we can keep macroeconomic and financial stability in check. Second. Taking determined steps to durably boost growth. This was a very present theme across all discussions. How to do that? Embracing regulatory house cleaning to unlock private sector potential as the main objective to get dynamism and lift up productivity and growth. Third, reducing excessive global imbalances. We talked about it in the spring. At that time, we got homework to do much more work in this area, and we continue to see an understanding across the membership that we need a more balanced world economy, boosting demand in surplus countries, consolidating in deficit countries. It is a global issue. But the work has to be done at home.

And finally, in this world of heightened uncertainty, members expressed support for the role of the Fund and expectation that the Fund will be an anchor of stability. As Mohamed mentioned, we are sharpening our surveillance and our financial sector assessments, so we can offer high quality policy advice to members. We are digging deeper into that issue of global imbalances and we are integrating work in bilateral surveillance in this area firmly. We are refining the methodology for the external sector report. We continue to push members for policy corrections.

Very important, especially for our poorer members' capacity development. The expectation is that it will be well integrated in our policy advice and in our program work where we have programs.

We are also reviewing the design and conditionality for our programs so lending effectiveness can go up. I very much agree that the work on debt is both very important and urgent. And in regard, we got encouragement for our intention to use our good offices' role to bring coordination among creditors and debtors, in addition to complement the work of the Global Sovereign Debt Roundtable, and also to do good work on the review of our debt sustainability framework for low-income countries.

I am also very appreciative of the membership. Almost everybody who spoke would press on this point, we need the Fund to be financially strong, so completion of the 16th January review of quota, that would increase our quotas by 50%, and the reforms for the PRGT, so we can do better for those who need us the most.

So, I came out of the meeting room with a sense of encouragement for our staff, but also with a long list of homework. What the meetings are saying so clearly is that there is desire for dialog, the importance to cooperate, even when countries may have different views, to have a place to share these views. And in terms of homework, we would reflect very carefully what more and better we can do in policy advice, in capacity building and financial support. One very encouraging thing I heard from the members, they all want us to be candid. They want our tough love. Thank you.

Ms. Kozack: Thank you very much, Your Excellency, Managing Director. We'll now open the floor for questions. If you do have a question, of course, please raise your hand and also identify yourself when the mic is given to you. So I'm going to start right over here. Gentlemen, on the end.

QUESTIONER: Thank you. Sorry to stress on one of the profound uncertainties, but obviously at the beginning of this meeting the US Treasury Secretary said in terms of trade it's China versus the world. Minister, did you see that any of that reflected around the table at these sorts of meetings? And managing director, how damaging would export embargo be to the world economy.

Minister Aljadaan: One thing I would say, without going into a lot of details, is that the IMFC meetings have been actually a very, very positive, very candid. And the members were able to exchange their views, even if they had difference in views. It was actually expressed in a civilized way, in a very constructive way. I thought it was actually very positive. And I'm sure there are a lot of negotiations on the side. We will not go into that discussion. But generally, the mood was actually very positive. And there is an appreciation of the value that this committee and the institution brings as a convening power to resolve problems that no one country can resolve in its own.

Managing Director: We do hope that there would be an agreement that would bring the current tension down. We will of course carefully calculate the impact should that become necessary. You probably recall in the World Economic Outlook, we do project a downside scenario. And while it is not calculated on that specific risk, what it illustrates is just about what the likely impact of this kind of deterioration would be, it would be a material impact on global growth. But again, I want to stress that my expectation is to see the path to agreement will be found, especially judging by the atmosphere we have witnessed in the room.

Ms. Kozack: Okay, thank you. Let's go to the middle. Second row, we have a woman in white with a black jacket.

QUESTIONER: Thank you so much. Based on the uncertainties and the risks, I just want to understand Africa, like other regions, faces impact from the new US tariffs. Curious to know the IMF policy advice that you'd have for African economies to mitigate a trade war effect as well as also managing inflation. Thank you.

Managing Director: We have engaged with the countries in Africa and with the regional organizations to identify ways in which economies can be strengthened. And I want to point to three very important areas of action. First, doing more domestically to improve governance, trust in institutions, and create better conditions for private sector to function, deliver jobs, deliver opportunities. There is a lot that can be done in that regard. Second, concentrate efforts on the public budgets to increase revenues in all countries. In all countries there is space to reduce tax evasion to bring more of the economy in the formal side, in the formal sector, to improve tax collection, and far too many countries are still quite low in tax to GDP. Our advice is tax to the GDP has to be at least 15% if you want to have the ability to stimulate, to provide services and stimulate the economy.

And the third is the most important at this time, in the context of the question you asked. Trade more with each other. The continental free trade area is something that should not be an aspiration. It should be turning into reality. In regional, subregional settings, there are plenty of tariff, non-tariff barriers, and logistical barriers. For countries to trade more with each other, to trade with the Gulf, to trade in other parts of the world. It should not be the case to have to take a lot of goods and go to Europe to be able to deliver that same lot of goods somewhere else in Africa.

So, these are important moments for Africa to turn challenge into an opportunity and to get an opportunity. I mean, just to give you this, we calculate that the benefits of regional trade integration can be up to 10% of income per capita in Africa. So, I hope that the uncertainty and the anxiety will turn into, okay, there is plenty we can do, we haven't done it so far, now is the time.

Minister Aljadaan: Just comment here that in addition to what the IMF is doing, a great job that they're providing, I think we should remember there are two pillars of the Bretton Woods institutions. And I think the World Bank and the IMF have never worked better than now. I mean, they collaborate, they work together, they exchange information. Particularly in relation to Europe, you could see the significant work that has been done by the World Bank in supporting the poorer countries in Africa and complementing that with the great work that IMF is doing. So personally, I'm a governor of both and I take them as a one package to help individual countries and regions.

Md. Kozack: Very good. Let's go here to this section. Woman right here in the front in the burgundy.

QUESTIONER: Thank you, Mrs. Georgieva and Minister Aljadaan for taking my question. So, my question is about AI. In the past, the industrial gap between countries was the cause of divergence between the economies of the North and the South. Now we know that the US and China are on the right track with the AI boom. To what extent do you think this AI gap will be the next gap that will widen the difference between the economies of the North and the South. And who is the most susceptible here? Is it the lower income countries only, or the countries that don't have access to cheap energy to build data centers, as probably countries like Saudi Arabia might benefit, as Minister Aljadaan pointed out a few days ago in one of the sessions that he has held this week on the sidelines of the IMF meetings. Thank you.

Managing Director: We have created an AI preparedness index exactly because of the essence of your question. We don't want AI to turn into yet another vehicle of divergence. We would like it to help the process of convergence. What we have done is we identified four key factors for preparedness for AI. First, digital infrastructure. Second, skills and labor markets that can support adoption of AI. Third, innovation and how it flows from one place to another in the economy. And fourth, regulation and ethics.

And when we applied this index to 174 countries, we came with some worry and with some hope. Worry because, indeed, advanced economies and emerging, more dynamic emerging market economies, including countries in the Gulf, are in the upper one-third of the index. Low-income countries are at the bottom. A little bit of hope because we also see a recognition in many developing economies that they need to move fast so they can leapfrog with AI. My advice to low income countries, to developing economies, eliminate first and foremost the technical obstacle. So if you don't have access to electricity, you don’t have access to the Internet, you cannot be part of the AI revolution.

And this is where your point about the World Bank and the IMF working together. The World Bank has set the target of 300 million people with access to electricity out of the 600 million that don't have it today, that has to be seen as priority for the countries and for their development partners, and it should be also an incentive to bring more private sector energy into resolving this problem.

We have seen how the cellphones allowed developing countries to leapfrog. They actually made some of the traditional banking services obsolete. I don't know anybody in a low-income country with a checkbook. Why would they have a checkbook? Why would they have anything but their phone and account in which they can move money? How can we get AI that easy access to knowledge that AI offers to developing countries? This is the task. So, it is an opportunity to for conversion, but you're right unless it is pursuit with systematic approach, it may turn into a risk for divergence.

Minister Aljadaan: Just to complement this, I think the gap is not really about between south and north. So, you will have potentially the risk of, you know, enlarging that gap, but actually within specific countries. I mean, take any country, even advanced economies. I think you will have to watch for that risk of gap widening within that same country. So, one needs to be careful. I think I am actually optimistic. Even with these risks, if we focus on managing them right, you will be able actually to provide significantly more efficient and cheaper support. For example, if you talk about the World Bank, the ability of the World Bank actually to provide the support to farmers, they could actually reach millions and hundreds of millions of farmers around the world with a very cheap tool that will actually be otherwise costing them billions and billions using AI tools. So, that's where the hope is coming from.

Managing Director: And I'm sorry, you asked whether access to energy, cheap energy is an advantage. It is an disadvantage to build the data centers. All other things equel, it is also an advantage if you have lower cost of energy to use to tap into AI. But it is not prohibitive if you don't have this. What would be prohibitive if you didn't have a strategy as to how to make AI work for everybody.

Minister Aljadaan: I think Africa has the tool just to take one continent that a lot of countries, including advanced economies, does not have, which is human capital. I think human capital is as important for AI as energy. So, we should not underestimate, if you have that, you don't need the data centers in your country. You could tap data centers wherever they are. It's the human capital and I think Africa and a lot of the low-income countries have what it takes. If they just focus on recalibrating their education system, I think they will be there.

Ms. Kozack: I have a very short amount of time left, so we will take one very quick final question and then we will wrap up. Okay, so let's go to the gentleman at the end here. Right here, second row at the end.

QUESTIONER: Thank you for taking my question. Just to bring this back to the Spring Meetings, you talked about several needs for Syria as it looks to reconnect with the global economy, rebuilding data credibility, the central bank. Could you run through the conversations that you've had this week, any tangible progress that has been made? And also, the Syrian finance minister said that they are working with the US and the IMF on a compliance strategy program. Could you share what this is? Thank you.

Managing Director: Thank you for this question. I want to recognize Minister Al-Jadan for Saudi Arabia's leadership role on accelerating support for Syria. What has happened since the Spring Meetings is we now have a full-fledged engagement with Syria and an IMF team has already been in Damascus on the issue of strengthening the capacity of the central bank to provide the necessary functions and to be an anchor of stability by being trusted by partners of Syria. We have defined a work program that includes identifying capacity development needs and delivering support for Syria on an accelerated basis. The World Bank is also very firmly engaged, and actually the two teams work very closely together. So yes, at that time, there was a request for the Fund, and by now we had delivered multiple engagements, including a mission to Damascus for that purpose. The minister invited me to go. And I said, let's get to that point in which we have achieved this institutional building. And at that time, I will be happy to come. So, Minister Aljadaan maybe would add to that, because as I said Saudi Arabia has been a very active supporter of Syria.

Minister Aljadaan: I will not add much, Kristalina, other than to say that we stand with Syria. We believe that they really mean business and they are genuine in their efforts to actually do the right thing for their people. And it's our duty, I think, as the international community to provide that support. And I'm really grateful also for our host, the United States, for actually taking major steps in removing sanctions and the same with the EU. That actually helped, both the way for private sector investments. And I can tell you a lot of investments are now going into that direction. So, from first-hand knowledge, I know that a lot of investments actually being finalized with Syria.

Ms. Kozack: Very good, so thank you so much. This concludes our press briefing for today. Thank you all for joining us. The full transcript, as always, will be made available on our website. And of course, if you have further questions, please do not hesitate to contact our media relations team. I wish you all a wonderful afternoon. Thank you.