Speaker: Ms. Julie Kozack, Director of the Communications Department at the IMF
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MS. KOZACK: Good morning, everyone. Welcome to this IMF Press Briefing. It's great to see you, all those of you here in-person and those online. I'm Julie Kozack, Director of the IMF's Communication Department. As usual, this briefing is embargoed until 11 a.m. Eastern Time in the United States.
Let me start with a few announcements, and then we'll move to your questions in person, on Webex, and via the Press Center.
Turning to management travel, First Deputy Managing Director Dan Katz is currently in Seoul, Republic of Korea, until March 21st, where he will meet with senior officials and private sector leaders. FDMD Katz will then travel to Beijing, China, from March 21st to 23rd. During his visit to Beijing, Mr. Katz will deliver a keynote address at the China Development Forum on March 22nd and hold meetings with senior officials and global business leaders.
The 2026 Spring Meetings of the IMF and World Bank Group will take place from Monday, April 13th, to Saturday, April 18th. The press registration to attend these meetings in person in Washington is open, and you can register through the IMF Connect website.
And with that, I will now open the floor for your questions. For those connecting virtually, please turn on both your camera and microphone when speaking.
Let's start right here in the front.
QUESTIONER: Thank you, Julie, for taking my question. I want to ask about the ongoing war between U.S., Israel, and Iran because we have seen oil prices surging in recent days. And how do you think that would impact the inflation picture of the United States, and also, in general, the U.S. economy? And if you also talk about the U.S., global economy, if you will. Thank you.
MS. KOZACK: I suspect we're going to have a lot of questions on this topic, so let's go ahead around and collect them. Let's just maybe go around the room to all the people with their hands up.
QUESTIONER: Thank you. If oil prices remain above $100 for a long time due to the war in the Middle East, what risk does the IMF see to global financial stability?
QUESTIONER: On that exact topic specifically, are there any vulnerable economies that the IMF is currently concerned about, and indeed, have any member states gotten in touch with concerns about possibly needing a program in the near future or any other kind of assistance? Thank you.
QUESTIONER: On this particular topic, has IMF conducted any early indications or studies to determine the potential impact for small states, who are -- one who are heavily dependent on imports, especially fuel and fertilizers. And on that same topic, a lot of Caribbean territories are highly import dependent, including for fuel and so forth. What's the early indications inflation-wise, if the IMF has actually started to carry out a study to determine the long-term impact for these particular states, even though the war is somewhat in its early stages?
MS. KOZACK: I think we have, yep. Now moving around. Yep. Well, you can start here with right in the back, and then we can move to this side of the room.
QUESTIONER: Thanks so much. Just, you know, piling on to the questions that we've already seen. The Central Banks are standing by, ready to take action. We've heard that from a number of Central Banks to be able to address inflation. What's your best guidance now to Central Banks in terms of monitoring policy developments? And has there been any communication, you know, with those, particularly the vulnerable countries in the region, who stand to, you know, sort of Lebanon, which is just on the cusp of trying to rebuild its economy? Thank you.
QUESTIONER: I would like to follow up on that question because we've seen some countries expressing concern. Morocco, for example, said that if oil prices remain high and top $120 a barrel, they're going to top IMF financing lines. So, I was wondering, besides specific talks with economies or specific talks with countries that have IMF programs, have you been addressed, but has the IMF been contacted by countries who don't have an IMF program and would like some type of financing? And also, would like to know if the IMF is thinking of offering Rapid Financing Instruments, as it happened before with global shocks, if this is something that at least the Executive Directors and the management are discussing. Thank you.
MS. KOZACK: Thank you. Then we have two here in the front, and then we'll come to, and then we'll go online.
QUESTIONER: Thank you for taking my question. Just jumping on top of the rest of the questions on Iran. Goldman Sachs came out with a report last week saying that the Gulf economies would bear the brunt of the economic damage. Is there an initial assessment from the IMF on this, and what is the IMF's assessment on what this means for the current programs it has in the Middle East, with Egypt, for example? Thank you.
QUESTIONER: Thanks, Julie. So, if this conflict is protracted, does the IMF see any meaningful risks for the global economy to slide into global recession or not? On top of this, what is your perspective on European economies as they are highly dependent on import of energy? And the last one, what about debt distress situation in countries that are highly dependent on energy imports? Do you see any risks, any real risks that these countries will fall into debt crisis as a result of this protracted conflict? Thanks.
QUESTIONER: Thank you for taking my question. Given the volatility of the energy prices that we're seeing and the limited fiscal space, which country, if the current trend continues, which countries, which economies are most at risk of financial distress in the next 12 to 24 months? And if you can add, which African economies will also be in that space? Thank you.
MS. KOZACK: And then I have two questions online. Please go ahead.
QUESTIONER: Yeah, hi. Thanks, Julie. My question is about Egypt. Specifically, if you're able to provide any information about talks that may be had with the authorities about some emergency assistance, and what form that assistance could take.
QUESTIONER: Thank you, everyone. I think most of it it's already been asked. I also want to ask about the RFI or any other lending facility around energy, fertilizers, or food that you guys are planning on opening. And how close is the global economy now to recession, given the damage to energy infrastructure today and the expectation of very high energy prices after that?
MS. KOZACK: I think that is what we have for now on this topic. So let me try to get to all of the questions. What I'm going to do is I'm going to start with how we see the global economy. Then I'll say a bit about some of the regions that we were asked about. And then I think we have two specific country questions on Egypt and Lebanon.
I mean, let me start by saying that conflicts upend lives and livelihoods, and our hearts do go out to people who are experiencing this.
Now, turning to the economic impact, we have already seen significant disruptions. The closure of the Strait of Hormuz has cut off access to roughly 20 percent of the world's oil and seaborne LNG supplies. Energy infrastructure in the Gulf Region and Iran has been damaged, and this has disrupted oil and gas production.
So now, when we think about the channels through which these disruptions can affect the global economy, regional economies, and individual economies, let me point to three main channels that we're keeping our eye on.
The first is commodity prices. So, of course, there the impact on commodity prices is going to be determined by how long the Strait of Hormuz is closed and the extent of damage to regional hydrocarbon production facilities. Oil and gas prices, as you know, have increased by more than 50 percent over the last month to over $100 a barrel. In addition, fertilizer shipments have been disrupted. And this, along with transportation disruptions, raise risks that we could see increases in food prices. And those could be substantial, again depending on the duration and intensity. And then, of course, for individual countries and regions, the specific impact of these commodity price increases are going to depend on the specific circumstances of each country.
Now turning to the second channel, which is kind of inflation and inflation expectations. If prolonged, higher energy prices will lead to higher headline inflation. And then I think what we, and I think Central Banks are also going to be keeping a careful eye on, is then whether there are what we would call second round effects on broader inflation, and also very importantly, whether there would be effects on inflation expectations. So, this is another channel through which we may see effects for the global economy as a whole.
When we look historically at energy price shocks, kind of a broad rule of thumb is that for every 10 percent increase in the oil price, if it were to persist, say throughout the rest of this year, this could lead to a 40 basis point increase in global headline inflation and a fall in global output of between 0.1 and 0.2 percent. So that's again, that's a rule of thumb, and that is for a persistent increase in the oil price.
And now let me turn to the third channel, which is financial conditions. Here we have seen reactions in global markets. Global stock prices have declined, and bond yields have increased across a range of countries, including in advanced economies like the U.S., the UK, and Europe, but also in emerging and developing countries. Volatility has increased. The U.S. dollar has appreciated, and the currencies of a number of emerging economies have weakened. So, this is how we see, I would say, the picture now and the channels.
The overall impact, of course, is going to depend very much on the duration and intensity of the conflict. We will provide an updated assessment in our World Economic Outlook in April, which will be comprehensive at the individual country level and also for global and regional economies.
Now turning to some of the regional and country-specific questions, there was a question about the GCC. So, what we see in the GCC is that, as I mentioned, for the global economy, the economic impact will depend on the duration, extent, and intensity of the crisis. Our preliminary assessment is that growth is expected to weaken, and fiscal and external imbalances will be affected. And for some countries, it depends very much on where the country is and the country's ability to resume exports. For some countries, higher energy prices could fully or partially offset lower production. And for other countries, that is not going to be the case. I would also add that most GCC countries do have substantial policy buffers. They have undertaken recent reforms to strengthen policy frameworks, promote economic diversification, upgrade logistics infrastructure, and all of this has helped enhance the resilience of these countries.
And finally, in terms of the impact on financial conditions and markets, we have seen, like in the global economy, an impact on equity markets, which have declined, and increasing bond spreads in GCC countries.
Let me now turn to some of the other regions. I want to get to [the] question on small states and the Caribbean. So, on the Caribbean and small states in general and for all of our members, you know, we are closely monitoring developments, including, I think, through the channels that you mentioned. So, we're looking at potential spillovers to countries for how global commodity prices, especially energy prices and food prices, may affect economies. And all of this is something that we will obviously have a full report of in our upcoming WEO in April. I think for the Caribbean, like many other regions, what is going to play an important role is whether countries are oil importers or oil exporters or energy importers or energy exporters. For countries that are energy importers, they may face again if the conflict is prolonged, they may face pressures on their balance of payments. For countries that are oil exporters, their balance of payments may improve because of higher prices. So, we may see a differential effect there. Changes to global financial conditions are likely to affect all countries.
Similarly, if financial conditions tighten as they have, and if they stay tighter, that could affect many countries around the world, including those in the Caribbean. And of course, for countries, small states, and those in the Caribbean that are very tourism dependent, we will be, of course, monitoring carefully how tourism flows evolve. Similarly, for countries that are very dependent on remittances, we will be also needing to look carefully at remittances.
Maybe now I'm just kind of looking through my notes here. I have a couple of more specific country questions, but before I get to those, let me talk a little bit about what we're doing at the IMF. There were a number of questions about our own response and our engagement with our membership.
So, first, we are engaging very actively with our membership. We are talking to them about how we see, as I explained here, how we see some of the impacts on the global economy, but also asking them how can we best support them at this time using the full range of tools available to us, including through our policy advice, capacity development, and also financial support as needed. We have engaged with finance ministers and Central Bank governors in many countries and regions. We've also engaged with regional institutions to discuss and share perspectives on the implications of the conflict and again, how the Fund can best provide support.
Right now, what we're seeing is countries are most interested in what is our assessment both of how the global economy, regional economies, and their individual countries may be affected. Our Managing Director has said recently that in an uncertain world, we do see more countries often turning to the Fund for support. We stand ready to provide that support as needed. Right now, we have not received any formal requests for emergency financing. But of course, as I said, as the situation evolves, as countries reassess their financing needs and their policy options, we stand ready to support them using all of the tools that are available to us.
Let me now turn to, I think there was a question on Europe, and then I have Egypt and Lebanon. So, for Europe, the main channel through which we see the conflict affecting Europe is through energy, higher energy prices. Europe is dependent on energy imports. So, this is the main channel through which we see Europe affected. And of course, an overall tightening of financial conditions will also have an impact on Europe, just like in other regions.
All right, let me now turn to Lebanon. So, the conflict is compounding the humanitarian crisis in Lebanon, and it's further exacerbating Lebanon's already fragile macroeconomic situation. It's taking a heavy toll on economic sectors such as tourism, agriculture, and trade. And obviously, there is physical infrastructure damage in Lebanon as well. Despite this very significant impact of the conflict, the authorities have demonstrated a commitment to continuing their discussions on a comprehensive reform program that could be supported by an IMF arrangement at the request of the authorities. We currently have an IMF team in Paris for talks with the authorities on the authorities' initial assessment of the current conflict, its impact on Lebanon, and to continue discussions. And we expect that these discussions will continue in Washington also during the Spring Meetings in April.
And then turning to Egypt. So, what I can say on Egypt is, maybe starting because there was a question on the impact on Egypt, but also kind of where are we with talk. So maybe just to, just to remind everyone that the Executive Board, the IMF’s Executives Board, approved the Fifth and Sixth Reviews of Egypt's program with the IMF on February 25th. And this was also the First Review of the RSF arrangement. And this allowed disbursements of about U.S. $2.3 billion. $2 billion under the EFF, $200, almost $300 million under the RSF.
We are, in terms of the impact of the conflict, so far, the impact of the conflict on Egypt has remained relatively contained. The channels through which Egypt would be affected are the ones that I laid out for the global economy. We have seen that the authorities have taken a proactive, timely, and well-coordinated response to the conflict. And to the economic impact, they activated a high-level crisis management committee, and that has helped ensure a swift and coherent economic response.
Flexibility of the exchange rate has allowed the currency to act as a shock absorber and to contain and cushion some of the external pressures that Egypt might have faced. And it's also helped Egypt preserve its foreign currency buffers, its international reserves. Egypt is also carefully balancing the need to maintain fiscal discipline, given fiscal pressures, but also to support vulnerable households. And they've been doing this by ensuring that there is social spending targeted at vulnerable households, even as they have ensured that the fiscal stance remains prudent.
Okay, let's move on.
QUESTIONER: Did you want to say something about Central Banks?
MS. KOZACK: I mean, I think I handled -- I thought I answered it when I talked about inflation and inflation expectations. But maybe what I can say on Central Banks is that our advice to Central Banks is, obviously, to remain vigilant in the face of this, the increase in energy prices, to look at specifically at what could potential impacts be on inflation expectations. And obviously, the longer-term impact, or the overall impact, I should say, will depend very much on the duration and extent of the conflict.
So right now, Central Banks need to look at the incoming data, but with a very careful eye on both what we would call second-round effects. Meaning is inflation moving into broadening beyond just energy price inflation, and also our inflation expectations continuing to be well anchored. So those are the things that we're advising Central Banks to keep an eye on.
QUESTIONER: Hi, Julie. Good morning. Question about Argentina and the Staff-Level Agreement. When might the Second Review of the agreement with Argentina be approved? And how are those negotiations progressing? And are you concerned about the latest figures regarding inflation and unemployment rates, or also the decline in tax revenue? Do you believe the Argentine government should make any adjustments in those issues? Thank you so much.
MS. KOZACK: Other questions on Argentina? I know we have some online.
QUESTIONER: Yes, thank you for taking my question. Good morning. Will the reserve accumulation target become annual, and is this something that was talking in Argentina? And second, when do -- I follow up the question of my colleague -- When do you expect the review to be submitted to the Board? And is a new -- it's going to change the phase of review as the IMF did last year? Thank you.
QUESTIONER: Hello Julie. Good morning.
MS. KOZACK: Good morning.
QUESTIONER: I would like to know if also the IMF is analyzing with the government the current level of the exchange rate. And I don't know if you have been following this up, but there have been reports of possible leak of the inflation numbers some minutes ahead before it was scheduled to be known. And there are some privileged information concerns there because of the trading, certain trading movements that came up. If that has been -- if that's in the in the IMF's radar and if there have been any conversations with the government regarding that subject.
QUESTIONER: Yes, thank you, Julie. So, my question following my colleagues is, well, there has been a tax drop in (inaudible) in February for the seventh consecutive month, almost 10 percent year on year. So, is that a cause for concern for the IMF regarding the program's sustainability? And also, the IMF is concerned about the rising inflation numbers, almost 3 percent in January and February. And I know you already commented on the impact of the world in the Middle East on some emerging countries, but if you can add some specifically impact on Argentina. What do you think about that? I would be pleased. Thank you.
MS. KOZACK: Okay, let me take these questions. So, on Argentina, you know, progress is continuing on some key fronts. Engagement between IMF Staff and the authorities is very close, and talks are advancing. I can also say that over the last two weeks the global environment has become more challenging, as we discussed already with the conflict in in the Middle East.
I can add that Argentina has weathered this shock relatively well so far, especially given that it is now a net energy exporter. And here what I can add is that in 2022, when we had the last large energy price shock, Argentina was a net energy importer. And now Argentina is a net energy exporter of $8 billion of oil and gas last year. So, this is a very important difference with the last energy price shock in 2022 for Argentina. And improvements or further advancements in Argentina's becoming a net energy exporter are expected over the medium term.
So, this is we see the beginning of a trend for Argentina. So that is obviously providing a significant mitigating factor for the Argentine economy. That said, we have to recognize, as I said, the situation is fluid, it's uncertain, and through tighter global financial conditions, which have the potential to create a more difficult environment for all emerging economies and even for some advanced economies.
Switching back to where we are on reforms, what I can say is reforms are advancing on multiple fronts in Argentina to entrench the early stabilization gains that we have seen. Congress recently approved some labor market measures to reduce informality in the labor market and to support job creation.
Efforts are underway, as we've discussed here, to rebuild international reserves. The BCRA has purchased about $3.5 billion in reserves since the start of the year. This is equivalent to about U.S. $70 million per day. In addition, the Treasury in Argentina is now regularly issuing U.S. dollar bonds in the local markets, and appetite for these instruments in Argentina has been strong. Discussions on the Second review and the Article IV Consultation are continuing. We'll keep you updated as those talks progress.
And that's all I have on Argentina for right now. I'd say the main thing here is that we're engaged, the talks are progressing, and the reforms are aimed at entrenching the strong stabilization gains that Argentina has seen so far.
QUESTIONER: Question on Ukraine. So, this week, the IMF mission has begun talks with Ukrainian government, according to the statement by IMF Representative Priscilla Toffano. So, this is all happening during the Ukrainian Rada, struggling to pass tax increase bills. And will the Fund consider any potential freeze of disbursements if there is no progress in passing those bills? If yes, are there any substantial risks for public finances in Ukraine? And just on top, next month there is a Spring Meetings session here. Are there any plans for the Managing Director to meet with Ukrainian representatives here in Washington? Thank you.
MS. KOZACK: Are there other questions on Ukraine?
QUESTIONER: Just on that Ukraine context. Hungary is still objecting to the $90 billion loan from the EU. Obviously, the IMF program was intended to secure that and to unlock that. Can you give us any indication of whether IMF officials have been in touch with anyone in Europe and Hungary about that kind of knot of problems?
MS. KOZACK: Thank you. And I think we have one question online on Ukraine. If you'd like to come in on Ukraine, please do.
QUESTIONER: Hi. No, I'm just actually just feeding off the questions that that were just asked a bit earlier. There were reports the fact that apparently the IMF was apparently saying that there were risks to the loan. I understand those reports maybe weren't totally 100 percent, so I was hoping you could clarify. Thank you.
MS. KOZACK: So, on Ukraine, I think, as you know, in February our Executive Board approved a new four-year EFF arrangement for Ukraine totaling U.S. $8.1 billion. That included an immediate disbursement to Ukraine of U.S. $1.5 billion, and this financing forms part of a broader $136.5 billion international assistance package for Ukraine.
The key goals of this new program are to help the authorities further anchor macroeconomic stability, building on the achievements of the previous program, and lay the foundations for strong medium-term growth in the post-war period, and also to lay the foundations for EU accession. This -- achieving all of this does require substantial external financing, but also for Ukraine to play its part with appropriate macro policies and structural reforms
An IMF mission is currently in Kyiv to engage the authorities on progress and plans to meet their commitments under the recently approved EFF. Some of these commitments include, on the fiscal side, fiscal policy, governance reforms, you know, continuing with governance reforms, structural policies to again boost growth, and lay the foundation for growth. The Staff will also use this opportunity to update projections of recent domestic and external developments. And of course, they will be having the usual set of meetings with authorities, civil society, and others. Staff will take the opportunity to meet with parliamentarians.
What I can say with respect to some of the specific questions on fiscal reforms is that the authorities commitment under the new program are to broaden the tax base, tackle tax evasion, bring informal businesses, so businesses in the informal economy into the formal economy. These are some of the essential pillars of Ukraine's strategy for macroeconomic stability, growth, and to secure financing for critical expenditures for reconstruction. What I can say is that the authorities have reaffirmed and reconfirmed their commitment to these reforms and they've also said that they're working with parliament to secure passage of the necessary financing.
On the specific question of financing, all I can say at this stage is that at the time of program approval, which was, you know, as I said, just in February, we did have all of the necessary financing assurances to move ahead. And Staff will obviously continue to monitor this very carefully and to work with partners to secure the full financing package.
QUESTIONER: Thank you, Julie. I just want to follow up on the question about the impact on the U.S. economy. So, you said that oil prices are surging and the fertilizers are kind of disrupted. How does that impact the inflation prospect of the United States? And also, there are some economists who have been warning that with the prices high, the recession risks has been rising. And I was wondering whether the IMF has evaluated a potential like higher risk on restrictions for the U.S. economy. Thank you.
MS. KOZACK: So, on the U.S., where we stand with the U.S., is we recently completed our discussions. Staff completed their discussions with the U.S. authorities for the U.S. Article IV consultation. We presented the concluding statement, I guess, it was in late February or early March several weeks ago. The next step for the Article IV will be to present the Staff Report to our Executive Board and then to publish the Staff Report.
So, all, and in the meantime, of course, we've had the conflict in the Middle East. So, Staff is in the process, of course, updating the Staff Report and the assessment of the U.S. economy to include their views on how the increase in oil prices and others, as you mentioned, may affect the U.S. economy. So that work is currently underway.
We will be -- the plan is to have the Board meeting and publish the Staff Report in the coming weeks, and that will then have the full comprehensive assessment of how we see the implications for the U.S. economy. And that will be followed shortly thereafter by the April WEO, which will also, of course, talk not only about the U.S. economy but the global economy.
QUESTIONER: So, on the U.S., there is recent data that shows that the U.S. debt level is now $39 trillion. This has been a point of concern that was also raised in the assessment. But do you have any further thoughts on that? And then specifically, I have a question about you - you keep referring to this as a “conflict.” Are you not using the word war on purpose, or I mean, I'm just confused about that. And then finally, do you know when the Curtain Raiser is, or is that a date that you can give us yet? Thank you.
MS. KOZACK: So, in terms of the U.S. and debt, I think our policy advice has been clear that we're encouraging the U.S. to reduce the fiscal deficit and to put public debt on a decisive downward path. We did acknowledge in the Article IV that the fiscal deficit did decline in the U.S. in 2025, and we're encouraging the U.S. to continue to reduce the fiscal deficit to ensure that debt can be put on a downward path.
In terms of the Curtain Raiser for the Managing Director, it will be the week before the Annual Meetings. I believe it will be on the Thursday. I don't know the exact date off the top of my head, but we will come back to you with more information once we have it.
And I think to your other question, this is just the terminology that we're using right now. I think there's nothing behind it.
MS. KOZACK: Sorry. Curtain Raiser is April 9th at 10 a.m.
QUESTIONER: Thank you. I have two questions on two different countries in Latin America. Firstly, on Venezuela, has the U.S. recognition of the Rodriguez administration via diplomatic channels changed anything on the relationship between IMF and Venezuela so far are engaging at any level. And secondly, I would like to ask about El Salvador. The country now faces two delayed reviews. Can we say, or can the IMF say now that this program is off track?
MS. KOZACK: Thank you. Before I answer on Venezuela or -- yep, let's go here.
QUESTIONER: Thank you. I was going to ask the same about Venezuela on any kind of engagement with the government and any change in the timeline on when the IMF will have some sort of idea of how that economy is looking right now. And a follow-up on the action from the IMF. Are you coordinating with other MDBs of any of the regionals or with anyone else about your response to the current crisis?
QUESTIONER: On Venezuela, as a follow-up, a specific question is there any progress in providing access to the [frozen] funds of about $5 billion to Caracas, or so far there's no progress in this specific direction of communications and engagements.
MS KOZACK: So, starting with Venezuela. We are continuing to monitor developments in Venezuela despite significant information gaps. Since 2019, the IMF's dealings with Venezuela have been paused, as we've discussed here before, due to government recognition issues. To reiterate what I've said before, so under our approach to government recognition, we're guided by the views of the international community as represented by a majority of total voting power of our members. And of course, we're monitoring developments in the bilateral relations of our members with Venezuela.
On the question about technical engagement here, I can confirm that we are working toward undertaking technical-level interactions with Venezuelan economic institutions. Those interactions will take place in due course, and of course, as we have more information, we'll provide it. And such interactions would involve some activities like obtaining basic economic data, which have been unavailable for many years. And these activities would be in line with the IMF's strategy for fragile and conflict-affected states. So, it's part of how we engage with fragile and conflicted states, not just in Venezuela, but for our entire membership.
QUESTIONER: The interactions with institutions -- will this be the Central Bank, or can you specify which institutions these are?
MS. KOZACK: I don't have the specific set of institutions at the moment, but we can try to come back to you.
QUESTIONER: Sorry, was this a request from the government?
MS. KOZACK: So, this is, I would say, the way I would characterize it is that both the Fund and the Venezuelan authorities recognize that having a technical level interaction is important for the Venezuelan economy, including to gather data, make an assessment of the economy. So that's the way I would sort of characterize it, a joint recognition of the importance.
The other thing that I do want to emphasize is that such technical interactions, such are very much limited to fact-finding and they do not indicate a trajectory toward recognition or a resumption of what we would call regular dialogue with the authorities.
And then on the funds, so there's -- I have no update on the frozen funds.
These are follow-ups, I take it, right?
QUESTIONER: Yeah, this is actually separate. This is a follow-up on the Iran war. I'm just doing the math in my head, and I wonder if you can help me with the math. So, you said that every 10 percent, the rule of thumb is every 10 percent increase in energy prices could lead to an increase 40 basis point increase in inflation and a 0.1 to 0.2, you know, drop in output. I mean, we've seen a 50 percent increase already and more and rising. So is it correct to say that if the say hundred dollar level of oil persists through the end of the year, that we could see as much as a drop of 1 percent in global output and as much as a, I don't know, 2 percent increase in, I guess a 200 basis point increase in inflation? Is that correct to do the math like that?
MS. KOZACK: So, I think the key, the critical part, is that the prices need to be sustained for one year. So, it's not that just because you have a short-term spike in oil prices, you get this very, so this is if we were to have a prolonged increase in oil prices for one year, then we could see these kind of significant impacts. But that's a very important part of it, right? So, it's not, you know, so it very much depends on the duration, and obviously, the longer the duration, then we could have the size of impacts that I would have to do the math. But we can come back to you on that. But yes, but I think the critical point is that it has to be sustained for one year.
And the other caveat I would make is that this is just a rule of thumb. So, in our April WEO, we will be presenting a full global, you know, our assessment of the global economy based on a certain set of assumptions, including assumptions for oil and other commodity prices. But we will also include in that a scenario, you know, scenario analysis, which we always do. And I think that would provide, I would say, a richer and more informative assessment compared to the rule of thumb that I -- that I talked about.
I want to get to -- do you have a follow-up on Venezuela?
QUESTIONER: No.
MS. KOZACK: Because I want to get to the question. I have a question on El Salvador to get to first.
On El Salvador, so what I can say on El Salvador is that when we look at the economy, economic, there have been some important positive economic developments in El Salvador which have been supported by the reforms that were undertaken under the program. So, for example, the fiscal deficit is coming down. The fiscal consolidation is being implemented. The economy is expanding at a faster-than-anticipated pace on the back of robust remittances and investment, especially in construction. And this is being underpinned also by improvements in the security situation in El Salvador. There is progress on the structural agenda, including the adoption of the new Financial Stability Law and the fiscal sustainability -- sorry, Financial Stability Law and Fiscal Sustainability Law.
Discussions are continuing toward a Staff-Level Agreement for the next review of the program. The teams are closely engaged, and discussions are focused on three policy areas. The first is on plans to continue to reduce the fiscal deficit, including through pension reforms The second is on efforts to deepen the structural reform agenda to strengthen governance, financial deepening, and the efficiency of budgetary spending. And these will be essential in El Salvador to improve productivity and attract foreign direct investment. And finally, the third area is plans to strengthen the transparency of Bitcoin operations and to unwind the government's participation in the Bitcoin project.
So, I am going to now go online for a couple of questions. We have some people who have been waiting patiently. I think you both have questions on Sri Lanka.
QUESTIONER: Hi Julie. Thank you for taking my question. My question is on Sri Lanka. Given what's happening in the Middle East and situation on economics and these external shocks, is the IMF planning on recalibrating the targets of the Extended Fund Facility for Sri Lanka? And if so, what kind of recalibration are we looking at? Thank you.
MS. KOZACK: Okay, thank you. I think there's another question online on Sri Lanka.
QUESTIONER: Yes, thanks, Julie. Just two questions. First one, amid shortages and rising pressure on households, does the IMF view potential electricity tariff hikes as appropriate? And second one, Sri Lanka's Central Bank Governor, Dr. Nandaral Weerasinghe, said in Thailand that Sri Lanka may seek to combine the Fifth and Sixth IMF Reviews. What is the status of this request? Thank you.
MS. KOZACK: Any other questions on Sri Lanka? Similar question for another country in the region? Sure.
QUESTIONER: Similar question for another country in the region. For Pakistan, exactly the same, does the IMF envisage electricity tariffs having to rise as a result of these shocks? And also, the oil price shocks obviously have a huge weightage on Pakistan's import bill. Is that something that IMF is talking to policymakers about there, and are there concerns? Thanks.
MS. KOZACK: Okay, so let me start with Sri Lanka. As you know, the Managing Director was recently in Sri Lanka. She noted there that the reform program for Sri Lanka has made very significant progress even after being hit by the devastating Cyclone Ditwah. The Managing Director noted and was inspired by the resilience of the Sri Lankan people and how they were able to face this momentous challenge.
With regard to the economy, Sri Lanka's economy has been growing relatively strongly. Actually, it grew by 5 percent in 2025. Inflation was about 1.6 percent in February. The debt restructuring is nearly complete, and gross international reserves have been increasing significantly. However, Sri Lanka, as noted, is exposed, significantly exposed to the conflict in the Middle East through trade remittances and tourism channels, which weighs, which can weigh or may weigh on its economic outlook with regard to what comes next for Sri Lanka.
We expect an IMF team to visit Sri Lanka from March 26 through April 9 to have discussions on economic policies. And there the aim will be to complete a combined Fifth and Sixth Review under the program. And obviously, as part of those discussions, the team will be engaging with the authorities to better understand what could be the potential impact of the Middle East conflict on Sri Lanka's economy. And the team, when they return, will obviously have an updated assessment of Sri Lanka's economy and how the IMF can best support continue to support Sri Lanka.
Okay, let me come to Pakistan, and then I'm going to take Kemi in the back as the last question.
So, on Pakistan, what I can say is that we are currently in discussions with the authorities for the next review under the program. And obviously those discussions will be focused on, you know, all of the developments that may affect Pakistan's economy, including obviously the situation in the Middle East, the increase in oil prices, increase in fertilizer prices, all of the different parts of the economic impact, including tightening of financial conditions, how all of that may affect Pakistan. And we'll hear from the team as those discussions come to a conclusion.
QUESTIONER: Thank you. My question if you could provide updates on Africa, and also, you did not answer the question I asked.
MS. KOZACK: I realized, sorry, I had a lot initially.
QUESTIONER: So, I will go ahead and ask again. Given the high global rates and the volatile energy prices and limited fiscal space, if the current trend continues, African economic are most at risk of financial distress. And the follow-up to that is in the context of the Middle East conflicts right now, how should African Central Banks balance the need to control inflation with the risk of stifling already fragile economic growth?
MS. KOZACK: Okay, so let me talk a little bit about how we see the situation in Africa, in the region in general. And then I will come to the question on vulnerable countries.
I would say, I think I answered already the issue of Central Banks, right? Which is for Central Banks to be vigilant, looking at second round effects potentially on inflation, and to keep an eye also on what's happening with inflation expectations.
So, when we look at Sub-Saharan Africa, what we see is a region that is diverse. Although we do have a number of low-income countries in the region, we have some countries that are commodity exporters and some countries that are commodity importers. So, the effects in Africa will depend very much on the individual circumstances of the countries.
We see the conflict in the Middle East as creating new risks for the region, notably through the channels that I talked about, commodity price channels. So, increases in oil and gas prices, increases in fertilizer prices, and potential increases in food prices. Some countries in the region are heavily reliant on imports. That means that their import costs are going to go up, and it may place pressure on their balance of payments. And at the same time, and then for countries that are commodity exporters, they will, the balance of payments will benefit from the higher prices in terms of more foreign currency inflows into the country through higher export prices.
But for all countries, we may see, as we said globally, there could be pressure, there will be pressure on headline inflation in all likelihood. And countries will need to be looking very carefully, Central Banks will need to be looking very carefully at the potential for broader inflation trends, but also to look very much at what might be happening with inflation expectations. So that's another channel that could be important for Sub-Saharan Africa.
And then, of course, the third channel that we discussed in the beginning, financial conditions, is also going to be very important for countries in Sub-Saharan Africa. We have a number of countries that recently were able to re-access international capital markets. Tighter financial conditions, if prolonged, could affect countries, including through their ability to access markets. So those are the three channels that we talked about for the global economy, which are also very relevant for Sub-Saharan Africa.
And then of course, the countries that may be -- that are already in a more vulnerable position are likely to be the ones that -- that are affected the most because they have fewer policy buffers with which to respond to the shock. They may already have very high levels of debt. They may already have low levels of international reserves. So, for those countries that are already in a very vulnerable position, those are the countries where the initial impacts of the crisis or the conflict, rather, may be felt, are likely to be felt first.
And so, then kind of that is a segue then to your next question, about which countries or regions are we most concerned about? We're always most concerned about our most vulnerable members for the reasons that I just mentioned. They have limited policy space, limited buffers, and in a world where financing conditions may be becoming more challenging for them, these are the countries that may need support from the IMF, and we will stand ready to work with those countries to support them. And that applies not just to countries in Africa, but throughout our entire membership.
Okay, and with that, I am going to bring this Press Briefing to a close. Thank you very much for your participation today.
As a reminder, this briefing is embargoed until 11:00 a.m. Eastern Time in the United States. A transcript will be available later on IMF.org. And if we did not have time to get to some of your questions, there may be some of you, particularly online or maybe even in the room, who we didn't get to your questions. Please do reach out to the media team at media@imf.org or visit the Press Center, and we will follow up with you bilaterally.
Thank you very much and wishing you all a wonderful day.
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