April 7, 2021

Speakers:

Kristalina Georgieva, Managing Director, IMF

Gerry Rice, Director, Communications Department, IMF

Mr. Rice: Hello everyone, and welcome to the 2021 Spring Meetings of the IMF and World Bank. It is very nice to have you with us today. I hope everyone is managing to stay safe and well. We are delighted to have with us the Managing Director of the International Monetary Fund, Kristalina Georgieva, and we are going to turn to her in a second. Just a reminder, I think everyone has received in advance a copy of our Global Policy Agenda, which we will be discussing today. We look forward to your questions. If you can keep them short, we will try to take as many as we can this morning.

With that, I want to turn to Kristalina.

Ms. Georgieva: Thank you very much, Gerry, and welcome to the virtual 2021 Spring Meetings from me as well. Leo Tolstoy in Anna Karenina captures very well where the world economy is today, with: "All the variety of life is made up of light and shadow."

We have good news that there is light at the end of the tunnel. After the worst global recession since the second world war, the recovery is underway. As you know, yesterday we lifted our global growth forecast to 6 percent for this year, 4.4 percent for 2022.

The outlook is brighter because millions of people are benefitting from vaccinations and because of further policy support, especially in the United States. This is adding to the exceptional and coordinated actions taken over the past year. Without them, without those fiscal and monetary measures, the global contraction last year would have been three times worse. This could have been another Great Depression.

Yet, while there is light, the crisis continues to cast a dark shadow. Economic fortunes are diverging dangerously. A small number of advanced and emerging market economies, led by U.S and China, are powering ahead. Weaker and poorer countries are falling behind in this multi‑speed recovery.

We also face extremely high uncertainty, especially over the impact of new virus strains and potential shifts in financial conditions. And there is the risk of further economic scarring from job losses, learning losses, bankruptcies, extreme poverty, hunger. Policymakers must take the right actions now by giving everyone a fair shot—not just into people's arms, but also in people's lives and in vulnerable economies.

Our Global Policy Agenda, released today, highlights three priorities:

First, a fair shot at the vaccine. This means ramping up vaccine production and distribution and steering clear of export controls. It means fully funding the COVAX facility and ensuring that surplus vaccines are transferred to poorer countries. This year, next, vaccine policy is economic policy. Faster progress in ending the health crisis could add almost $9 trillion to global GDP by 2025, best value for public money in our times. This window of opportunity is closing fast. The scientists have given us vaccines in record time. Now governments must show the same sense of urgency and collaboration to provide vaccines to everyone everywhere.

Second, a fair shot at recovery. The keys to support vulnerable households and viable firms so long as the crisis is with us. This requires targeted fiscal measures and maintaining favorable financial conditions. Given diverging recoveries, we need careful communication by major central banks, and we need prudent policies in emerging and developing countries to minimize harmful financial spillovers.

Once the health crisis is over, governments should gradually scale back support programs and scale up targeted hiring subsidies and retraining and reskilling. This is particularly important for low‑skilled workers, youth, and women, who have borne the brunt of the crisis. Viable small businesses need more help through equity injections and better restructuring procedures, and once the recovery is firmly underway, governments need to ground financial policy in credible medium‑term frameworks.

Third, a fair shot at the future. This is perhaps the most consequential decision that any government can make this year. The focus should be on scaling up public investment in green projects and digital infrastructure, in people's health and education, to ensure that everyone can benefit from the historic transformation to greener, smarter, more inclusive economies. To unlock this potential, countries will need sufficient public revenues, and they would need more efficient spending. In many cases, this will mean more progressive taxation and an agreement on questions like minimum taxation for companies and international tax rights. This has to be coupled with stronger support for poorer countries as they fight the crisis and seek to invest in the future.

Our research shows that low‑income countries have to deploy some $450 billion over the next five years. As part of a comprehensive effort, they need more domestic revenue mobilization, but also more external concessional financing, more help to deal with debt. The further extension of the Debt Service Suspension Initiative just announced by the G‑20 and the new Common Framework for orderly debt restructuring will help. The IMF will do its part.

We continue to step up in an unprecedented way. So far we have supported 86 countries with over $110 billion using a variety of instruments. Our lending to Sub‑Saharan Africa last year was 13 times more than the annual average over the previous decade. We have supported 160 countries through technical assistance and training, and 29 of our poorest members through debt service relief recently extended.

As indicated by the G‑20 today, we will propose a new SDR allocation of $650 billion. This will help address the long‑term global need for reserve assets and provide substantial liquidity boost to all our members, especially the most vulnerable. What this crisis has shown us is just how inescapable our shared destiny is. Now we must build on this broader sense of common responsibility to foster a fair recovery and a resilient post‑pandemic world. Thank you.

Mr. Rice: Thank you very much, Kristalina. So nice to see so many colleagues online today and on WebEx; good to see everybody there. I am seeing questions coming in online as well. We will try to get to everyone today, and we will try and do our usual touching on the various parts of the membership, the various parts of the world.

Question: Thank you, Gerry and Madam Managing Director, for doing this. Two questions, the first one is, Managing Director, you mentioned [inaudible] changed already about the world.

The second is that countries like China [inaudible] economy. Can you also talk about how the role [inaudible] country global mitigation and especially [inaudible].

Mr. Rice: Thank you very much, Gabriel. I think it was cutting out a bit for Kristalina, but I got the whole thing I think. Let me read it back to you, Kristalina:

The global economy is projected to reach pre‑COVID level this year, but in your curtain raiser speech you mentioned we are at a turning point; so what has the pandemic changed permanently about the world. And the second question: Countries like China offering policy support to reach carbon neutral and green economy, could you talk more about the role multilateralism can play in mitigating climate change, especially to make sure no country would be left out?

Ms. Georgieva: Thank you very much, Gabriel. What we learned in this crisis is how interdependent we are and that we are only as strong as the weakest link. After the global financial crisis, the most important lesson the world learned was that we needed to boost the resilience of the banking system, and we did it. After this crisis, our understanding of the importance to work together to build resilience to future shocks is definitely much more profound, and it is that concentration within communities, countries, and internationally, on building resilience of people, investing in education, health, social protection, building the resilience of our planet. Many of us were worried that the pandemic would push aside concerns about this other crisis, the climate crisis. That did not happen. On the contrary, we are much more understanding of this interdependence and also our dependence on nature.

Finally, a more comprehensive resilience of the economy even going back to the global financial crisis, now we recognize that we worked on the banking system but not on the nonbanking financial institutions, and we are seeing that we have to expand this resilience building more broadly towards them as well. So this I think is a change we all have to integrate in our thinking, and hopefully it would help us to be much more proactive as a world community, as countries, as businesses and families, towards this more resilient world. It is not by chance that we all recognize that digitalization, climate resilience, the transition to the new climate economy, more attention to equality, these are lessons we are taking with us.

That takes me straight to your climate question. 2021 has the potential to be the year of climate action. We have the stars aligning. We have the G7 presidency making this a priority. The G‑20 presidency, we just came from the G‑20 Finance Ministers meeting, making this a priority. We have COP26. We have science speaking loud and clear of the need of action, and we also have a multilateral environment in which countries are stepping up with their commitments to net zero in 2050; in the case of China, 2060. Using this to build a strong momentum is what we at the IMF strongly support.

In our view, there are four elements in building this multilateral action: One, recognizing that we have to make progress in collectively defining how the world can meet its objective for net zero by 2050 with actions in this decade. What we do this decade would define whether we can reach this target.

Secondly, and this is where IMF stepped up, identifying the foundation to deal with the transition to the low carbon economy in a way that is beneficial in terms of growth and green jobs, and we looked at how that can be achieved: first, putting a price on carbon; second, investing in green infrastructure massively; and, third, making sure that those that are affected by shifts are given a fair say; that there is just transition.

Three, there is a call for burden‑sharing, and it is something that has been agreed, 100 billion a year from now to 2030 to go to developing countries. Obviously that has to be done.

Four, and that affects us all, all hands on deck. Everybody has to do what is in their capacity. For the IMF, our comparative strength, surveillance, capacity development, integrating climate risks in financial stability assessments, and data; and we are playing on this strength.

Mr. Rice: Thank you very much, Kristalina. Let me take a question from WebEx.

Question: Thank you for taking my question. I know recently the IMF announced that the [debt service for LICs for 2020‑21] low‑income countries in the world. Many of those countries are in Sub‑Saharan Africa. As you know, debt service means countries need [inaudible] reduce their debt. What else can the IMF do for African countries to rescue [inaudible], apart from committing more money [inaudible]?

Ms. Georgieva: Thank you very much for your question. Africa has been very severely hit by the health crisis but even more so by the economic consequences. We have seen last year Sub‑Saharan Africa shrinking by 2 percent, the first recession in decades since the 1960s; and on top of it, we see that the recovery in Africa falls short to the global recovery. We project 6 percent for the world for 2021 but only 3.4 percent for Africa. Africa should grow 8 percent, not 3. That is where our concern is; that Sub‑Saharan Africa stepped into this crisis with limited fiscal space. It has been prudently approaching prioritizing health expenditures, but very clearly investments have shrunk, and in many countries in Sub‑Saharan Africa, debt levels are high.

It is the reason for the IMF to concentrate a lot of our engagements on Sub‑Saharan Africa. As I mentioned in my opening, we have increased last year 13 times the financing, especially on emergency basis, to Africa. We have advocated for debt service suspension, and that has provided up to now some $7 billion to low‑income countries. A big chunk of this is for Sub‑Saharan Africa. We ourselves have provided debt relief to our most vulnerable members, so Sub‑Saharan African countries that fall in this category benefited from it. We are looking forward, and we asked our Board of Directors to allow us to have higher access levels going forward, because 2021, the crisis is not over. We are looking for ways to reform our concessional lending program, the Poverty Reduction and Growth Trust, so we can do more concessional financing on a larger scale for longer, especially in Sub‑Saharan Africa.

Last but not least, as I announced, we now have a big support from the G‑20. We will take it to our Board. I am very optimistic we will get a new SDR allocation; and, of course, Sub‑Saharan African countries with depleted buffers, for them, that would be a very welcome injection. We are calling on our wealthier members who may not need an injection of reserves to own lend through us on highly concessional terms funding that can go to countries that need it, and I have no doubt that we would have success in supporting the countries in Africa.

Let me say something very, very important. In my engagement with the Ministers of Finance in Sub‑Saharan Africa, I made it very clear that there is a lot that needs to be done domestically to increase tax revenues, to improve the quality of spending, and that the Fund is there to support countries to do so and to support them in improving governance, transparency, and accountability to their citizens. Thank you.

Mr. Rice: Thank you very much, Kristalina, and I think you just touched on this, but we see online two questions on SDRs, a lot of interest; and again you just touched on this, but Larry Elliott of the Guardian is asking how soon will the IMF be able to allocate the proposed SDRs, and is there a plan for richer countries to allocate to poorer countries, which you just mentioned.

Then there is a question about if you agree with the intention of Argentina and Mexico, who have proposed to create a specific fund to reallocate the SDGs from rich countries to some middle‑income countries, if you would like to comment on SDRs.

Ms. Georgieva: Those two questions are connected. We will work in parallel on the new SDR allocation, the proposal we are due to present to our Board‑‑we are aiming for some time in June to do so‑‑and on identifying viable options for using SDRs from wealthier members to support our more vulnerable countries.

This work obviously starts right now, now that we know that we have strong support for a new SDR allocation. We have been receiving some ideas as to what these options may be. We will carefully assess these proposals, and that goes to the answer to both questions. We will be engaging with our members to make sure that the options that we will present are broadly enjoying support from the membership and that they are defined on the basis of contributing most effectively to the needs of vulnerable countries, so how we define these options is work to be done intensively in the next months.

One more point to the Guardian question. We have some experience with using SDRs for expanding concessional lending. Last year in April when the crisis hit, exactly at that same time a year ago, I turned to our members, and I asked them to please own lend to us resources to scale up, to triple concessional finance. I am so grateful they did it. Two‑thirds of this boost of our concessional finance, a total of $24 billion, came through own lending of SDRs, so we have piloted that own lending for concessional finance. We do not have any experience with any other form, and obviously we will be reviewing options, as I said, in the weeks and months ahead.

Question: Kristalina, I want to ask you about your concern on the other countries besides just the poorest countries. Are you concerned that the G‑20 has not now endorsed any kind of expansion of either the DSSI or the Common Framework to include middle‑income countries or particularly vulnerable small island states, which is something that you raised before; do you anticipate that happening at any point?

And for the reallocation question, are you confident that you will be able to set up a different facility that would have a wider access than just the PRGT? And then I have a real quick tax question.

Ms. Georgieva: Very good question, and it goes a little bit deeper in the previous questions. We are concerned about middle‑income countries that have entered the crisis with weaker fundamentals, some of them with higher debt levels, and find themselves in a more difficult position because the limited fiscal space they entered with meant limited deployment of fiscal measures to support the economy during this period of time, and, therefore, they find it more difficult to step on the road to recovery. That is one of the reasons we had this multi‑speed recovery I talked about.

When we look at the countries that are in a more difficult position, either because of limited fiscal space, high debt level, or the structure of their economies—for example, middle‑income tourism dependent countries are in a very difficult position—we are, of course, concerned how we can rally more support so they can be on a more prudent path to recovery.

In all countries, number one priority is access to vaccines, so I am repeating this, but I cannot repeat it enough given the significance, but there are also other ways in which countries can be supported. During the G‑20 meeting and in other engagements, there have been voices advocating for expanding the deployment, especially of the new SDRs in own lending, in reallocation, to those vulnerable middle‑income countries, and the proposal that was mentioned from Mexico and Argentina goes in this direction.

We will discuss with the members whether there is enough support to expand the concessionality of reallocated SDRs beyond low‑income countries. Today I am not in a position to answer, but you asked me for my opinion. My opinion is that income levels, low‑income levels, this is a vulnerability, but there are other sources of vulnerability, for example, high vulnerability to climate shocks; and therefore the international community should look into other factors for vulnerability as we think of appropriate ways to support developing countries. That discussion is going to be quite intensively going on over the next months.

As for debt levels, at this point of time we do not see a systemic debt crisis, and we want to keep it that way. This is why we have been so strongly advocating for measures to preemptively support countries that are in debt distress or close to it, and we will continue to be watchful on that issue. We know that when growth recovers, positive spillovers will help these countries; but, again, I would say something I have been saying many times: Countries that find themselves in a difficult position should act early, and there are many avenues‑‑from reprofiling to restructuring, to, in some cases, debt relief‑‑that can be pursued effectively, and we have a reasonably good framework to do so.

Question: Thank you, MD. I am going to ask about the speed of SDRs. I see the officials from the U.S. Treasury saying that they expect these to be on central bank balance sheets by August. We also saw yesterday Vera Songwe mentioning that particularly towards Africa, the SDRs are something that are needed basically yesterday, or they are urgently needed. So I wanted to ask about what can be done to speed the SDRs, to make this happen any sooner than we understand the potential Board meeting in June, but what can be done to get these out sooner and also about the size of the reallocation.

There was a report yesterday from the Rockefeller Foundation saying that the reallocation should be somewhere around $100 billion, and I wanted to ask about the size that you see in terms of potential reallocation given that low‑income countries as their allocation will only receive around $20 billion. Thank you.

Ms. Georgieva: Thank you for these questions. To your first question, it is very important that a signal is already sent that there is strong support for a new SDR allocation. Around the G‑20 table, universally there was an expression of support with some very important questions brought forward, like make sure that we can improve the transparency, to make sure that the case is prudently and clearly made that there is a need for a boost of global reserves. We will respond to these calls by mid‑June; so in a sense, the expectation that there will be a boost of reserves is already being built. As a confidence measure, it is already after today's meeting, I can say we need 85 percent voting power, and as you know, the G‑20 is, broadly speaking, a big chunk of the world economy, big chunk of the shareholding, the quota holding in the IMF. We also had representatives from outside of the G‑20, and they were even more vocal in support, especially representatives from Africa. So the confidence‑building signal is sent. And then comes the prudent execution. We do need to take to the Board a report. Then there has to be voting, and then there has to be domestic measures put in place for the allocation to become reality. And we know from history, from 2009, that it is about three to four months; therefore, this mid‑August timeline is very objectively a tight timeline but a realistic one.

On the expectation for own lending of SDRs from countries that do not need a boost of reserves to countries that do need a boost of reserves, it is premature to make any projections around the scale of this, but we have two data points. One is the fact that we have already received a boost from existing SDRs to fight this crisis; and if you take it in proportionality, out of $250 billion allocation over the years, because the U.K., for example, has provided some of their SDRs before the crisis, it is somewhere in the order of about 10 percent.

Now, we can be more ambitious, and I think that if we listen carefully to those who have supported a parallel process of mobilizing SDRs for own lending and the broad‑based support that we got in that regard, we can aim high; but today I am not in a position to answer this question aside of saying we did a test drive. It proved to be successful, so we are confident in the ability to boost own lending on concessional terms.

Mr. Rice: Thank you, Kristalina. We are really running out of time. I am going to try to squeeze in two more questions.

Question: Thanks, Gerry. Ms. Georgieva, Argentina and the IMF have been engaged in talks towards a new program with the IMF for quite some time now. Do you believe there will be an agreement before the mid‑term elections in Argentina next October? And if I may, what do you think about the Argentine government's request to reduce the interest rate the IMF charges for its credit lines? Thank you.

Ms. Georgieva: We are very constructively engaged with Argentina. The two teams, our team and the Argentine team, are working, and during the visit of Minister Guzman, we had a constructive meeting. At that time the two teams have agreed on some broad principles for the program, and the work continues. We will advance it and then when the agreement is in place, we will take it to our Board of Directors.

When we look at the point that Minister Guzman is making on interest rates, we have to recognize two things. One, that he is bringing this point at a time when the Fund is going to be going through its periodic review of our charges, and that is the time when these kinds of questions can be discussed.

Two, there is a reason why the Fund has introduced in the past surcharges for exceptional access, and it is to create an incentive for countries to move in and out of programs as effectively and swiftly as possible. Given that the Fund is an institution lending to countries more often than not when they are faced with difficulties, that poses a higher risk, and therefore it requires for the Fund to also build for the membership—not for the management; for the membership—to build strength through precautionary balances. This is all in that sense of the prudent financial management of Fund resources that the decision on charges is made. As I said, there will be a review, and as always, we listen to the members, and then we seek a pathway to what makes best sense and where the consensus among the membership is.

Question: Thank you, Gerry, for taking my question. Ms. Georgieva, thank you for taking my question. My question is, the Managing Director of COVAX facility said on Monday that the facility has serious issues about the finances, so do you think the COVAX facility could reach its target to introduce 2 billion doses to the developing countries, including the Middle East region as well? Thank you so much.

Ms. Georgieva: I am confident that this will be possible, and it will happen. Why am I confident? Because very clearly the case for vaccinations of everyone everywhere is made, and COVAX is the multilateral vehicle to make sure that everybody has access to vaccines. We hear from advanced economies that there is a step‑up in pledges, most recently the U.S., with $4 billion, and we also recognize that as vaccinations advance, there would be a clearer picture of how they can be more fairly accessed, and COVAX will play a very important role in that. I also want to be forcefully reminding us that time is not on our side, and during the G‑20 meeting, every possibility I have, I do bring that issue of multilateral response to the health crisis and the importance the COVAX facility plays.

Mr. Rice: Thank you very much, Kristalina. With that, we bring this press conference to a halt. We look forward to seeing you tomorrow for the IMFC press conference, and thanks to all of you for joining us today. Thanks again to Kristalina. Please stay safe and well, and we will see you soon.

Global Policy Agenda