Kristalina Georgieva, Managing Director, IMF
Gerry Rice, Director, Communications Department, IMF
MR. RICE: Hello, everyone, and a warm welcome to the Annual Meetings of the IMF and the World Bank 2020. Delighted to have you with us for our virtual press conference. We are on the record this morning, and we will be taking your questions online and via WebEx where possible. I am pleased to say we have with us this morning the Managing Director of the IMF, Kristalina Georgieva. I am going to ask Kristalina to make some opening remarks, and then we will turn to your questions and take as many as possible.
MS. GEORGIEVA: Thank you very much, and from me, welcome to our virtual 2020 Annual Meetings. Reflecting on what is in front of us during these meetings. I recalled the words of a Russian poet, Apollon Maykov. He said the darker the night, the brighter the stars. So we are nine months into the pandemic. We are still struggling with the darkness of a crisis that has taken more than a million lives and has driven the economy into reverse, causing sharply higher unemployment, rising poverty for a first time after decades, and the risk of a lost generation in low-income countries. The picture over the last couple of months has become less dire, yet we continue to project the worst global recession since the Great Depression. Growth is expected to fall to minus 4.4 percent this year, and over the next five years, the crisis could cost an estimated $28 trillion in output losses.
At the same time, we can see stars shining above us. We see unprecedented efforts in vaccine development and treatment. We see extraordinary and coordinated fiscal and monetary measures putting a floor under the world economy. And the world is starting to learn how to live with the virus. While there is tremendous uncertainty in our forecast, we do project a partial and uneven recovery in 2021, growth expected at 5.2 percent.
As I said in my curtain raiser speech, all countries now face a long ascent, a journey that will be difficult, uneven, uncertain, and prone to setbacks. Think of how the virus is resurging right now in a number of countries.
So what is the path forward? We are releasing today our Global Policy Agenda, and we outlined measures that we believe are needed to overcome the crisis and build a brighter future. So let me highlight three priorities.
First, continue with essential measures to protect lives and livelihoods. A durable economic recovery is only possible if we beat the pandemic and we beat it everywhere. Stepping up vital health measures is our imperative, as is fiscal and monetary support to households and firms. These lifelines, such as credit guarantees, wage subsidies, they are likely to remain critical for some time to ensure economic and financial stability. Pull the plug too early, and then we can see serious self-inflicted harm. Avoid, avoid doing that.
Second, build a more resilient and inclusive economy. A crisis is an opportunity. Our research shows that public investment, especially in green projects and digital infrastructure can be a game changer with the potential to create millions of new jobs—well-paying jobs—while boosting productivity, raising incomes. Supporting workers as they transition to new jobs is a key element of a more resilient and inclusive future, particularly important for those most affected today: women, young people. They are those that should benefit from a just transition.
Third, deal with the debt. Global public debt is projected to reach a record high—100 percent of GDP—level in 2021. This is partially because countries are doing the right thing. They are boosting spending to fight the crisis and secure the recovery. Addressing this issue over the medium term will be critical, but for many low-income countries, it has to be done urgently. It has to be done now. Given the heavy debt burden already, they are struggling to maintain vital policy support. They need access to more grants, more concessional credits, and debt relief. More than ever, we need each other. We need strong international cooperation, especially in vaccine development and distribution. If we do it and we do it fast, then we can speed up the recovery. It could add almost $9 trillion to global income by 2025. And in turn, this would narrow the income gap between poorer and richer nations.
What is it that we do at the IMF? Since the pandemic began, we have been pressing ahead full force, full commitment with our policy advice, with capacity development, and, yes, with financial resources. We have reached over 280 billion in lending commitments, more than one-third of this, $101 billion, has been approved since March. We still have substantial resources from our $1 trillion lending capacity to help support our members. We have provided financing to 81 countries. We have extended debt service relief to our 29 poorest members. We have also mobilized an additional $21 billion to support lending on concessional, zero interest terms. It helps us to gear up for the next phase for support for the recovery, and we are considering options to further adapt our lending toolkit.
I started with a Russian poet. Let me end with another Russian, Fyodor Dostoyevsky, who wrote: “Only one thing matters—to be able to dare.” A crisis like no other calls for recovery like no other. We must dare to face our most daunting challenge together. We must dare to take the right actions now. And with that, I am very happy to hear you and answer your questions.
MR. RICE: Thank you very much, Managing Director. We already have a couple of questions online. The first couple of questions are from Delphine Touitou of Agence France Presse: What is the biggest risk to the recovery in the near term in your view, Managing Director, and has the G20 found a consensus about extension of the DSSI, and how can we ensure all creditors, public and private, and especially China, participate in this initiative?
MS. GEORGIEVA: Thank you very much for your question. In the short run, given the high level of uncertainty, I worry most about withdrawing support to workers and firms prematurely because it could cause a wave of bankruptcies and massive increase in unemployment. We are advising all governments: “Do as much as you can. Do not cut financial lifelines too early.”
When we look down the road, I worry about the scarring this crisis can cause—an increase in inequality, structural unemployment, workers that are not supported to move from the sectors of the economy that are contracting to sectors that are expanding. And therefore we have to focus on thinking how to prevent the scarring, how to make sure that we come on the other side boosting employment in sectors that are growing and shifting our tax system for the 21st century so we have a more equitable world.
As for the Debt Service Suspension Initiative, bravo to the G20 in April for coming to an agreement. I just walked out of the G20 meeting. It is still ongoing, but my understanding listening to everybody there is that there will be a six‑month extension, and also there is very good progress on a common framework which would bring all bilateral creditors around the same principles and same approach to dealing with debt.
There is a very strong call for private sector to participate. Unfortunately, we have not yet seen it happening. Out of the 44 countries that have subscribed, only three have reached out to private creditors, and as for now, nothing has happened yet.
At the Fund, we take this issue to heart. We have submitted to the G20 our view on international debt architecture, and you would see us engaging very strongly on making sure that when we deal with debt, we do it fairly with participation of all creditors and that we build up together with the World Bank more transparency on debt, and we build up a clear pathway for debt resolution for countries where debt is already not sustainable, that need debt restructuring.
MR. RICE: Thank you very much, Kristalina. As usual with this press conference, we are going to try and quickly go around the world and take some questions from different regions. Let’s start with Africa. First News Africa is with us on WebEx. We are having some trouble finding Simon. We will come back to you if we can reconnect. Let’s move to Latin America. Simon, can you hear us now?
QUESTION: Thank you for taking my question. Simon Ateba, Today News Africa in Washington, D.C.
Ms. Georgieva, last June you said the COVID‑19 economic crisis is the heaviest hit on Africa since the 1970s, and last month in a joint column with the IMF Africa Director you argued that Africa’s recovery would be long, would be gradual, and that the Continent would need more help. I was wondering how much more help will be needed for the Continent of Africa? Where do we stand right now? And what more can the IMF do, especially because the IMF has already provided tens of billions of dollars to African countries in emergency support? And maybe lastly, are you satisfied with the way the money that was provided to African countries was utilized, has been utilized so far? Thank you.
MS. GEORGIEVA: Thank you very much, Simon. We had a very important meeting on mobilizing with Africa, the second time we did it. The first one was in April. At this meeting where leaders from Africa and from around the world participated, our message was very straightforward. The Continent of Africa is being severely hit, and as a result, over the next years, between now and 2023, there would be $1.2 trillion dollars financial gap, to answer your question how much does Africa need. Out of this, as of today, we still do not know how we would fill $345 billion. [NB: This figure was corrected after delivery from $245 billion as stated at the press conference]
We have to make it possible to raise resources for Africa with Africa, and for that we need the African countries themselves to concentrate on ambitious reforms, to make themselves more attractive for investment from the private sector and also more capable to mobilize domestically finances for the recovery from the crisis, for growth in the future. We also need the international partners of Africa to do more. I was satisfied to see that when we had these calls, they do bring more attention, and they lead to more resources. As you mentioned, the Fund has done in six months 10 times more than we do in an average year. We have provided to the Continent of Africa $26 billion in emergency financing and other types of financing. Of this, close to $16 billion went to Sub‑Saharan Africa. We are going to continue to do more. We made a strong call to our membership for more concessional financing, for subsidy resources, so we can extend more support for Africa. And we are calling on others, especially in terms of providing grants, please step up. Now is the time to help the Continent. It was on a great path. Many countries had vibrant economies, and now we see growth in Africa shrinking this year by over 3 percent. For next year, we expect growth to return to 3 percent, but let’s remember, for the rest of the world, we are projecting 5.2 percent growth. So rather than Africa growing faster than the rest of the world, to meet the aspirations of people, it is going to grow slower unless we act. I was pleased to hear President Macron announcing that in May 2021, there will be a conference on financing with and for Africa. And there a great deal of attention needs to concentrate on reducing the perceived and real risk for investing in Africa so we can see this huge availability of financing for the rest of the world to trickle down into Africa.
Let’s remember Sub‑Saharan Africa has not issued any debt while the rest of the emerging markets and developing economies, taking advantage of low interest rates, have issued quite a lot. As for “Are we happy with what is being done with funds we provide?” We have seen countries taking responsibility to genuinely direct the money where it matters the most: doctors, nurses, health systems, vulnerable people, vulnerable parts of the economy. Quite a number of countries have strengthened their social safety nets. They have used digital payments to direct more money to where the vulnerable people are in direst need. And many countries have taken responsibility to keep the receipts, to take auditing steps. “How was the money used?” I can tell you as we look for the next round of support for Africa, it is for the citizens of Africa, where we would stress even more transparency and accountability so we can be all satisfied that money in this dire moment goes to the intended purpose.
MR. RICE: Thank you so much. I want to turn to Latin America and Raphael Mathus of La Nación. Please Raphael if you’re there. I’d like to recognize Liliana Franco from Ambito and Martin Kanenguiser from Infobae. Please go ahead Raphael, La Nación.
QUESTION: Thanks. Ms. Georgieva, a staff mission just returned from Argentina. They say the country faces exceptionally difficult challenges with no easy solutions, and a comprehensive plan is required to restore confidence. What do you think is needed to restore confidence in Argentina, and do you believe the government has the political will and the consensus to move forward with such a plan? Thank you very much.
MS. GEORGIEVA: Argentina faces very dramatic challenges. The country is in deep recession. Social conditions are worsening. Economic imbalances are growing. The divorce between the official exchange rate and the shadow exchange rate is expanding, so the country is at a point when as the mission has concluded, the top priority ought to be to put in place a credible and comprehensive economic agenda that balances supporting the economy and people in this very difficult time with also making sure that we have macroeconomic stability in sight. And the most important task for the country is, indeed, to give that roadmap as to what is the direction to travel, and how do we know that we are reaching our destination. We are there for Argentina. The mission will return in November. We want to be a partner of Argentina. We do count on a political determination to get the country out of what has been historically boom‑bust cycles.
MR. RICE: Thank you very much, Managing Director. We are turning to the Middle East. I am trying to connect with Jordan. … In the meantime, let’s move on to South Asia, and I am going to take a question from Press Trust of India.
QUESTION: Thank you for doing this. I wanted to ask you about the coronavirus situation in India and the impact it is having. As you know, India has one of the largest number of COVID-positive cases there, and yesterday the report that came in, it says India’s economy is going to contract by 10.3 percent. Can you give us your assessment of the economic situation India is in and what India needs to do? Thank you.
MS. GEORGIEVA: Let me first say that this is first and foremost a human crisis everywhere, and especially in countries where loss of life has climbed up so much. In India, 100,000 people died, and therefore focusing on protecting people and on the health of the population remains a priority.
India has taken measures within the capacity of the country, 2 percent fiscal measures, plus 4 percent in forms of guarantees, not direct fiscal measures. This helps, but if you compare what advanced economies have been able to do, what some of the other emerging markets with very strong fundamentals could do, clearly is somewhat constrained. What we see in India is a very dramatic shrinkage of GDP this year by over 10 percent, according to our just‑released forecast.
Now, India has a vibrant economy. Let’s remember that it stepped into this crisis as one of the fastest growing economies in the world. For next year our projections in baseline scenario is return to growth of 8.8 percent. What needs to be done? Your question is where to concentrate. Well, clearly protecting the most vulnerable people, well‑targeted support, protecting small and medium‑sized enterprises firms so they do not collapse, and using what the government is now aiming to do, a further injection of support in a way that gives a better chance to turn a corner. Like everywhere else, until we have a durable exit from the health crisis, we will be faced with difficulties, uncertainty, and uneven recovery.
MR. RICE: Thank you very much. Let me just read the question on the Middle East: What is the outlook for the Middle East and North Africa, and what has the IMF done to help those countries cope with the virus and deal with high debt and unemployment?
MS. GEORGIEVA: The Middle East and North Africa are affected like pretty much almost everywhere else in the world. There are very, very few countries that are going to finish this year with positive growth, and this is not the case [either] in the Middle East and North Africa. Growth projections are minus 5 percent for the region in 2020. More troubling is the projections for next year for region are worse than our global average—we project 3.2 for the region, whereas for the world we project 5.2 percent. [NB: Growth figures were corrected after delivery from minus 4.1 percent for MENA in 2020 and 3 percent in 2021 stated at the press conference.]
So what does that mean? It means that it is very important for countries to focus support where it would make the biggest difference in protecting firms and protecting people, and for the rest of the world, for the international partners, to do the right thing. Step up. We have done the right thing. We have stepped up. We have provided $15 billion of support for countries in the region, and we are geared to respond to further calls of support. Also, the most vulnerable countries, for example, like Yemen have also benefited from debt relief from the Fund, so they do not have to serve obligations to us while they are in this very dire situation. Hopefully we would see acceleration of reforms that have started in the region to give that one and only viable exit, which is: we exit on the health side, but we come out on the other side with more vibrant, more dynamic, more competitive economies.
MR. Rice: Thank you very much, Managing Director. I am going to try and squeeze in two quick questions if we can. Eric Martin, Bloomberg.
QUESTION: I wanted to ask you about a question that applies to countries the size of Mexico in terms of middle‑income countries, and we have seen with the DSSI a lot of relief for low‑income countries, but much of the Continent, much of the region rather, of Latin America fits into the middle‑income bucket, and so I was wondering what you can say about more efforts that can be done; what can be done for middle‑income countries, whether it be systemically or on a case‑by‑case basis, and also if you could talk about China’s participation in the DSSI and recognizing things like a common framework for debt reworking among the Paris Club plus China, things like participation of China Development Bank, and whether you see progress there versus where we may have been three or six months ago?
MS. GEORGIEVA: Thank you very much. Indeed, we do see debt levels going up everywhere, in advanced economies, in emerging market economies, in low‑income countries. On the positive side, the fact that the world came together very quickly to provide fiscal and monetary policy support in a synchronized manner meant that after a drop in access to markets‑‑in fact, markets froze in March‑‑we have seen from April on emerging markets with strong fundamentals being able to go and issue debt at a very reasonable cost. In other words, like the advanced economies, many emerging market economies are able to inject stimulus on the basis of low-cost debt issuance, and that, of course, helps. And the most important lesson from this crisis is build strong fundamentals in good times; build your buffers in good times. When you get into bad times, this is how you can be more resilient.
There are countries where the situation is much more difficult because of very high debt levels, that are not able to access markets at all, or only at prohibitively high cost. In this case, what we are saying to countries is: “If you are in this category and your debt is not sustainable, act early, and act decisively.” We have seen two countries in Latin America doing exactly that: Argentina and Ecuador. The two cases are not exactly the same, but they are similar in the sense private sector participated. In the case of Ecuador, also bilateral creditors participated.
Let me just finish on this. For the Fund, this is a very important agenda for the next months, for the next year: How to improve international debt architecture so we can have fair, quick, relatively simple, relatively low-cost resolution of cases when debt is not sustainable and how to make sure that the private sector participates actively.
That takes me to the question of participation in the DSSI. What we have seen, regrettably, is the private sector shied away, and the countries themselves shied away from asking the private sector because of fears that that may erode their future access to markets, access they have earned the hard way in previous years. When we look at the participation of bilateral creditors, I am very hopeful that there will be a common framework for G20 bilateral creditors in which not only traditional participants like the Paris Club, but also China and others, will participate. It is to be announced by the G20, but I am encouraged by what I have heard in that regard.
In terms of China’s institutions and their participation, it has been an open question because some of the Chinese lenders participated in the DSSI. Others—on the basis of how they are classified—have not yet participated. This is what the common framework is to address. And what we are also hearing from China is a recognition that they are a relatively new creditor, but they are a very large creditor, and they need to mature domestically in terms of how they handle their own lenders, the coordination among them.
MR. RICE: Thank you very much, Managing Director, and thanks to everyone who joined us today. I am sorry we did not get to all the questions given the time constraints. There will be another press conference with the Managing Director tomorrow after the IMFC meetings, so perhaps we can take more of your questions then. Again, thanks to Kristalina Georgieva, and thanks to all of you, and we look forward to seeing you in the course of our Annual Meetings over the next few days. Stay safe and well.