February 7, 2022
PARTICIPANTS:
GERARD RICE, Moderator
KRISTALINA GEORGIEVA, Managing Director
FATIMA HUSSEIN, Associated Press
COLBY SMITH, Financial Times
ANDREA SHALAL, Reuters
ERIC MARTIN, Bloomberg
ALAN RAPPEPORT, New York Times
DELPHINE TOUITOU, Agence France-Presse
PAN GAO, Xinhua News Agency
PATRICK SMITH, Africa Report
LALIT JHA, Press Trust of India
JOSH ZUMBRUN, Wall Street Journal
P R O C E E D I N G S
MR. RICE: Hey, everybody. It’s great to see you. Thanks for joining us today. Glad we could do this. We wanted to do one of our regular get-togethers with you with the Managing Director, with Kristalina, early in the new year, and this was as early as we could get to it. So, it comes quite a timely moment because, as you know, we just did the WEO update last week, so a good time to talk about where the global economy stands, and look forward to discussing that with you today.
Good to see everyone, hopefully, looking safe and well and smiling. Thank you. I really appreciate the smiles these days.
I think you know the ground rules, guys. We’re on the record, but there’s a 4:30 embargo, I think, is what Alistair (phonetic) and the team agreed with you to give everyone a fair shot. And Kristalina will make a few opening remarks, set the table for us, and then look forward to your questions, try and make sure everybody gets a question today.
Okay. Kristalina, thank you for joining us and over to you.
MS. GEORGIEVA: Thank you very much, Gerry. And many thanks to everybody who is joining. Of course, it would have been much nicer if we are in the same room. Hopefully, this time would come. At least at the Spring Meetings we will be together.
Let me wish you all all the very best. I know we are already in February and we are not supposed to have any more Happy New Year wishes, but this year starts with some good news and a lot of uncertainty. So, in that context, may I wish you all good health, good friends, good news, good fortunes.
Three points to start this today. First, you have seen our global outlook. The recovery continues, but it has lost some momentum because of the slowdown in the two big engines of growth, U.S. and China, and because of Omicron and the restrictions it led to. We are particularly concerned about the higher uncertainty in front of us, so we crafted this term that ’22 would be navigating an obstacle course with three main obstacles on the way.
First, still COVID, third year in the pandemic. We still have to build up defense systems against it and it has quite an impact on the wellbeing of the world economy. You are familiar with the number we came up with: the difference between pre-COVID trajectory and trajectory with COVID, staggering $13.8 trillion between the start of the pandemic and 2024.
Second, inflation. In many countries it is a bigger both economic and social concern than it was a couple of months ago. And we need to understand the origins of inflation, different from those in previous rounds because of the impact of the pandemic. And I’m sure later in the conversation we will talk about that. What is important to acknowledge is that there are different conditions in different countries and, therefore, action to confront inflation also differs.
We have seen some central banks in emerging market economies and in the U.S., in the U.K. already taking steps to provide clear forward guidance on how data will drive withdrawal of monetary policy support. We also know that there are places where inflation is not a threat and let us just remember Japan, where they’re still struggling to push inflation up, not to drag it down.
There are implications of fighting inflation in terms of how much support there is for the recovery. And that delicate balance between addressing inflation and protecting the recovery that is one that central banks are acting on and are acting on quite prudently.
And then we have the spillover from these actions to emerging markets and developing economies, especially those with high levels of debt. And this issue of debt is getting more prominence in 2022. We know that 2020 was a record jump in debt levels for understandable reasons. We got the highest increase since the Second World War. In ’21, there was a small decline in debt levels, but not everywhere.
And what we are particularly concerned are situations in countries where there is already debt distress. Let’s remember that in low-income countries that jumped from 30 percent to 60 percent over the last years, the percentage of countries in debt distress. And now we have some emerging markets where we are saying look at actions you can take.
And that takes me to my second brief point. What is clearly different in ’22 vis-à-vis 2020 is how policy action should be calibrated to country-specific circumstances. In 2020, we had the synchronized shock and synchronized very powerful, very effective response. In ’22, conditions are different, different levels of inflation, different policy space, different levels of debt. And that dictates specificity in policy action and it requires from policymakers agility as we navigate a more uncertain world.
We are very keen to do our part, and that takes me to my third and last point. During the first years of the pandemic, we stepped up to support our members with financing, with the new SDR allocation, and with analysis of the changing circumstances that the Fund is best equipped to do. In 2022, we see three key demands on the Fund.
Number one, our bilateral surveillance. It takes ‑‑ it is always important, even more important in this time of uncertainty.
Number two, something that you don’t hear us talking much about, but is actually hugely important, support we provide to policymakers through capacity development, through engaging and solving new problems in front of them.
And number three, the Fund is always at the time of more stress ready to step up in terms of financing. We have 700 billion lending capacity. I hope we won’t need to use much of it, but we are prepared to support our membership if that is necessary.
And so when I talk about financing, we continue to innovate in terms of what is it that the Fund offers to our members since they have to deal with the pandemic-induced policy challenges and also with the transition to a digital, green, and more equitable economy? We are coming up with a new, longer-term financing instrument, the Resilience and Sustainability Trust, specifically to support policy action on climate and possibly on pandemic preparedness.
So, let’s see what questions you have. And for sure, it would be quite a year we will be meeting each other and debating challenges and solutions for them. Thank you.
MR. RICE: Thanks very much, Kristalina. That’s great.
So, let’s get to it. Let’s get to your questions. And if you can limit yourself to one question, please. It means we can get around everybody and if we have time for more, we’ll take them.
I want to start with a relative newcomer to our group, though she’s not a newcomer to journalism by any means, Fatima Hussein. Fatima, welcome. Great to have you with us and AP. You get the first question today, Fatima.
MS. HUSSEIN: Excellent. Thank you. I appreciate it. Yes, I’m new to the Treasury beat, so, hopefully, you’ll be seeing more of me and I’ll be seeing more of you.
I have two questions, I’ll go with my first one. I’m curious about the danger that — or the rollback of fiscal stimulus and tightening monetary policy and how that could derail the economic recovery. And I’m also curious if you could talk a little bit more about this long-term financing instrument.
MS. GEORGIEVA: Uh-huh. Well, thank you very much. I think as a newcomer, you have the right of two questions. Yes, Gerry? Gerry is the one that gives the —
MR. RICE: Of course.
MS. GEORGIEVA: — the greenlight on that. Your first question is the one that is going to be top of mind ‑‑ is top of mind everywhere because after two years of exceptional policy support, in many countries the space to continue to provide it has tightened up. And also, it is only right that as we go with the recovery, there should be a policy normalization.
It is no more one-size-fits-all. In countries where inflation is more of a pressing issue, the withdrawal of monetary support is already taking place. And we would see that deployed as long as and as much as needed with very clear communication and forward guidance. And again, I want to stress that, so far, the fact that there hasn’t been disorderly impact of monetary policy normalization, especially in the United States, is due to this well-calibrated communication.
What we do expect is that the — that monetary policy and fiscal policy will continue to work hand-in-hand and that fiscal policy would focus on supporting the segments of the economy and a population that are most vulnerable and where some continuity of support is necessary.
Some countries have more of this policy space. Just let’s look at China. China actually pulled back policy support earlier than others and it is now gently introducing more of it because of the slowdown of the Chinese economy. But let’s be very, very clear. This has to be in ‑‑ hand-in-hand with also recognizing that the pandemic is still with us and that a big part of policy response is health response. The health policy remains a top policy in 2022. When we see the correlation, and we actually published on that topic, between measures taken to protect the population against the pandemic and economic recovery, the speed of recovery, the correlation is clearly positive. So, we will have to continue to do that because if we don’t, then interruptions in economic performance would be the most significant risk to the recovery. And these interruptions, interruptions of supply chains, the fact that labor market continues to be actually quite significantly influenced by the pandemic, these factors are, as we have seen them in the previous year, at the heart of the slowdown of momentum that has happened, especially in the United States.
So, to sum it up, we need monetary policy and fiscal policy to work hand-in-hand, so that that calibration of gradual withdrawal of policy support without undermining the recovery is done properly. And we also need to recognize that still the biggest risk to the world economy is the pandemic and, therefore, building the defenses against it is a top economic objective.
You know, our target, the target we have agreed with other multilateral organizations, 70 percent vaccination in all countries by mid-2022. Yes, there are some that are saying, well, maybe Omicron is the end of the pandemic, but what if it is not? We have to recognize our duty to support the world economy by investing billions ‑‑ we said we need 50 billion and we are only now short 16 ‑‑ billions to gain the trillions in output I talked about.
To your second question, so what we — as probably all of you know, in July last year, our board adopted a very important addition to how we do multilateral and bilateral surveillance by including climate, climate risks and the opportunities of the green transformation, in our Article IV consultations. Then looking into what we can do in terms of our capacity development, our policy advice. And in that context, we thought that it would be important for the Fund to also translate what we learned from policy analysis into policy lending for the transformation that countries ought to embrace and undertake.
We had this very fortunate moment that many of our members that have received special drawing (phonetic) rights, but don’t need them because they have sound reserve position, are willing to express solidarity with the rest of the membership by un-lending this as (inaudible) highly concessional terms. We are using some of this solidarity for our Poverty Reduction and Growth Trust to expand its capabilities.
And then we are creating a new Resilience and Sustainability Trust that would offer our members with clear, strong policy frameworks for the climate transition and policy engagement with the Fund, support that could be up to 1 billion or up to 150 percent of quarter, whichever is the smaller of the two. And that support would be for a longer grace period and longer maturity. Why? Because this transition, this transformation is a long-term process. We all know that it is 2050 we are aiming for to get to net zero in carbon emissions.
So, the conditions that we are discussing and our members are very amenable to approve, 10 years a grace period, 20 years repayment. This is new for the Fund. And, of course, we work with other organizations to make sure that what we provide, this policy lending, is well-calibrated vis-à-vis other forms of assistance. And we recognize we have to be — to start somewhat small, so the initial size we aim to be $30 billion going up to 50, maybe above 50, depending on, of course, supply of SDRs and demand from the members.
MR. RICE: Thanks very much, Kristalina. It’s very helpful that you’re raising your hands on the chat, so I’ll try to take them that way. I saw Colby first. Colby, FT.
MR. SMITH: Thank you so much for taking my questions here. I wanted to ask about Argentina. The IMF’s own internal report indicated the Fund’s 2018 agreement with Argentina failed because of weak conditionality. And someone raised a similar question of whether the Fund is, you know, repeating the same mistake again by accepting weak conditions on deficit reduction and a lack of a firm commitment to phase out costly energy subsidies in the latest deal.
So, I’m wondering what your response is to those concerns.
MS. GEORGIEVA: Thanks very much, Colby. As you can imagine, this is something we are debating, we have been debating, and will continue to debate at the Fund. The assessment that was done on the 2018 program actually had other components in which we draw lessons ‑‑ on the basis of which we draw lessons for the new program. Among them, the need to have broader support in society for the program. The importance of realistic assumptions, don’t go only with your baseline because things may turn to the worse. And also, the need for management and staff at the Fund to work closely together and to agree on what is the way forward. So, we took all those on board.
And I want to say that we are, in the preliminary agreement, of course, it has to be worked out, we are confident that this is a pragmatic program that is going to make Argentina ‑‑ provided it is implemented and, if necessary, adjusted as we go — in other words, if we can do, we will do more — that it will help Argentina to deal with the most significant structural problems.
You rightly said that we have an objective to reduce the deficit, to actually bring it down to zero by 2025. We also have the objective of monetary policy that brings interest rates into real interest rates territory. And we have the additional, very important objective to support Argentina to finally take a key step on energy subsidies that, as you know, have been quite generous not just for the poor people in Argentina.
We also have two structural ‑‑ areas of structural conditionality that would come in the staff level agreement once we get to that point. One is on taxation. We want to see more revenues in a way that is sustainable over time. And the second one is on public spending. We want to see a high quality of spending, more transparency of spending. We have two technical assistants (phonetic) going on right now: one is on tax and one is on public spending. We are working with the World Bank on a public investment management assessment, the so-called PIMA. And the recommendations of PIMA ought to be part of our work.
We also recognize the limitations of what can be done over the next years. As you saw immediately after the announcement of this broad agreement, there was a reaction from one part of the political spectrum in Argentina. So, we have to calibrate the problem to be implementable. That was part of the recommendations, come up with something that actually is going to get done.
Our main, main focus is to get Argentina out of this very dangerous path of high inflation. We know inflation is a tax on the poor, and right now it runs at 50 percent. We know the exchange rate on the black market versus the official exchange rate is in the wrong place. I lived in an economy with exactly these same problems and they are bad for the economy, but they are particularly bad for the poor segment of the population.
So, let’s concentrate on getting an agreement and then sticking to this agreement, so we see improvements in Argentina, not solving all the problems in one go, but what is the alternative? The alternative is nothing and then continuous deterioration, continuous increase in poverty, including in child poverty in Argentina.
So, our team is very focused on getting the very best for the country with the country. And we listen very carefully. I read very carefully the FT editorial on Argentina. I have great sympathy for the — actually I take to heart the points you’re making there.
And actually, was it Bloomberg that published five points?
MR. RICE: Yeah.
MS. GEORGIEVA: We read very carefully what others are thinking because, obviously, we recognize how important is this time to do the right thing and to do it right.
MR. RICE: Thanks very much, Kristalina. Let’s try and keep it rolling here fairly rapidly. Andrea, good to see you. I am going to ask you the impossible, which is one question, Andrea.
MS. SHALAL: That is a challenge, too. Right? Good to see you. Thank you, Kristalina, for doing this.
I want to ask you about what you’re saying about the future and how the IMF is prepared for what’s coming. Do you think the institution is ready to deal with another shock, another pandemic? You’ve been asked in the past whether the IMF needs a separate facility for a pandemic and have said that, you know, the RST should accomplish those goals. But it remains the case that the — you know, you only have a certain amount of staff. They all had to work really, really hard in the beginning of the pandemic. Does the IMF — is the IMF ready for the future?
And on the RSTs specifically, that program is now requiring an IMF program, which excludes then some of the countries that might need longer-term assistance in terms of resilience or — resilience, you know, building defenses against further pandemics, but maybe don’t have an IMF existing program.
So, I just want to throw those questions out there.
MS. GEORGIEVA: Yeah. Thanks very much, Andrea. Yes, we are ready. We are an institution that is created to respond to a crisis swiftly, and we have done it in 2020.
In 2022, we think that the risks countries could face are different. They are asymmetric. Different countries have different problems in front of them. We have been running scenario exercises on the key risks, for example on debt, to see what we should anticipate, what may be coming, and what is the appropriate response. We are, obviously, praying for a smooth lending out of the crisis, but we are ready to support the membership when they need us.
We have been strengthening the capacity of the Fund. We actually got, as a recognition of the complexity of the problems the world faces, an augmentation of our budget that allows us to step up in key areas, like macroeconomic stability, the ability to understand risks in countries, like digital money. We see that as fast-moving development that is at the core of what the IMF is, monetary system, financial stability. And we also got — we are getting some reinforcement to scale up our work on climate-related financial stability risks as well as opportunities that the green transformation can provide to countries.
In terms of our readiness to deploy, well, you saw us. We worked with 106 countries over the last years. We are ready to respond to the call of our members. Whenever the call comes, we are there for the membership.
Of course, we work with others. We are not an island in the international financial infrastructure. We use all the fora, including the G-20, the ability to address specific issues like the pandemic with the World Bank, WHO, and WTO. So, we can say that we play our direct role as a crisis manager and our catalytic role in the ‑‑ as the core of the global safety net.
And you can be sure that even after this two years of tremendous pressure on our staff, and I cannot praise the staff of the IMF enough for how they stepped up, we are ‑‑ how do you say that, Gerry ‑‑ battle tested and battle ready.
On your question on the Resilience and Sustainability Trust, we do require an engagement of the Fund with a country, but not necessarily a financial engagement. Why do we require it? And, of course, we still have the board to approve the design of the RST. Because we want to present to the membership some assurances that we do have deep policy engagement and, therefore, the lending we would provide on longer maturity, longer grace is in a context of understanding quite profoundly the policy challenges and how they can be overcome.
In the original discussions, indeed we were talking only about financial arrangements, but that ‑‑ exactly for the reason you put your question, because that would narrow down our ability to help the membership. We are proposing at this point, I think, we will have an agreement to include non-financial arrangements in which the Fund has built sufficient knowledge to provide that assurance that the support is going to be productive and well-utilized.
MR. RICE: Thanks very much, Kristalina. Let’s turn to Bloomberg. Eric, good to see you.
MR. MARTIN: Good to see you, too, Gerry. Thank you, Managing Director, for the availability and for organizing — for participating in this.
I just wanted, for one point of clarification on your last answer, what would be a non-financial arrangement that could qualify? I understand financial arrangements. What could be non-financial?
But my question — my core question is about following up on your comments on Argentina and some of the opposition you’ve seen. Already one lawmaker making a protest in Congress there. And whether if you don’t have approval in Argentina’s Congress by the end of March, you know, what would happen? Whether the IMF Board could still approve a program based on some other kinds of political assurances from the country rather than a congressional vote or what would happen if you don’t yet have board approval by the end of March when Argentina would fall into arrears?
MS. GEORGIEVA: Mm-hmm. To your first question, Eric ‑‑ well, thanks for asking both. We do have arrangements with countries in which we do not provide financing, but we provide the framework that gives confidence that the reforms a country is undertaking are with kind of second pair of eyes looking at them and the support of the IMF. And that has become quite popular, including with countries that exit the program, financial arrangement of a kind, but does not want to exit a close collaboration with the Fund.
For example, we are currently in discussions with some countries, I don’t want to give you names. Actually, Gerry, we will follow up and see whether we can give you names to enrich your story, unless there is, you know, a reason of confidentiality. And we find this to be a very good way for countries that are strong, they have good reserves, their balance of payment situation is good, but they still want to have the engagement with the Fund and Fund staff going over policy choices they are making.
On your question on Argentina, I’m not going to speculate where we are going to be because it is a matter for the country first to seek the — domestically to seek broad support for this program. Obviously, we will do our part in terms of engaging to get to the details of the program. And that is not yet done, so we have to — we have some weeks of hard work for the two teams in front of us.
MR. RICE: Thanks Kristalina. I’m going to turn to the New York Times, Alan. Nice to have you with us.
MR. RAPPEPORT: Thanks for having me. Thanks so much for doing this. Speaking of inflation, there’s been some new data out today from the UN looking at food price inflation. I was wondering if you could talk —
MS. GEORGIEVA: Mm-hmm.
MR. RAPPEPORT: — a little bit about the significance of this —
MS. GEORGIEVA: Mm-hmm.
MR. RAPPEPORT: — for the global economy, as well as poor countries and the poor in particular.
MS. GEORGIEVA: I’m so glad you brought up the, I was hoping somebody would bring up the question of inflation for more comprehensive discussion. And I want to start by saying that when we look at the pressure on prices they’re clearly multiple.
We have the pressure that comes from supply site disruptions. We have pressure coming from demanding some countries being pumped up by the policy support measures. And then this demand well exceeds what the supply can provide. We have the issue of shift from services to goods and then shortage of these goods to meet the demand. And we have pressure from the energy prices to a certain degree, the geopolitical factors also play a role there.
But as you rightly pointed out, these pressures in their combination do play a role also in terms of food prices. And on top of that, we have the weather factor. We have seen quite dramatic climate events that have led to additional food price push and that is particularly dangerous for the poor people, because these are, this is the segment of society where food is a very big component in their spending.
And I want to say that one of the aspects of tensions, for example, Ukraine/Russia could translate into more pressure on food prices because of the role Ukraine plays as a grain supplier. But what I particularly worry the most is climate shocks. We have seen how these shocks, floods, droughts, hurricanes, how they have impacted foot availability.
And we know that in parts of the world, like the Sahara or Horn of Africa, this is aggravating, not just the living conditions for people, but also the security situation. And how we can, what can we do my, my simple message is, we need a new mindset. We need to put resilience at the center of how we think about policy and build resilience to shocks of all kinds including of climate shocks.
MR. RICE: Okay, thanks very much, Kristalina. Just looking at on the screen. I see we have Delphine Touitou, Patrick, Lalit, Josh, try and get to everybody for their question. Delphine, let’s go to you. AFP.
MS. TOUITOU: Hello everybody. Thank you very much for me and taking my question. I would like come to Lebanon, let everybody talk, the talk began last week, if I’m right. We know there’s a kind of urgency to help Lebanon and the Lebanese people, if we see how the poverty’s increasing a lot for the last few months.
I was wondering if you can update the situation about Lebanon, and also, could you return to the concern about how you can deal with the country where you have rampant corruption? Is it a threat for the IMF and the reputation to deal with Lebanese authority?
MS. GEORGIEVA: Well, starting from the situation in Lebanon, we all know it is very, very dire. Has been so for a long time, and short of a strong Government commitment to change the course of the country, the suffering of the Lebanese people would continue.
We have said from the very beginning of the Lebanese crisis, we are there for you. We are there for the Lebanese people. We have to have a partner. Now, we have a partner. We are engaging on the elements of a budget proposal. On plans, the country is putting forward to deal with the financial sector, deep crisis. And more broadly on reforms that the country needs, including more transparency for what the Government does, fighting corruption and dealing with the implications of a very difficult domestic political environment.
We don’t yet have specific results. I don’t have anything to share yet aside of saying that our team is working very closely with the Lebanese counterparts. And we are stressing that it has to be a comprehensive program. We can’t solve separate problems without thinking of the overall, the Government’s Fundamentals for the country. So, while I’m very to see this engagement, let’s see how far and how fast we can go to be in a position to support a program.
And what you said in the very end that the IMF needs to be mindful that we, as we engage, we also bear responsibly. We are mindful of that. We know that we have to take an approach of support on the basis and only then of confidence that there is that program and that there is an alignment and support for it. Support also from the society, support from ordinary people.
MR. RICE: Thanks very much. Kristalina. Pan Gao, let me turn to you.
MR. GAO: Oh, thank you, Gerry.
MR. RICE: Welcome.
MR. GAO: First I want to say, thank you, Managing Director for your special remarks for several meetings during the new year, the year of tiger. And in the remarks you mentioned that Bank member countries need to be more agile in the year ahead. So, for the Chinese economies in what were areas, do you think policy makers should be more agile?
MS. GEORGIEVA: Mm-hmm.
MR. GAO: And by the way, how do you think the pandemic is shaping globally (phonetic)? We have seen that many countries now place more emphasis on the security and the revenue in the supply chain rather than efficient (phonetic). Thank you.
MR. GEORGIEVA: Mm-hmm. Thank you, thank you very much for these questions and my best wishes for the year of the tiger. Yes, we need to be like a tiger in this year to deal with the complex challenges ahead. And top of mind is indeed policy agility. In the case of China, China does have policy space, but in terms of fiscal space and in terms of monetary policy, and therefore, we are recommending, and we see that some steps are taken in that direction.
To use this space, to provide the economy with the necessary boost, so we don’t see growth being undermined. But for the sake of China itself, but also because of China’s important role in the global economy. We see, as a key step for China and actions are being taken in this direction to deal with the real estate issue, because it can be a drag not only on the sector in this particular sector, but a drag on consumer confidence. And that is the area where, where we recommend it more attention and deploying more policy agility.
Consumer demand in China has not stepped up enough to be a robust pillar of recovery and taking measures to balance growth as China itself wants to do between domestic factors and export is an area where we see space for China in the future. And to take from here to your next question, it is also very important to carefully assess and calibrate pandemic related response because the pandemic is changing and everywhere, including in China, we need to reflect on these changes.
The latest wave, very highly transmissible, luckily, less deadly, but this high transmissibility means more need for restrictions, how they’re targeted and how measures are put in place to respond to these changes in the pandemic to more boosting the capacity to deal with the pandemic is important. That takes me to your point on globalization and the pandemic. It is fair to say that in the, especially in the first months of the pandemic, we were in huge uncertainty. There were us a bit of a sense how do I take care of my community, of my citizens, of my country, but we forget that even in the first weeks of the pandemic, there was also an incredible global coordination of fiscal and monetary policy actions.
We were predicting initially that the shrinkage of the world economy in 2020 could have been up to 10 percent. It was bad, the largest contraction in peace time since the Second World War 3.1 percent, but it was far from what initially we feared. Why we had such a tremendous remarkable response because of policy coordination among central bankers, among finance authorities. And we, the IMF, provided a platform for this coordination.
So, and then what we have seen is a fairly quick uptake in trade. Yes, we have to do more to work together. In fact, in my view, the biggest lesson from the pandemic is we are interdependent. We need our scientists to serve the whole world.
We need our supply chains to not be interrupted so they can deliver more for the benefit of the global economy. So, those who say globalization is going in the reverse maybe a bit over pessimistic view of it.
MR. RICE: Thanks Kristalina. Let’s take Patrick on Africa, let’s take on Africa, I presume. Patrick, we go back a long way. Lalit on India, and Josh will finish up with you. So, Patrick.
MR. SMITH: Thanks. Thanks very much, Gerry. Thanks very much Managing Director for doing this. I wanted to ask core question, whatever happened to equitable distribution of vaccines? A year ago —
MS. GEORGIEVA: Yep.
MR. SMITH: — your deputy managing director put a costed program together in coordination with the World Health Organization, $50 billion to get 70 percent of the world vaccinated by the middle of this year.
MS. GEORGIEVA: Mm-hmm.
MR. SMITH: We’ve entered February. We’re nowhere near that level and of prospect of meeting it. You said there’s still 16 billion outstanding from that budget through the ACT accelerator program. What’s to stop you, The World Bank and the IMF just like allocating that money on the argument that to lose, as you’ve said, $9 trillion of growth over four to five years is jeopardizing the financial stability of the world system. And also, the core program of The World Bank is the same in terms of development equity.
So, I wanted to find out what do you think the remedy for this situation is, and just a clarification on your policy specificity when it comes to debt. Does that mean to say since the G20 initiative expired at the end of last year, there’s going to know more internationally coordinated action on debt. It’s always, or are we going to be country-by-country, or does there need to be a much more ambitious replacement?
MS. GEORGIEVA: Yep. Excellent questions. To your first question. We are — because of what Gita Gopinath and Rushiel Ottowan (phonetic) did and because of the very strong voice the Fund added to the discussions, we have gotten by the end of ’21 more transparency of contracts, one billion dollars is delivered by Covaks (phonetic) to the low-income countries. And we got advancement in the understanding of how significant this pandemic is for the functioning of the world economy.
More money, more action, but you’re absolutely right, not enough. We finished ’21 with 86 countries not meeting the 40 percent target. Of those 86 countries, maybe 20, 25 are either in a war, or with a very significant fragility in the country, meaning that it was not feasible to get there for this reason. But for the rest, it was the slowness with which vaccinations were rolled. And also the fact that in many countries, unfortunately we have significant pushback because of misinformation campaigns. People just don’t want to get vaccinated.
So, to step up work, we have been doing advanced planning month-by-month, what would it take for the 70 percent target this year to be met? Yes, there is still a grant shortfall. The Fund does not provide grants. The World Bank now has more idle resources. So, hopefully The World Bank would be able to step up and I want to praise The World Bank for their relentless pursuit of the early idle replenishment that gives them this grant capacity.
The reason at the Fund, we have not jumped so much into trying to create a lending facility is because it would put a burden of borrowing in countries that many of them are already under a high level of debt. But let’s remember, we did provide SDR allocation for Sub Saharan Africa that meant $23 billion more. Quite a number of countries are using the SDR. The SDR does not add to debt. It is really expanding reserve capabilities of countries on the basis of the strength of the collective. And I would point to even one country, Senegal, using some of the SDR allocation to expand vaccine production in Senegal.
I actually believe that our advocacy for diversifying vaccine production is as important as our advocacy for financing vaccine production. The important thing is to recognize that today vaccine supplies, there is still work to be done, but this is a much lesser of the problems. The big problem actually is the last mile, getting avail (phonetic) into a shot in the arm. What does it mean? It means health systems in the country.
So, what we do at the IMF to support this is we have adopted, and we are sticking to it, what we call social spending floor. We want to see countries actually paying attention to education, health social protections to invest in their people. And I want to finish just by saying, I really appreciate you ask this question because we have to relentlessly pursue this built up of defense against the pandemic. And it would pay back very big time from billions to trillions.
To your second question on debt, again, I really appreciate you ask this question. So, the debt service suspension initiative expired end of ’21. We both, David Malpass and I were very active to have it in place. We were not completely convinced that the job is done.
So, what we are now concentrating on is how we can get coordinated and on scale response, or actually prevention of debt problems turning into a massive obstacle to countries to recover from this pandemic. And we have put forward actually my colleague, Jayla Baboshiel (phonetic) and myself, we wrote a book on that. We put three very practical proposals to the G20, and we are working to make the G20 engage on these proposals.
Number one, create an incentive for countries with that vulnerabilities to ask for that treatment under the so-called common framework. Right now, countries are sitting back. They’re not asking because they are likely to, if they had market access, they may lose it. If they had it, they may lose it. And they don’t know how long this process would take and how it would produce what results.
What we are proposing is that countries asking for treatment immediately receive debt standstill until this treatment is completed. So, in other words, translating the debt service suspension initiative into targeted initiative for countries with great debt burden.
Secondly, we propose that there is time bound commitment on the formation of creditors’ committees and on the completion of work of these committees. So, again, countries can rely on a predictable process. And three, we are asking whether it is right to keep access only for the countries that were eligible for debt service suspension, or expand it more broadly to countries with high debt vulnerabilities.
Of course, we want to see the Paris Club, the non-Paris Club creditors and private sector, all working hand-in-hand. And the more you, this fabulous group on the code, the more you urge attention, the better. So, we can act preventively to help countries under debt distress.
MR. RICE: Thanks, Kristalina. We’re running a bit over. Can you stay for a bit?
MS. GEORGIEVA: Oh, I’m very sorry. My apologies.
MR. RICE: Can you stay?
MS. GEORGIEVA: Of course, I can stay. This is —
MR. RICE: Then let’s go, we’ve got Lalit and we’ve got Josh. Lalit, come on in.
MR. JHA: Thank you, Gerry, for doing this. Thank you, Madam Secretary, Managing Director for organizing this roundtable. I wanted to ask you about India. This early this week, India’s finance misrepresented her annual budget to a lot of new reforms and those related to climate change were introduced in her budget. In that backdrop, how do you see India’s economy now?
MS. GEORGIEVA: Well we, as you know, we have been projecting quite robust growth for India. Yes, there is a small downgrade versus our previous projection from 9.5 percent to 9 percent for 2022. But then we have also a small upgrade for ’23 because we think that we would see stable growth. Not very different from the Minister of Finance.
We see this being conditioned on a number of factors, including that the pandemic, we continue to function better and better should the pandemic continue to be around us. And that the tightening of financial conditions would be done with clear forward guidance and in a prudent manner, not creating anymore significant shocks.
So far, by the way, what we see is that the tightening of financial conditions is not translating into a big problem for emerging markets. In comparison to previous periods, actually, the impact on rates is not at all significant. Why? Because emerging markets have worked to build up buffers and strength for situations like this. And because many of them have taken, themselves have prudent actions once they faced inflationary pressures.
We are very, very positive on the fact that in this thinking of addressing short-term issues, but also long-term structural transformation and that there is a great deal of is placed on innovation, on research and development, on human capital investment and digitalization, as well as thinking of how India can accelerate the climate and agenda using economic instruments for that. So, all in all I read the statement that I thought it was a very thoughtful policy agenda for India.
MR. RICE: Thank you, Kristalina. Thank you, Lalit. Josh over to you. Welcome.
MR. ZUMBRUN: Thanks so much for sticking around and take the question. I rarely use WebEx. And so I had to Google how to raise my hand, which is why I was last. The question I wanted to ask is when you spoke in October, Janet Yellen had conveyed the US believed that — and she wanted to see proactive steps taken to reinforce data integrity and credibility at the IMF.
I remember the remarks you gave in October at the press conference, kind of about the integrity of the IMF staff and the existing set of processes. But I just wondered if there were any new proactive steps that had been taken since October on those issues of data integrity and credibility that you could tell us about.
MS. GEORGIEVA: Well, let me again, stress that the IMF works very hard to be an institution trusted for the integrity of data and research. And in fact Gerry told me, can I, may I share the fact of the 60 percent increase of, or this is secret of the Communications Department?
MR. RICE: It’s not, there’s no secret.
MS. GEORGIEVA: Gerry, of course, follows on what is the pickup on IMF research and the most recent presentation of the World Economic Outlook followed by the global —
MR. RICE: Global media.
MS. GEORGIEVA: — yeah. Was demonstrably way higher, in fact, 60 percent increase of pickup of the research. And that is not — I don’t — I’m not the one to take credit. It is the researchers, the staff of the IMF that deserves credit for it. And Gita Gopinath, as the former chief economist now, first deputy managing director who leads that, who has led this work.
But the Fund has strong research capabilities and strong data credibility because it constantly reviews processes and how this processes are being followed. And for that reason, we did take a decision to review our processes and to make sure that if there are improvements we can make, we make these improvements.
And also, we look at a very important opponent of good decision-making, good research, and it is, do people feel comfortable to raise their hand — Josh, maybe like you, they would have trouble doing it on WebEx, but still raise their hands and express a dissenting opinion. And that in a multicultural organization is very, very important. So, we do have work going on these two areas. Look at our processes and then look at what more we can do to bring every single voice at the Fund in discussions. So, pro products we present are of the highest quality.
MR. RICE: Thanks, Kristalina. I had earlier asked the impossible of Andrea —
MS. GEORGIEVA: Uh-huh.
MR. RICE: — just to ask one question. She’s got her hand up again. Do you have the time for the final question from Andrea —
MS. GEORGIEVA: Andrea, yes. Andrea, sure.
MR. RICE: Okay, Andrea.
MS. SHALAL: Thank you.
MS. GEORGIEVA: If people don’t mind, I mean, this is actually even handiness for your colleagues.
MS. SHALAL: Thank you so much. I just wanted to follow up on your points about inflation and what you said. Is there, given what you’ve talked about in terms of the climate shocks, just some of the miscalculations that didn’t let people see this longer term increase in inflation. Is it time to start thinking about an era of more sustained inflation going forward, given climate shocks, geopolitical tensions, the Ukraine situation has heated up since you put out the WEO (phonetic).
And then these shifts in supply chains both to adapt to climate challenges, but also to move away from this dependent in China that’s caused problems at the beginning of the pandemic.
MS. GEORGIEVA: The short answer is answer is too early to say. What we can anticipate is a more shock prone world, but there are two scenarios, Andrea. One, in which we integrate this future into decisions we make today, we invest more in resilience of people, the resilience of the economy. Remember after the global financial crisis, there was a lot done for the resilience of the banking system, but at time, we didn’t look at the non-banking financial institutions as closely. And there are other elements of economic resilience that we need to build.
One of these elements is actually more equitable access to opportunities and more inclusive growth. And do we take good care of the resilience of our planet? If we do that, if we are the captains of our ship and we act responsibly, then we might have an opportunity for greener jobs for more inclusive growth. That is actually not necessarily, so much of a kind of a bleak projection, or we don’t do that. And then in this case, certainly we have to brace for more unexpected events for which we are not prepared.
And there is another thing, Andrea. We are not yet tuned enough to operate in a world in which there may be more than one crisis at one time. And you see how our attention moves to what is top of mind. And then, we ignore, we forget a little bit about other important developments. So, policy, policymakers, international organizations, we have our job cut out for us to tune ourselves to this, to more agility, not only in 2020, but more agility as we deal with this future.
We had — may say something off the record because it is for some somebody who said that to us and I want to quote him without permission. But we had a guest speaker who talked about supply chain interruptions. Great presentation. And I asked, actually, asked him this question. Do you think that supply chain interruptions are going to recede, or they may continue? And he made exactly that observation that if we do not think about other shocks like climate shocks, he said, inevitably, they’re going to play a big role in all kinds of transport freight and any other form of transport. If you don’t pay attention to factors that that are clearly more present including geopolitical tensions then, we may be for a bad (phonetic) surprise.
So, it is really a matter of us to recognize that we cannot only look at the review mirrors. Say, this is what crisis are, and this is how we deal with them. We have to imagine what the world would look like. And then, act upon that understanding of the future.
MR. RICE: Okay.
MS. GEORGIEVA: And then be able to adjust much more to evidence, to data than we were accustomed to. Have I told you, I’m sorry. I need to — I would finish that. Have I told this group the story of my granddaughter when I talked to her and I said, when I was your age, she was five at that time, we had no computers and we had no TV. And she looks up at me and says, so you only had iPads. And I realized at that moment, how fast the world we live in is changing.
MR. RICE: Okay.
MS. GEORGIEVA: And that’s it. I’m sorry. I held you. My apologies to everybody.
MR. RICE: That’s a great note to end on. Thanks, Kristalina for staying on. Thanks to all of you for joining us today and for your interest in the Fund and the issues that we deal with. We’ll try and do this again with this group again —
MS. GEORGIEVA: In person.
MR. RICE: — in the near future, and hopefully, in person. Stay safe, stay well, everyone. See you all soon. Thanks.
MS. GEORGIEVA: Thank you.