Via IMF (Den Internationale Valutafond)

Transcript of Kristalina Georgieva’s Participation in the World Health Organization Press Briefing

April 3, 2020


Kristalina Georgieva:
Thank you very much, Dr. Tedros, for the invitation, but most importantly
for the work you and your staff do and I want to express from the bottom of
my heart a gratitude to all health workers that are on the frontline to
save lives, sometimes risking their own.

At the outset, I would like to make three points. First, this is a crisis
like no other. Never in the history of the IMF, we have witnessed the world
economy coming to a standstill. We are now in recession. It is way worse
than the global financial crisis. And it is a crisis that requires all of
us to come together. WHO is there to protect the health of people; the IMF
is there to protect the health of the world economy; they both are under
siege. And only united we can do our duties.

I want to stress the message that you and I have sent to the world: that
saving lives and protecting livelihoods ought to go hand in hand. We cannot
do one without the other. And in that spirit, we at the IMF are
concentrated on making sure that there is a strong response to the health
crisis as well as protecting the strength of the economy.

My second point is about emerging markets and developing economies. They
are hard hit, and they have very often less resources to protect themselves
against this dual crisis, health and economic crisis. We know that in many
countries, health systems are weak. We know that in a flight to safety, a
lot of capital has left the emerging economies, the developing world.
Nearly 90 billion dollars has flown out. This is way more than during the
global financial crisis. And some countries are highly dependent on
commodity exports. With prices collapsing, they’re hit yet again. It is
paramount for us to place these countries and especially the weakest among
them in the center of our attention. The same way the virus hits vulnerable
people with medical preconditions hardest, the economic crisis hits
vulnerable economies the hardest.

And that takes me to my third point. We at the IMF are mobilizing
strongly, working together with the World Bank and other international
financial institutions, bringing the world together to provide
protection against this crisis. We have a one trillion dollars war
chest and we are determined to use as much as necessary of that
protecting the economy from the scarring of this crisis. We are
mobilizing emergency financing assistance to countries, and I can tell
you we have never seen ever such a growing demand for emergency
financing. Already over 90 countries have been placing requests to the
IMF for it. And this emergency financing is to underpin the appeal that
you and I are putting out. And it is: please, prioritize health
expenditures, use money to pay doctors and nurses, make sure hospitals
function, that there are makeshift clinics where necessary, and protect
your economy, the most vulnerable people and firms so they can hold on
to their workers. Because the highest risk we see is a wave of
bankruptcies and layoffs that would make the recovery from this crisis

Third, in this line of financial support we have the big one: one trillion.
We have the emergency financing. We are also taking strong action for the
poorest of our members by mobilizing grant funds to serve their duties to
the IMF so they don’t have to use scarce resources today for that purpose.
And together with the president of the World Bank, we put out an appeal to
official bilateral creditors for the time the economy’s standing still to
have debt service obligations also in a standstill. A moratorium on debt
service for either countries. Let me finish by saying that this is – in my
lifetime – humanity’s darkest hour, a big threat to the whole world. And it
requires from us to stand tall, be united, and protect the most vulnerable
of our fellow citizens on this planet. Thank you. Thank you, Tedros, for
having me.

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My question goes to the managing director of the IMF, Miss Kristalina
Georgieva. From Lagos, Nigeria, to Johannesburg in South Africa and even to
Kinshasa in the Democratic Republic of Congo, Africans who have been forced
to stay home are complaining about hunger. Many of them say their hunger
may kill them faster than even the coronavirus. The WHO director-general
recently said the IMF and the World Bank should grant debt relief to
developing countries, including African countries to provide food to their
citizens and curb the spread of the coronavirus. Can you guarantee here
today that you will pay special attention to African nations to contain
this pandemic by granting debt relief to African nations before it’s too
late? Thank you.

Kristalina Georgieva: Well, I want to thank very much for this question. It is the continent we
at the IMF worry a lot about. There has been a momentum built in Africa.
Africa has been growing. And many countries have done really well in recent
years. And we are risking to lose this momentum. And even worse, to reverse
it. And therefore, it is hugely important to provide substantial financial
support to Africa.

And we do it in two ways. One, we are scaling up emergency financing. And I
can tell you that yesterday our board approved emergency financing for
Rwanda. And today, two more African countries are going to be in discussion
for approval. Our objective is to double what normally is being provided as
emergency financing. And we do that in very highly concessional terms with
a big component today of this financing being a de facto grant component.
We do so because we recognize that many governments are faced with this
dilemma. Do they provide support to people to simply survive? Do they fight
the virus? And we want this to be a false dilemma.

We want them to have for the next months substantial financial resources so
they can step up their support for people against the pandemic and their
support for the economy, in many cases, informal economy that requires
social safety nets to be strengthened to help people.

Two: We do see the issue of debt as one that has to be addressed
urgently. For us at the IMF, what it means is that for our poorest
members, we are raising grant financing to cover debt dues to the IMF.
It is called Catastrophe Containment and Relief Trust. And we have been
getting support from the UK, Japan, and others so we can do what you’re
saying: provide debt relief vis-a-vis our own obligations. Beyond that
we are also calling on official creditors to countries, other
countries, many of those are countries in Africa, to provide
much-needed space for countries to address their immediate priorities
by a standstill on debt service to official creditors for a period of
one year. And I can tell you that I have been in touch with many of the
leaders in Africa. I know how important it is right now to stand up and
support Africa and build a bridge over what is such a dramatic drop in
their economic performance.

The question goes to Miss Kristalina Georgieva of the IMF. I’d like to ask
you something more specific on the economic impact in Southeast Asia.
Because, I’m wondering, I mean, based on the IMF assessment, what has been
the economic impact of the pandemic on Indonesia, South East Asia’s largest
economy? What does Jakarta, the capital city, need to do more in order to
overcome the issue?

Kristalina Georgieva: Well, thank you. Thank you very much for this question. Indonesia over
the last year has done a lot to build very strong macroeconomic
fundamentals and buffers exactly in a case of a crisis. And what is
happening today is: Indonesia is taking a set of measures that are
significant. They are large and they’re well targeted to support the
economy, to go through this very difficult time. Like many other emerging
market economies, Indonesia is experiencing a significant outflow of
capital, and that makes it so much more difficult for the country, because
there is a drop in production and that is to say, drop in revenues. And at
the same time, the needs of supporting the population in this crisis are
growing. What we see Indonesia doing very well is to have a coordinated
response between the Ministry of Finance and the central bank, so measures
that are taken are impactful. They’re strong and impactful.

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We are also fully aware that an addition of dollar liquidity is one that
that many countries, including Indonesia, need to wrestle with. And this is
where we are very strongly supporting central banks of advanced economies,
and especially the Federal Reserve in the United States, to do more of what
they have started doing. And it is to offer swap lines to banks in emerging
market economies.

On our side at the IMF, we have been very much encouraged by Indonesia,
amongst many other countries, to look into whether we can offer more in
terms of instruments that are fitting for emerging market economies and
address the issue of liquidity. And our board is going to review a proposal
in the next days on creating a short-term liquidity line that is exactly
targeted to countries with strong fundamentals, strong macroeconomic
fundamentals, that may be experiencing short term liquidity constraints.
And I actually, if I may, if I may add, what is very impressive is to see
how much attention Indonesia is paying exactly on this issue of protecting
firms, especially SME’s [small and medium enterprises] in this period, that
would allow then – when the recovery comes – for the country to step up.
It’s a very well thought through targeted fiscal measure.

There’s been this situation, there’s probably been a lot of work on trying
to do institutional innovation, the role of the IMF has been very active in
raising funds to help the poorer countries. But there’s also been some talk
about expanding quantitative easing from central banks in Europe. And I was
wondering if the IMF is considering a role, a new kind of role there in
sort of serving as a guarantor or intermediary in a global level
quantitative easing or when central banks in Europe and the U.S. buy
sovereign bonds from emerging markets.

Kristalina Georgieva: Thank you, that this is a very interesting question. Let me first say that
we have seen unprecedented stepping up of action of central banks and also
of ministries of finance in advanced economies. That has been done in a
very serious short period of time with a tremendous significance, because
we have seen as a result of this determined action, some stabilization in
markets and most importantly, financing going to protect people, protect
firms, protect jobs that could have not been done by central banks alone on
their own only. It does require the monetary side and the fiscal side to
come together. So, I just want to recognize that what has been done is
unprecedented. The problem we face is gigantic, but also the actions that
are taken are very significant, very big.

When it comes down to the role of the IMF, our main preoccupation in this
crisis is: 1) to very rapidly step up financing for countries, especially
emerging market developing countries that are faced with very significant
and growing needs. And 2), to think of what may be needed, but is not there
in the defense system of the world. And in that context, what we have done
is, on one side, to encourage central banks in advanced economies to do
more for liquidity in the emerging markets. And actually, I must say, I
think that they have recognized that need on their own. And we have seen
both stepping up of swap operations with emerging markets by the Fed. We
have seen repo operations that are directed towards this stabilization of
emerging markets.

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And then, two, we looked at our own instruments. And what we have
identified is that we are short of one particular instrument. And it is: to
provide short term liquidity to countries that are basically strong but may
find themselves in a tight place. We have not been pursuing anything beyond
the mandate of the Fund that traditionally we have been exercising. We have
been asked by some of our members on something that de facto goes into, if
you wish, quantitative easing for the world. And it is, whether or not what
was done in 2009 by the allocation of additional SDR’s [Special Drawing
Rights], to boost liquidity mostly useful for emerging markets and
developing countries, the special drawing rights. This is what the fund
offers as an addition during a debt crisis.

Many of our members are saying we should look into this again. At this
point, however, our membership, our shareholders are saying use everything
you can use right now fast. And that is the focus of our attention to step
up, double, emergency financing from 50 to 100 billion [dollars], that
order of magnitude, and then make sure that we are ready to deploy the one
trillion we have as lending capacity as this crisis continues to evolve.
But as you said, we do need to think beyond what we have. And in that
context, the questions around what more we can do are always very welcome.
So, I really appreciate you bringing up that question.

Does China support a postponement of official bilateral debt payments?

Kristalina Georgieva: Yes. Thank you. Thank you for your question. China is constructively
engaged on this issue of debt standstill for poor countries so they can
weather the tremendous difficulties they’re faced with during this crisis.
We had a G-20 ministers of finance call earlier this week. This topic of
potentially having a debt relief for IDA [International Development Agency]
countries, for poor countries was on the agenda. And China addressed that
issue by framing a set of principles they would be interested to see being
integrated in that process. And it is also important to point out to
China’s decision to contribute to the Catastrophe Containment and Relief
Trust (CCRT) that the IMF has been mobilizing to make sure that poor
countries do not have to serve their debt obligations to the IMF, that this
would be taken over by grant provision. And China is one of the countries
that are making commitments to that fund, to that trust, to the Catastrophe
Containment and Relief Trust. We will be obviously working with everybody
in the next days, the G20, the Paris Club, IMF, World Bank, by the time of
our Spring Meetings. We look forward to advancing this discussion.

Closing Remarks

Kristalina Georgieva: Thank you for inviting me, Dr. Tedros. I do believe that bringing together
epidemiology and economics is absolutely crucial. My closing message is: we
will get through this. But how fast and how effectively will depend a lot
on actions we take. And making sure that in these actions we bring world
together. The commitment of my institution, the IMF, is to play our part.
Thank you for all you do.

*For full transcript, please consult the WHO website:

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