Speech

Managing Director’s Speaking Points at 2020 Spring Meetings IMFC Plenary

April 16, 2020

As prepared for delivery

Thank you, Governor. Good morning.

We meet during exceptional times. And exceptional times call for exceptional action.

More than ever, we must work together to respond to this unprecedented crisis and prepare for recovery.

Outlook

This is a crisis like no other. It is:

• More complex, with interlinked shocks to our health and our economies that have brought our way of life to a complete stop;
• More uncertain, as we are learning only gradually how to treat the novel virus, make containment most effective, and restart our economies; and
• Truly global. Pandemics don’t respect borders, neither does the economic shock they cause.

The outlook is dire, as our flagships have shown—and I want to thank Gita and Tobias for their excellent presentations. We expect global economic activity to decline on a scale we have not seen since the Great Depression . This year 170 countries will see income per capita go down – only months ago we were projecting 160 economies to register positive per capita income growth.

This is an unprecedented crisis that calls for a comprehensive approach by our institution.

Actions Taken

Thanks to your wise actions to strengthen the financial capacity of the IMF with the New Arrangements to Borrow and the Bilateral Borrowing Arrangements, we have $1 trillion lending capacity – 4 times more than at the outset of the Global Financial Crisis. And like you at home, we have taken exceptional measures.

In our surveillance, we combined macroeconomic policy analysis with epidemiological modelling to disentangle the path of the virus and its impact on health and economic systems. We gave early guidance on the severity of the downturn and incorporated additional scenario analysis to reflect the unusual uncertainty.

We tracked policy actions across 193 economies to develop policy advice and share good practices aimed at slowing the outbreak, protecting people and jobs, and safeguarding macro-financial stability.

Recognizing the characteristics of this crisis—global, fast-moving such that early action is far more valuable, and enormous—we sought to maximize our ability to provide financial resources quickly, especially for low-income members, to ease liquidity constraints and provide space for priority outlays: above all health measures, and actions to protect vulnerable people and avoid unnecessary insolvencies.

With invaluable support from you and from our Executive Board we doubled annual access limits for our rapid disbursing vehicles to cover urgent financing needs. More than 100 countries have approached us for emergency financing, and the Board will have considered about half of these requests by the end of the month.

With the World Bank and other international financial institutions we are working as a system to maximize the impact of our collective action, and to make sure we support countries to use resources in a targeted way and with good governance.

And we have rapidly revamped how we deliver capacity support in a shutdown. Over 90 countries have already benefited from our capacity development, which has been closely integrated with our policy advice.

We also revamped the Catastrophe Containment and Relief Trust to help 29 of our poorest and most vulnerable members through rapid debt service relief . Thank you to those that have pledged contributions, and we hope many more will soon take part.

We wholeheartedly welcome the leadership of the G20 for reaching an agreement on official bilateral creditors to suspend debt service obligations will further free up resources for our poorest members. This is an impressive achievement, done in record time, and combines the long-acquired expertise of the Paris Club, the flexibility of emerging creditors, and the generosity of all. We join the call for private sector creditors to participate on comparable terms.

As staff and the Board have reminded me more than once, this is a staggering amount of policy progress in less than two months. We could not have strengthened our arsenal in this way without such strong support from you.

As one example of our efforts and collaboration, tomorrow we are co-hosting with the World Bank a high-level “Mobilization with Africa” event – and count on many of you to take part in it.

Preventing a Protracted Recession

But now is the time to look ahead. In a nod to our departing Canadian Governor Stephen Poloz, I’ll quote another great Canadian. Wayne Gretzky: “Skate to where the puck is going, not where it has been.” We need to think hard about where this crisis is headed and how we can be ready to help our members, being mindful of both risks and opportunities. Just as we responded strongly in the initial phase of the crisis to avoid lasting scars for the global economy, we will be relentless in our efforts to avoid a protracted recession.

I am particularly concerned about emerging markets and developing countries. They have experienced the sharpest portfolio flow reversal on record of about 100 billion dollars. Those dependent on commodities have been further shocked by plummeting export prices. Tourism-dependent countries are experiencing collapse of revenues, as are those relying on remittances for income support.

Some of these countries could face temporary liquidity pressures and to protect those with very strong policies, the Fund yesterday established a new Short-term Liquidity Line .

But, with the peak of the outbreak still ahead, many economies will require significant fiscal outlays to tackle the health crisis and minimize bankruptcies and job losses, while facing mounting external financing needs.

For emerging economies, we can engage through our regular facilities, including those of a precautionary nature.

This may require considerable resources if further market pressures arise. To prevent them from spreading, we should be ready to deploy our full lending capacity and should be ready to mobilize all layers of the global financial safety net.

For our poorest members, we need much more concessional financing. We aim to triple our concessional lending and are urgently seeking 17 billion dollars in new loan resources for the Poverty Reduction and Growth Trust. We will also likely need at least 1.8 billion dollars in subsidy resources. We will consider how the use of SDRs could be more helpful.

But across the membership, more lending may not always be the best solution, as the crisis is adding to high debt burdens, and many countries could find themselves on an unsustainable path.

We therefore need to contemplate new approaches, working closely with other international institutions and fora, as well as the private sector , to help our members steer through this crisis and come out of it more resilient.

And we, like our members, may need to venture even farther outside our comfort zone to consider whether extraordinary measures might temporarily help in this unprecedented crisis.

Preparing for Recovery

To help our members lay the foundations for a strong recovery, our policy advice will need to adapt to the evolving realities. By the time of the Annual Meetings in October, we will need to have a better understanding of the challenges, risks and tradeoffs facing our membership as they gradually restart their economies.

Key questions include how long to maintain the extraordinary stimulus and unconventional policy measures, and how to unwind them, dealing with high unemployment and ever ‘lower-for-longer’ interest rates, preserving financial stability, and, where needed, facilitating sectoral adjustment and private sector debt workouts.

And we must not forget about long-standing challenges that require a collective response, such as reigniting trade as an engine for growth, sharing the benefits of fintech and digital transformation which have demonstrated their usefulness during this crisis, and combating climate change where stimulus to reinforce the recovery could advance a green economy.

Finally, in this new world, we simply cannot take social cohesion for granted. So, we will support countries’ efforts in calibrating their social policies to reduce inequality, protect vulnerable people, and promote access to opportunities for all.

Final Remarks

There is much uncertainty about the shape of our future. But we can and we must embrace this crisis also as an opportunity to craft this future together.

As we discussed at the last Annual Meetings, we have successfully worked together through more than 75 years of transitions. We have overcome numerous challenges and we will do so again.

Thank you.