Atlantic Council

Front Page Event

Opening Remarks:

Josh Lipsky
Director of Programs and Policy, Global Business & Economics Program
Atlantic Council


Kristalina Georgieva
Managing Director
International Monetary Fund

Moderated by:

Frederick Kempe
President & CEO
Atlantic Council

Josh Lipsky [00:01:33] Good morning. Thank you, everyone, for joining us today. I’m Josh Lipsky, I’m the Director of policy and programs at the Atlantic Council’s Global Business and Economics Center. And we are honored today at the Atlantic Council to welcome Kristalina Georgieva, managing director of the International Monetary Fund. Today’s event is part of our Headline AC front page series. It’s our new Premier Live Ideas platform where we bring together global leaders to discuss the most urgent challenges facing the world. So I think we really do have the perfect guest this morning. She leads an institution that is on the frontlines of trying to save the global economy. And on a personal note, I’m proud to say it’s an institution I was able to call home for three years. So we want everyone to engage in this virtual conversation today and ask her questions. If you’re on Twitter, if you’re on Facebook, if you’re on LinkedIn, whatever platform you’re watching on. Use the hashtag #ACfrontpage. Submit your questions. We’re going to try to get to them throughout today’s chat. Now, our commitment at the Atlantic Council has been to keep you informed not only about the current crisis, but about the changing nature of the global economy, not only what’s happening in 2020, but what’s going to happen in 2021, in 2022 and throughout the decade ahead. And I know the managing director will be able to help us in that effort today. So without further ado, let me introduce my current boss, Fred Kempe, president and CEO of the Atlantic Council and my former boss, Kristalina Georgieva.

Fred Kempe [00:03:11] Thank you. Thank you. Josh and Josh, in a very short time you’ve made a significant difference at the Atlantic Council as our director of programs and strategy at our Global Business and Economics Program. And you’re doing it at a I can’t imagine a more critical moment. And in that spirit, Madam Georgieva, we are delighted to host you for this edition of Atlantic Council. Front page. Hashtag #ACfront page, as Josh said, it is our headline series for global leaders

Fred Kempe [00:03:43] As you said in your curtain raiser speech at the IMF, Spring Meetings, quite unusual Spring Meetings held virtually and we’ll talk about that later: “This is a crisis like no other.” With the worst economic downturn since the Great Depression, you added later, humanity is facing one of its darkest periods in human memory. You’re no stranger to crisis management, having been a European Union Vice president and commissioner during the euro area debt crisis of 2000, euro area debt crisis and then the 2015 refugee crisis. Reuters last week called you a force of nature. Those of us who’ve known you for some time realize that that’s true. And they said that because of the impressive array of measures taken at your virtual Spring Meetings. But before we get into the state of the economy, the world economy, which we’ll talk about, or those actions which we’ll talk about. I’d like to start on a personal note for the many listening who are just getting to know you. You’ve been in your new job only six months. And what a six months it’s been. I wonder if you could talk about the challenge in the context of other challenges you faced in your life from a personal standpoint, not forgetting that you also lived through a change of a political system and economy, economic system in your home country of Bulgaria.

MD Georgieva [00:05:16] Well, thank you very much for the invitation and to everybody in the audience. Thank you for joining. I am in a job today in which the fact that I was a crisis commissioner for five years comes very handy. And in this case, my motto was: pray for the best, prepare for the worst, and act decisively. What I have learned in my life is that a crisis can bring the worst out of people, but it also brings the best out of people. And I have seen enormous solidarity of people hit by force of nature or by war. [00:06:09]And what we need to remember is that goodness is everywhere. But the problem we face is that hate, anger, fear, they’re very loud, and goodness is very quiet. [17.0s]

MD Georgieva [00:06:27] So in my current job, what I want to do is not only mobilize resources, especially for the most vulnerable people and most vulnerable countries, but give a platform for us as humanity to come together and aim to have a better world on the other side of this crisis. And it is possible.

Fred Kempe [00:06:55] And from a historic standpoint, and then we’ll get to some of the knottier issues, but from a historic standpoint, you talk about this being the worst disaster in human memory. As you talk about being a platform for humanity, what do you think is at stake if you’re looking at history? Is this the end of WWI or the end of WW2. What would you point to?

MD Georgieva [00:07:23] Why is this a crisis like no other? First, because. It is hitting us simultaneously everywhere. This is a truly global crisis. To block the risks to people’s lives and well-being, we are stopping the world economy. And it is done everywhere. We are actually projecting this year, 2020, a hundred and seventy countries to have negative per capita income growth.

MD Georgieva [00:08:04] This is in comparison: three months ago we were saying a hundred and sixty countries would have a positive income per capita growth. So it is very massive. But the most striking difference is uncertainty that comes from this novel virus. We just don’t know what is going to happen next. We don’t know whether the virus will make two rounds around the world. We don’t know where the vaccine and treatment will become available sooner rather than later. And for policymakers, this uncertainty is very difficult to handle. But it is also very difficult for people.

MD Georgieva [00:08:50] And since to fight the crisis, we are retreating in our homes, there is this risk of losing that sense of unity as a global community. And yet when you ask me what I fear most, I fear most that we in the choice we have to make in the next months, whether we come together and we work together to bring our economy up and make it a better economy, fairer economy with less inequalities, more equality for countries and for people, and also a greener economy. One that would help us deal with another huge challenge we face as human race: this of climate change. And how we make these choices would depend, of course, on leaders and it would depend on each and every one of us. What do we want the world for our children to be? So I take this to be also very critical for the Fund. How the Fund acts as an institution that brings money, advice, but also integrity, commonality of purpose.

Fred Kempe [00:10:22] Thank you. Thank you so much for the rich context. The focus on uncertainty. What we want to leave for our children, the greener world. So it’s not just getting through this. It is coming out the other end with a better world, not a worse world. And this really speaks to the whole Atlantic Council mission about shaping the future together with allies and partners. Thank you for that.

Fred Kempe [00:10:45] So the IMFcoined the term the great Lockdown and described what that is. You also defined what the projections would be in numbers, (inaudible) a percent negative growth globally, down from earlier projections of more than 3 percent growth. So that’s a swing of more than 6 percent in projections, 7.5 percent down in Europe, I think it was 6.7 percent in (inaudible). But it’s simply that, as you said, as a moving target, we don’t know where it’s going. So question: could it get worse? Could we have an economic decline worse than the Great Depression in some bucks? As you look at the whole globe, where do you have the most concern?

MD Georgieva [00:11:33] Well, in our reporting, the World Economic Outlook, we actually did answer this question. Yes, it can get worse. It can get worse if during the second half of the year there is still significant lingering impact of the pandemic that forces either a return to the lock-down, to the great lock-down or very slow reopening of the economies. It can get even worse if the pandemic goes on a second round- the-world-trip, and we are projecting what it would mean in terms of the economy shrinking further. And what we are saying in the report is that this makes it critical to manage with integration of epidemiological and macroeconomic data. And that is actually the news for us. For the first time in the history of the IMF, we made projections for growth based on dual modeling, epidemiological modeling and traditional macroeconomic modeling.

MD Georgieva [00:12:55] So where do we need to concentrate our attention. First, on a responsible restart of the economies and then learning from each other as we go forward with it. And second, thinking today of the recovery and how to manage the risks that would come on the other side and their significance. [00:13:21]More debt, more deficits, likely more bankruptcies, more unemployment, and the risk of more poverty. But there are also tremendous opportunities to shift the economy faster towards the knowledge economy and to have a mechanism of our tax policies, our overall macro policies, that favor addressing these risks in a way that would bring a fairer standing of people and countries on the other side. [42.4s]

Fred Kempe [00:14:07] Thank you for that. So you are the first managing director from an emerging market country. I think it’s very important to say that at a time where the hit has not yet moved fully to emerging market countries. You have a lot of power, one trillion dollars is the number that’s often cited. But I also saw in some of the documents from the Spring Meetings that one thought: 2.5 million dollars would be needed for emerging markets alone. So about what’s coming to emerging markets: could you have a situation unfold where the rich and poor does not just become greater within a country, but between emerging markets and developed countries?

Fred Kempe [00:15:03] Is there enough firepower? Is there enough capability to ensure that doesn’t happen?

MD Georgieva [00:15:12] Well, we are very concerned about emerging markets and developing economies, because on top of being hit by the pandemic itself, and having to join the Great Lockdown, they’re faced with additional fairly serious problems. Those of them that are commodity exporters, and many are, are hit by collapse of commodity and oil prices. Those that depend on the injection of capital, and practically everybody in this group depends on that, are seeing flight to safety of gigantic proportions. Much bigger than during the global financial crisis. Hundred billion dollars had left emerging markets because of this fear of the unknown.

MD Georgieva [00:16:12] And then many of these countries depend on remittances. Remittances have shrunk. We are estimating some 20 to 30 percent already decline of remittances. I am particularly worried about countries that even before this crisis were in a weaker position. The same way the virus hits more severely, those that have preconditions with weakened immune systems, the crisis hits weaker countries much more severely. So when we look at the emerging markets and developing economies, we did a rough estimate. Actually, I need to add a couple of zeros to your number. It is actually 2.5 trillion dollars that we think the needs there are, and countries are short of hundreds of billions to be able to meet these needs. Yes, they have built reserves. Many of them actually have pursued good policies. But similarly, there are many countries in this group that have been under the burden of debt already before the coronavirus hit.

MD Georgieva [00:17:30] So how is the Fund looking at the picture there? One, of course, we are leaning forward. This is what I will do during crisis. Be decisive, move fast by providing emergency financing. We got over a hundred requests, and I’m very proud to say that in six weeks we got almost half of this request already processed and the money disbursed. We are also looking into focus on the most vulnerable countries. These are the poorest countries and there: very good success of the call we made with David Malpass for a debt moratorium for poor countries. But then would come the next the wave: when countries are faced with a more prolonged period of time of shrinkage of the world economy. So where are we as an institution?

MD Georgieva [00:18:39] The good news is that we have four times more money today than before. The global financial crisis or the global financial crisis pushed the world to expand the capabilities of the Fund. [00:18:54]We have one trillion dollars lending capacity. And in any conversation I have had with the shareholders of the Fund: They would like us to stay focused on delivering with what we have, but not shy away for assessing the situation. So if more needs to be done, one of our ministers would say that all options on the table, if more needs to be done, we will be able to step up and do it. [29.4s]

Fred Kempe [00:19:26] Thank you. Thank you for that answer. So we’re starting to get some questions online and hesitated to put this at the top of my questions because for the layman SDRs is hard to understand. But a lot of the questions circle around it. 

Fred Kempe [00:19:45] This is the one thing that did not happen at the Spring Meetings. And obviously there are political questions on this. So how critical is it that there is a increase, maybe even as much by a trillion dollars in special drawing rights? And is this what could make you an international lender of last resort? Because a lot say: that’s what’s missing in the future as an international lender of last resort. There’s also some talk about working with Central Banks on swaps and that sort of thing. But you said all options are on the table. Are those options on the table, too?

MD Georgieva [00:20:26] So let me first say as clearly as I can: We are a lender of last resort. And we are acting as such for the countries that have received already lifelines of emergency financial assistance. They have one message to the Fund and it is: thank God you are there. We are well-capitalized in terms of the next months, the needs that are being projected by emerging economies and developing countries. But as I said. If we are in a worse situation than our scenario of minus 3 percent growth, it might be necessary for the Fund to step up even further. During the global financial crisis one of the instruments that helped the fund to act was the issuance of two hundred and fifty billion SDRs. For those who don’t know what it is, it is like paper gold. When we issue an SDR allocation, every country gets more liquidity instantaneously. But SDRs have, some downsides that in a crisis that we need to pause on, the first one is: it takes time.

MD Georgieva [00:21:55] In these days, it took five months to get from an agreement of the board of directors to issuing the allocation. And the second one, which some of the membership are uncomfortable with, is: it goes to everybody. It goes to countries that need it. And it goes to countries that don’t need it. Advanced economies that have their own hard currency. They’re not benefiting from SDRs and in the ownership of the fund advanced economies are 62 percent. There are some other hesitations among the membership.

MD Georgieva [00:22:33] Where we are today is there are many who are saying don’t take SDRs of the table. Of course we won’t. But we are not yet at the point when we have that unity of purpose that we got on doubling access to emergency financing, on coming with short term liquidity line, on increasing our concessional financing on debt [00:22:56]relief. And I just list those because we need to recognize that at a time when we need to keep the world together, it is actually very important not only to act, but to build unity of purpose in action. [18.2s] On SDR’s the conversation, I’m sure, would continue. At this point in the spirit of “now” act with what we have “now” we are looking into the existing SDRs. [00:23:31]Many advanced economies have SDRs from the previous allocation, doesn’t do any good for them, but there are developing countries for which this is the answer. [11.3s] If we find a way to transfer, there would be a major injection of liquidity. So act. Act on where we have the world together and continue to build commonality of purpose, where there are still differences in views.

Fred Kempe [00:24:04] So the spirit of “now”, build the commonality, purpose, and I think this next question that came in touches on this: it is a question, Madam Georgieva, please: contrast the international and domestic effort to address Covid-19 in terms of boldness and scope. And I think, you know, behind this it is a question of: compared to 2008/2009 do (inaudible) have as much international commonality purposes we have been and therefore is domestic actually leading the international commonality purpose?

MD Georgieva [00:24:47] Let me go back to what I said in the beginning, that this is a truly global crisis. Everybody hurts and it is a crisis with a very high degree of unknown, uncertainty.

MD Georgieva [00:25:02] As a result, what we have seen is stepping up domestic efforts and understandably so. If people are dying in your constituencies, and they are begging you to take action to protect life and also to protect livelihoods, to come up with a bridge over this huge slump in the economy, then it is understandable that we have seen very massive engagement, not only it is understandable, it is actually great. [00:25:39]Because when large economies are stepping up and they are protecting from a dramatic collapse, that has positive spillover effect for the whole world. [14.7s] So and actions have been unprecedented the same way this crisis is unprecedented. Eight trillion dollars of fiscal measures. I mean. In comparison with the global financial crisis, 1.5 percent of GDP more, massive injection of liquidity from central banks. I also would argue that we we have seen the world coming together in record short time, an agreement on moratorium on bilateral official debt under the G20 umbrella. And for those who are following these issues closely: bringing in everybody, the Paris Club, China, India, the Gulf, everybody in a record short time. This is not a minor achievement. We also had seen in our discussions at the IMF tremendous support of the membership. Similarly, in the discussions at the World Bank. And I recognize that in this moment of time, we have an extra responsibility to bring a strong international response.

MD Georgieva [00:27:15] [00:27:15]Urge for it. Call for it. Beg for it. Champion it. And that is what we have done during our Spring Meetings and I can tell you I was actually very pleased with the outcome because it gives us an impetus to do much more. [18.8s] I mean, just to give you the comparison. Twice as much in emergency financing. Agreed within a short period of time, Virtually within 10 days.

Fred Kempe [00:27:46] No, it’s really remarkable what you’re what you were able to move that the IMF had tried to move in many respects before and you saw this, you were able to animate things in a very short period of time.

Fred Kempe [00:27:59] Let’s move to a fiscal question. So the Atlantic Council today has released a groundbreaking tracke, a fiscal tracker, G20 fiscal spending from the global financial crisis compared to today is really worth looking at. We’ll try to get it around to the people who were listening on this call, but it’s at our website, What’s interesting for me and this is also we’re able to engineer this partly because of the expertise of IMF’s Josh Lipsky, who has come to us. So it’s just fantastic. But what’s great about this tracker is it shows you for all the money that you cited that’s out there: china and India fiscally have not put so much in.

Fred Kempe [00:28:48] And I wonder what particularly could speak to the issue of China as seems to be the first emerging toward growth and how are you looking at China and where it’s going and whether the world should actually expect extra response, perhaps from China, particularly in the fiscal realm?

MD Georgieva [00:29:10] Well, since you mentioned the fiscal tracker, congratulations for getting it out. I also want to refer to Policy Action Tracker that we also run at the Fund for a 193 countries. It looks at all measures that are being put in place, including fiscal measures. But we were very pleased to see that the Atlantic Council took the fiscal aspect one step forward to compare to the global financial crisis.

MD Georgieva [00:29:43] Two points on China. The first one is that in comparison with 2008/2009, China has not bet much in terms of fiscal space. It has plenty but in 2008/2009 China was in a position because it did not have a hit on its own economy, in the large magnitude that it has been in advanced economies up to lead the emerging markets out of the global financial crisis.

MD Georgieva [00:30:25] Now China is acting actually quite significantly. It has put in our estimate around 5 percent of GDP in various forms of measures and Chinese thinking that there would be, if you wish, a second bite of this apple when a fiscal stimulus is to be put in place. To energize the recovery. So my expectation is that we will see more being done by China. So far they have been very prudent. Their measures are well-targeted. Some of these measures are clearly temporary. In other words, when they need to be withdrawn, they will be withdrawn. And in that sense, we see a good, good overall action there.

MD Georgieva [00:31:22] But my second point is, for the rest of the world, this crisis is like a domino. Countries falling one after another, after another, after another, being hit dramatically by the pandemic, then by the restrictive measures to contain the pandemic. It hasn’t happened all at the same time. And as a result, what we see is that gradually this wave of actions moves towards the countries that are latecomers in terms of how the pandemic hits. Just to give one example, a country like Indonesia, it is now feeling more the heat of the pandemic. It is taking very aggressive both fiscal and central bank liquidity measures to counter the negative impact of what they have to do, which is: restrict their own economic activities. What is hugely important for us is to learn from each other. And in that sense, your tracker is a very welcomed contribution. And what we do at the Fund to be a transmission line of experience. And I’ll tell you something very interesting. We had virtual meetings, but they were incredibly engaged and productive and we had all our regional segments of the Spring Meetings as if we are in kind of the traditional Spring Meetings format. And everybody at the top level would be there to hear from us. But most importantly, to hear from each other.

Fred Kempe [00:33:06] In many respects, this digital world can also bring us closer together, it’s very interesting to see that unfold. I wonder, we have got a couple of other questions that I’m going to link together here as we get into our final minutes. One of them is talking about Nigeria and oil and really the question of the twin shocking countries that get this twin shock. And is there a particular strain on these commodity exporters? And that really leads me to a related question. Which is debt: We only may get through, but are you worried about the impact of debt in 2021 and beyond?

MD Georgieva [00:33:53] Well, first on Nigeria. It is one of the countries that are more severely hit because there is this incredible drop in oil prices that is handicapping economies dependent on oil exports. We are working very rapidly to provide a significant emergency financing to Nigeria. Actually, I expect this to be done by the end of the month. But beyond that, clearly the lesson from this crisis is one that the Fund has been repeating time and again: diversify your economies, build buffers during good times so you can withstand bad time. And we see among the oil exporters, some countries that have done more of it, and they are in a stronger position and some that have more vulnerabilities are looking into the debt situation.

MD Georgieva [00:34:54] Very clearly, the world is building up much more debt to counter the necessity to be in this great Lockdown. It has to be done and our advice as the Fund is: [00:35:10]do as much as you can and then do a little bit more. Because this is only the only way for us to go through this first stage of the of the crisis. [9.3s] Coming on the other side: our expectation is that interest rates are likely to remain low for a long time. And that means that in 2021, we would see that stabilizing at a somewhat higher level. But still in relatively not dramatic conditions in terms of how much you pay to service this debt and there has to be thinking today how to jumpstart the economy so over time, this debt burden can shrink. [00:36:04]And we are very much in favor of thinking today about a preferably coordinated fiscal stimulus that can generate a new momentum for the world economy. We would like this new momentum to be green. [16.2s] We want to see the economy being more resilient and we want to see every country pay more attention on what are the opportunities that can give an extra momentum. And I mentioned the digital economy: very clearly it would be the big winner of this crisis. What else can be done to make local businesses more vibrant? We do expect to see more local purchases. That may give a good boost for sustainable local agriculture. We would see hopefully more communities being more vibrant. That would mean good, good news for the small shopkeepers. But all of this today is still one big question mark that we need to work on and give answers as prudently and again, depending on this, learning from each other.

Fred Kempe [00:37:35] Thank you for that. But let me give you the sort of last two questions, both of which build off other things you’ve said. One is really wanting you to drill down a little bit on the agreement of (inaudible), a member of the executive committee of the Atlantic Council for. And it’s really drilling down on the debt agreement, debt agreements, how countries of the IMF for additional assistance. And can you talk more in detail about the debt agreement? And then what to watch? I then I think the closing one, because I think you touched on climate. And we’ve had a number of people – because people are concerned that we could lose our focus on climate in this period of time with everything else pointed at us. So how do we. And you’ve been a leader in this area and you’ve tried to lead the Fund in this area. What do you see as the next step?

MD Georgieva [00:38:28] So on the debt agreements, the moratorium on official bilateral that is being worked out. We expect it to come into force on May 1st. In meanwhile, good progress is being made with private creditors so they can join voluntarily on the basis of a standardised approach, harmonized standard. So there is no risk of moral hazard of some winning from the fact that others are doing the right thing and standing still in terms of debt service. We also need to look at country by country where that vulnerabilities may be more significant. And the World Bank and the IMF got a mandate during the Spring Meetings to do exactly that. And of course, we would need a very prudent strategy of engagement with creditors to make sure that we are creating a public good rather than risk and additional vulnerabilities.

MD Georgieva [00:39:40] On the question of climate, look, Mother Nature is not going to let us forget that climate change is a major risk to the well-being of people and the well-being of economies. So I know that right now we are rightly we are concentrated on the immediate emergency and rightly so, but as we deal with Covid-19 and we restart economies, it is a great opportunity to see what are the policies that we can put in place and even accelerate. So we have resilient, climate friendly growth in the future. [00:40:29]Because if we don’t, then we are going to see an acceleration of another type of risk. And it is the climate risk. The pandemic is unique because it hits everybody at the same time. Climate disasters affect different regions at a different moment, but in their aggregation they are quite significant [22.8s] So what are the areas we can pursue? Well, [00:40:56]oil prices are very low. Very good moment to phase out harmful subsidies, taking advantage of this low, low oil prices. [10.2s] The necessity to rely on food supplies that are sustainable: that is a good reason to move into green agriculture, sustainable agriculture. We would have mortgages. People would have difficulty to service their mortgages. What if we decide to have a program that if you retrofit your house, you get a discount on how you service your debt or you have a prolongation of servicing that debt. There are many policy ideas that can serve us really well. So we come in a way better off, you know, a crisis never to be missed as an opportunity to do better. And I want to finish. I’m doing the same in my own institution. I am looking at the way we work now, all from home, all virtually. Well, I don’t have any intention when this when this crisis is over. And as Lincoln would say, this shall also pass. [00:42:21]I’m not going to go back to the way it was. It’s going to be better. [2.8s]

Fred Kempe [00:42:27] Madam Georgieva, what a wonderful note to end on behalf of everybody listening in.

Fred Kempe [00:42:32] Let me thank you. Your quote. Why is this a crisis like no other? You told us that 170 countries now projected for an economic downdraft when 160 were supposed to have growth. The focus on uncertainty. And then this wonderful statement. What do we want the world to be for our children? Thank you for your leadership and thank you for your inspiration toward greater global unity and a greater effort of shaping the world together. Thank you, Madam Georgieva.

MD Georgieva [00:43:06] Thank you for having me.