Author: RYAN HEATH
The fund's Managing Director Kristalina Georgieva is urging governments to spend more and guarantee salaries.
The head of the International Monetary Fund predicts it could take until 2023 for the global economy to return to its pre-coronavirus levels.
“The most severe shock has already occurred,” IMF Managing Director Kristalina Georgieva said at a POLITICO virtual event on Friday, noting that 170 countries have entered negative economic growth since March. Georgieva said she expects the global economy to shrink further beyond the current IMF estimate of -3 percent GDP in 2020, before a “partial recovery” in 2021
The economic rupture is causing the IMF to throw out some of its old advice and adopt the posture of global social justice warrior, instead.
Struggling and bankrupt government have long-dreaded IMF conditions on lending, including strict limits on government outlays and privatizing assets, but while Georgieva still urges governments to “spend wisely,” the emphasis is now very much on the spending.
“Spend as much as you can, and then spend a bit more for your doctors, for your nurses, for the vulnerable people in your society,” she said.
The IMF is also attaching green conditions to its financial assistance and Georgieva pushes gender equality at every opportunity. “We are richer when women are equal,” she said.
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While Georgieva has more leverage than any IMF leader before her — lending capacity at the D.C.-based NGO has quadrupled to $1 trillion since 2008 — she still operates within strict constraints largely determined by the United States, the IMF’s largest shareholder.
Organizations as diverse as Goldman Sachs, Oxfam and AFL-CIO are now urging governments to authorize the IMF to deliver $3 trillion in support to low- and middle-income countries, via a special asset class known as Special Drawing Rights. But Georgieva needs U.S. support before the IMF can come to the rescue.
“Everything has to be on the table” when it comes to responding to the coronavirus pandemic, Georgieva said, but “my focus is and will continue to be to keep the membership together.” That’s code for keeping the Trump administration at the table, something other international bodies such as the World Health Organization and World Trade Organization have increasingly failed to do.
Georgieva offered some advice for any nation or global institution grappling with the “America First” instincts of President Donald Trump’s team, based on the relative success she and the IMF are having.
First, entities need to be transparent and come armed with “a credible strategy,” she said.
And their leaders need to hit the phones, and (when social distancing restrictions ease) pound the pavement. “I talk to everybody. I go to the Hill,” she said, referring to Capitol Hill, home of the U.S. Congress. And “what I present is where we are, what the projections are for the future, what needs to be done, how the U.S. can help us,” Georgieva said.
Georgieva likes to highlight her “track record,” as she called it, during follow-up meetings, to maintain traction.
Her go-to contacts in the Trump administration include Treasury Secretary Steve Mnuchin and Ivanka Trump. She credited Mnuchin for getting resources for the IMF into the $2 trillion package package known as the CARES Act that Congress passed last month, while juggling “very serious domestic problems.”
Georgieva isn't afraid to fall back on transparency in situations where her power or influence are limited. “We have to serve as a transmission line of different experiences,” she said, citing the example of a new IMF Policy Action Tracker. “Everybody can see what others are doing in terms of fiscal measures, monetary policy, financial actions.”
Out of that, Georgieva says, she sees a big success in governments’ initial response to the crisis: “support for companies to retain their workers in place,” which usually takes the form of a government-funded salary guarantee if a given job is maintained.
The policy might have languished as a luxury for only rich welfare states, but is now “massively spreading around the world” Georgieva claimed, reasoning that many governments see it as the quickest way to restart their economies.
What’s next? Georgieva is finding time for Ken Burns’ PBS series “The Roosevelts: An Intimate History.” Asked if that meant she was researching options for a Global New Deal, Georgieva replied: “Yeah, absolutely. It has been proven that after a war we come together. Well, why not after a pandemic?”