Virtual Meeting

C. Peter McColough Series on International Economics With Kristalina Georgieva

Tuesday, March 30, 2021
Remo Casilli / REUTERS
Speaker

Managing Director, International Monetary Fund

Presider

Host, Fareed Zakaria GPS, CNN; Member, Board of Directors, Council on Foreign Relations

Ahead of the annual IMF and World Bank Spring Meetings, IMF Managing Director Kristalina Georgieva discusses the economic outlook in the post-pandemic world and the actions needed to drive the recovery.

The C. Peter McColough Series on International Economics brings the world's foremost economic policymakers and scholars to address members on current topics in international economics and U.S. monetary policy. This meeting series is presented by the Maurice R. Greenberg Center for Geoeconomic Studies.

ZAKARIA:  Thank you so much. Welcome, everyone. This is a very special meeting that I'm greatly looking forward to. It's part of the Peter McColough Series on International Affairs. But what is special about it is we have an extraordinary guest of honor who is going to first present some remarks, and then engage in a conversation with me and with all of us. Kristalina Georgieva is probably the most talented, or certainly the most qualified person to have ever been appointed Managing Director of the IMF. I say this just on the basis of her credentials, which are that she has been the interim or acting President of the World Bank, Vice Chairman of the European Commission. And in that sense, has held exactly the kinds of high level jobs in international economics that would perfectly prepare her for this. To my mind, she is also distinctive in that I think she would must be the only Managing Director of the IMF, who received her first degree from a university named after Karl Marx. She comes from Bulgaria and has had an experience, deep experience, with the communist world and therefore comes to this job, I think, with a unique and very important perspective. She did me the honor of interviewing me on my most recent book a few months ago, and so I'm particularly pleased, delighted, honored to be able to return the, to do a return match with her. We're going to do the conversation in this way; we will start with a presentation of some remarks, about fifteen minutes. After that, the managing director and I will engage in a conversation. And after that, we'll open it up to questions. So let's get to part one here, which is her opening presentation.

GEORGIEVA:  Thank you Fareed for the warm welcome. And many thanks to Richard Hass and the Council on Foreign Relations for bringing us together. Our three institutions are connected by history and values. Both founded at global turning points, following global conflicts; both deeply committed to a more peaceful and prosperous world. Today, we face another turning point. In the words of Franklin Delano Roosevelt, the point in history at which we stand is full of promise and danger. The good news is that the global economy is on a firmer footing. Millions of people are benefiting from vaccines that hold the promise of a normal life of embracing friends and loved ones. But there is danger as well. Economic fortunes are diverging, vaccines are not yet available to everyone and everywhere. Too many people continue to face job losses and rising poverty. Too many countries are falling behind. We must not let our guard down. What we do now will shape the post crisis world. So we must do the right thing. This means above all, giving everyone a fair shot, a shot in the arm everywhere, to bring the pandemic to a durable end and a shot at a better future for vulnerable people and vulnerable countries to pave the way to inclusive and sustainable recovery. This will be the focus of our virtual spring meetings next week. So let's look at the economic picture.

In January we projected global growth at 5.5% in 2021. We now expect a further acceleration, partly because of additional policy support including the new fiscal package in the United States, partly because of the expected vaccine power recovery in many advanced economies later this year. This allows us for an upward revision to our global forecast for this year and for 2022, as you will see now the world economic outlook next week. Stay tuned. How we got to this point is a tale of extraordinary effort. Nurses and doctors saving lives, essential workers supporting livelihoods, scientists from around the world working together to create vaccines in record times, and government took exceptional measures, including about sixteen trillion in fiscal action in a massive liquidity injection by central banks. Without these synchronized measures, the global contraction last year would have been at least three times worse. Just think about it. This could have been another great depression. Also, we did not have another global financial crisis, not just because of the extraordinary measures I mentioned, but also because countries had to work together over the past decade to make banking systems more resilient. And yet, while the outlook has improved overall, prospects are diverging dangerously not only within countries, but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two energies, U.S. and China. They are part of a small group of countries that will be well ahead of their pre-crisis GDP levels by the end of 2021. But they are the exception, not the rule.

The cumulative loss in per capita income relative to pre-crisis projections will be eleven percent in advanced economies by next year. For emerging and developing economies, excluding China, the loss will be much worse at twenty percent. Cutting 1/5 of what is already a much smaller per capita income than in richer countries. This loss of income means millions of people will face destitution, homelessness, and hunger. And we see that clearly. But many other things are less clear. Indeed, one of the greatest dangers facing us is extremely high uncertainty. So much depends on the path of the pandemic, which is now shaped by uneven progress in vaccination, and the new virus strains that are holding back growth prospects, especially in Europe and Latin America. There could also be more pressure coming to vulnerable emerging market, low income and fragile states. They already have more limited fiscal firepower to fight the crisis, and many are highly exposed to hard hit sectors, such as tourism. Now they face less access to vaccines, and even less room in their budgets. And some are already at high risk of debt distress in sovereign corporate or banking sectors. Now add to this uncertainty of financial conditions. Accelerated recovery brings good news overall, but it may also create some less desired outcomes. For example, strong growth in the U.S. can benefit many countries through increased trade. We expect inflation to remain contained but fast U.S. recovery could cause a rapid rise in interest rates, which could lead to a sharper tightening of financial conditions and significant capital outflows from emerging and developing economies. This would pose major challenges especially to middle income countries with large external financing needs and elevated debt levels. Many of these countries will need more support. Return to growth would also mean policy transition and the need to deal with the long term scars of this crisis. Among them is the impact on human capital, especially on the young, the low skilled, women, and informal workers. Allowing those scars to persist will result in lower growth potential, making it even more difficult to increase employment and reduce inequality.

It is very clear, there will be no sustainable recovery without giving people a fair shot. What should be done? First, we must keep our focus on escaping the crisis. We must follow the example of the scientists by stepping up cross border efforts by doing whatever it takes to ramp up vaccine production, distribution, and deployment. One option is to pursue at the global level what has worked at the national level, and that is subsidizing vaccine producers, input suppliers, and last mile distribution. The world needs a fair mechanism to redistribute vaccines from surplus to deficit countries, and a fully funded kovax facility to accelerate vaccinations in poorer countries. This is how we can protect people's health, but also how we can accelerate the recovery. Faster progress in ending the health crisis could add almost nine trillion dollars to global GDP by 2025. But the window of opportunity is closing fast. The longer it takes to speed up vaccine production and rollout, the harder it will be to achieve these gains. While the crisis is still with us, the key is to help vulnerable households and viable firms. This requires targeted fiscal measures with credible medium term frameworks, as well as continued monetary accommodation. And given diverging recoveries, it is prudent to keep a close eye on financial risk, including stretched asset valuations. And major central banks have to carefully communicate their policy plans to prevent excess financial volatility at home and abroad.       

Second, we must safeguard the recovery. As the epidemic recedes, government furlough and support programs should be scaled back. But this transition needs to be carefully managed to cushion the impact on workers through income support, targeted hiring subsidies, retraining, rescaling. There should also be further support to viable small and medium sized firms through equity injections and more effective bankruptcy procedures. SMEs are the world's biggest employer. Yet our research shows that the share of insolvent SMEs could rise sharply this year, as support is scaled back, threatening one in ten jobs in this vital sector. And here you can see the effectiveness of current procedures across the world. Most emerging and developing countries are orange or red, which means they would be more heavily affected by a wave of insolvencies. So we need further reforms to mitigate these economic scars and promote a fairer transition.

Third, invest in the future. The crisis has made the case for pandemic preparedness and more broadly for investing in resilience, especially to climate shocks. A new momentum is building towards greener, smarter, and more inclusive economies. And so far only a small fraction of fiscal stimulus has been directed to climate and green finance, but the tide is turning and rightly so. A coordinated green infrastructure push combined with carbon pricing could boost global GDP in the next fifteen years by 0.7% a year and create millions of jobs. There is also the potential of digitalization. In a recent survey, almost fifty percent of shoppers said they were using digital payments more than before the pandemic. I'm one of them. A growing number of central banks are considering digital currencies, which could transform the International Monetary System and digital infrastructure investment could help transform our economic system, boosting productivity and living standards. Now to unlock this potential, we need to combine better infrastructure and greater access to the internet with more investment in people education and health. This requires sufficient public revenues and national tax systems retold for the twenty-first century. In many cases, this will mean making them more progressive and fairer. And that has to be coupled with modernizing international corporate taxation through multilateral efforts to ensure that highly profitable firms pay their fair share where they do business. All this is essential. But it would only take us so far. The harsh reality is that poorer nations are at risk of missing out on what is going to be a historic transformation to a new global economy built on green and digital foundations. New IMF research released today shows that low income countries have to deploy some $200 billion over five years just to fight the pandemic, and then another $250 billion to return to the path of catching up to higher income levels. They can cover only a portion of that on their own. Success would call for a comprehensive effort, more domestic revenue mobilization, more external concessional financing, more helped to deal with that. And in that regard, the G-20 debt service suspension initiative, the new common framework, are a good start.

For our part, the IMF has stepped up in an unprecedented way. We have provided over $107 billion in new financing to eighty-five countries. That service relief to twenty-nine of our poorest members. In Sub-Saharan Africa, IMF financing last year was about thirteen times more than the annual average over the previous decade. And I'm very encouraged that support is building among the IMF membership for a possible special drawing rights allocation of $650 billion. This would benefit all our members, but especially the most vulnerable by boosting reserves without adding to that burdens. It will send a powerful signal of multilateral solidarity, freeing up resources for vaccination programs, and other urgent needs. Just as we have helped fight the crisis, we will help our members secure the recovery. And let me end as I began with FDR. On February 12, 1945, he called on U.S. Congress to adopt the Bretton Woods agreement, which created the IMF and the World Bank. He said, the world will either move toward unity and widely shared prosperity, or it will move apart. We have a chance to use our influence in favor of more united and cooperating world. This world could not be more apt today, when we face the biggest test of our generation. How we work together to build a better world will be remembered for generations to come. Let's give it a fair shot.

ZAKARIA:  Thank you so much Kristalina. That was a very powerful presentation. Let me begin by asking you to talk about something you alluded to, which is at the center of the conversation in the United States, and then we'll branch out. Which is, is the fiscal stimulus that the Biden administration has requested and has now been passed in Congress too big? As you know, there is a heated debate about this. There are people of very distinguished economists like Larry Summers, who argue that the amount of money proposed to be spent is four times larger than the so called output gap. That is, you know, the place the gap between where the economy would have been without the pandemic and where it is today. That the danger here is that you overheat the economy and you end up with inflation. Inflation is something the IMF is particularly focused on and sensitive to. There are others who say, no, this is about writing and will not trigger inflation, largely because it's a onetime measure. How do you think about it?

GEORGIEVA:  First, great to be with you Fareed and of course, to be in this conversation hosted by the center, Council on Foreign Relations. Sorry. I feel that we are indeed in a very, very important time in history and we do need to talk about this big decisions that are being made. What we see from the IMF is the criticality of moving the world economy on sound footing. And the decision the U.S. has taken to provide further stimulus, in our view is going to contribute some five to six percent of growth in the U.S. over the next three years. In other words, it is helping in lifting up the US economy, and it has positive spillover effects for the rest of the world. One of the reasons we are going to upgrade our projections for 2021 is because of this extraordinary measures taken and the most recent stimulus in the U.S. We did look into the question of inflation. Our conclusion is that 2022 inflation in the United States post stimulus would be two and a quarter percent. In other words, not something to be scared of. And we recognize that even if there is a small spark in prices, because pent up demand leads to people coming with their capacity to buy goods and services, this would be short lived. So we are not in the school of those who worry about inflation. As I said in my presentation, we do have to be vigilant. Because if the U.S. economy accelerates, and this leads to a tightening of financial conditions, there could be risks for emerging markets, and that has to be watched carefully. We, however, have a fairly clear message coming from the FED, from Chair Powell, that is giving clear forward guidance on the issue of how the U.S. intends to pursue taking advantage of low interest rates. So when we look at this package, we would see it as a very important complement to the monetary policy accommodation in the United States. Of course, we are expecting that they would be another step towards investment in infrastructure, because we believe that relief measures as important as they are, are not going to be enough to lift the productivity and secure long term growth.

ZAKARIA:  So I was going to go through exactly that question. If the one point nine trillion doesn't make you nervous, how about if I add three trillion of infrastructure spending to that? Does that really not alter your calculus on in terms of inflation?

GEORGIEVA:  We have to see what is the composition of the next proposed package and how it is going to be implemented over time. Because for infrastructure investments, we take a much longer period of time for the money to actually reach out those for whom they're intended. But let me make a broader point. And it is twofold. One, we very strongly believe that now is the time to move in green investments, especially green infrastructure investments, and investments in human capital. And that the direction of this proposal that is being discussed, is the right direction. Our research shows that investing in green infrastructure, as I spoke in my presentation, can boost growth by 0.7%, creating net, millions of net jobs. And if you go back before this crisis, what did we talk about? Actually, that was my first speech as the managing director of the IMF. We talked about anemic growth, low productivity, our looming climate crisis and growing inequalities. None of this has gone away. So I do believe it is important to use this momentum coming out of this crisis, to shift gear towards higher productivity and towards greener growth for the future.

ZAKARIA:  Why do you think we have seen so little inflation over the last twenty years? You know, there is, you know there are many theories about this. But, you know, the Trump trade tax cuts didn't trigger inflation, the spending after the global financial crisis didn't trigger inflation. It feels as though there are some kind of powerful deflationary forces at work in the global economy. And so what do you think of that? And does that mean that, you know, in many ways, central banks were sort of too worried about fighting the last war, the war of the seventies against stagflation?

GEORGIEVA:  What we have seen is that, indeed, with employment going up, inflation did not follow. We had after the global financial crisis, an increase in unemployment to ten percent. It went down to three and a half percent. Without this affecting price levels. We see two factors in work. One is we have central banks that have become much better with their tools, and their communications. And that helps. And then secondly, what we seek in the world economy, is a fairly significant shift in terms of demography. And that while it is not easy to explain how that plays a role, but it also appears to be playing a role. I personally see much stronger capacity in central banks, not only domestically, to provide this forward guidance to the economy, but also to work in a synchronized manner. And if there is one thing that I take from this crisis as the most impressive, positive lesson, it is synchronized action by central banks, and by finance authorities globally. I don't think that we give enough credit to what has been built over the last decades, where the IMF also plays a role because these ministers and central bankers, they do get together twice a year and communicate actively also in 180, sorry, 190 members setting. And that I think we should be very grateful for, because it has been the most powerful force to put the floor under the word economy. And I am a very strong believer, it would continue to be a force for good as we move on the other side of this crisis.

ZAKARIA:  I think it's very important how you have highlighted the role of global cooperation. I mean, and that this has happened now twice. Once after the global financial crisis and now again, the coordinated fiscal and monetary responses of countries. And you also highlighted something which I think people forget, which is when the pandemic began, everyone was criticizing globalization. But of course, the vaccine, both in its discovery and its production, and its distribution is entirely a product of globalization and the triumph of global cooperation. And, you know, we sometimes tend to forget these victories and focus only on the problems. But let me now in that, you know, me being a journalist, I have to talk about the problems. The biggest surprise on the downside, it seems to me this year, which is going to affect global growth, is what is happening in the European Union. The vaccine rollout in the European Union is going to end up being much slower than people had expected. Which means, to pick up on the point you made in your presentation, if the pandemic is not dealt with effectively and efficiently, and quickly, the economic recovery will take longer. How bad do you think the situation in Europe is? And how quickly can it be rectified? And will it have an economic impact? Give us your thinking on that.

GEORGIEVA:  So our expectation is in the second half of the year, we will see the European economies on a sound recovery path. We do see the attention now being concentrated on accelerating vaccinations and rightly so. And I believe that the European governments, the policymakers, the health authorities in European countries recognize that this is priority number one, and they're acting upon it. What we have seen in other places is that when attention focuses on vaccinations, and the traditional expectations of this being done, without intervention from the government are set aside, vaccinations speed up. The subsidizing of vaccines, making it possible for people to easily choose where and how to get vaccinated, all of this has been a factor where you and I live in the United States, and we have seen tremendous acceleration of vaccinations. So, our expectation for the European countries is that we will see exactly the same. And then a quarter later, the lift up of prospects for growth that are now very clearly strong in the United States. And strongly in other countries where this push for not only vaccinations, but also other measures to live with the pandemic and recover the economy had been put in place.

ZAKARIA:  One of the things we all wonder about is when things get back to normal with regard to the pandemic, will you still see consumers come out and spend? Will you see, you know, would activity recover as quickly as people hope? And it seems to me that the most interesting picture there is China. And so give us a sense of what do you think is happening in China? How much has the economy recovered? And where do you see China's trajectory as the second largest economy in the world?

GEORGIEVA:  We are projecting strong growth for China for this year of eight percent. And it is on the back of containing the pandemic and seeing the manufacturing sector recovering very quickly, where the recovery is somewhat slower is indeed in consumer spending. And in that sense, the Chinese recovery somewhat still unbalanced. We would like to see more of this consumer led growth in China. And as time goes, we expect that would be the case. The country that has been the most demonstrably telling us what happens when you overcome the pandemic has been Israel, where economic boom is also driven by consumer boom. And we do believe that as restrictions can be eased because of vaccinations, then consumers are stepping up, they go out and spend. But let's remember that the changes that have come with this pandemic, are very profound, and they will be long lasting. One of them is digitalization, and the fact that a lot of consumption has moved into the virtual economy. We don't think that this is going to roll back altogether. We are actually in these meetings, looking into real estate and what is going to be the long term impact on commercial real estate, because of the shift in the way we live, we work, we dine, we entertain. And this change is, I think, we have to be very open to and embrace rather than, I hear many people saying, oh, let's just go back to how it used to be. I don't think this is going to be happening. So thinking of this systemic changes in the economy, in consumer patterns, in the way we work, but also in our monetary systems. This is what we are concentrated on at the IMF. We want to be sure that policies that are coming after the pandemic are supporting building societies that are more inclusive and more resilient. And actually if I have one message for everybody is to accept that that concept of resilience is with us to stay. And that for each and every country, it has to translate into more resilient people, people that are educated, healthy. One lesson of the crisis is social safety nets, social protection, it matters when you have it, you're in a better shape at the time of shock. More resilient planet, we clearly are seeing much more interest in dealing with the climate crisis before it is too late. And, of course, more resilient economies, where a partnership between governments and private sector are contributing to higher standards of living and more dynamism in our societies.

ZAKARIA:  You touched on this issue, but I want to get you to tell us, give us a broader picture, which is the unequal fate of countries as they confront this pandemic and the economic problems that are produced. So the rich countries in the world, broadly speaking, countries that can issue debt, relatively freely, have found a way out of this crisis; the United States, China, European Union, you know, countries like that. The countries that do not have that luxury of being able to issue debt freely and without too much concern, are going to face a very different problem, even if they recover, because of the output gaps that will not be filled by fiscal measures. So tell us how bad it is. Some of the data I've seen says, and this comes out of the IMF and the World Bank, maybe 100 to 150 million people have fallen back into poverty. That maybe another 100 million will fall back. And to put that in perspective, I mean, in the last thirty or forty years, we move 400 million people out of poverty. So it sounds like we're saying almost half of that work of a generation has been undone in one year or two years. Is that likely to persist? And then of course, what do we do about it?

GEORGIEVA:  Well, it is a very serious problem that is coming out of this crisis. Take Sub-Saharan Africa, it is experiencing in 2020, for the first time in decades, a recession. And for 2021, we are only projecting Africa, Sub-Saharan Africa, to grow slightly over three percent. It should grow six, seven, eight percent to catch up with the rest of the world. Why is this happening? Low access to vaccines to step on a path of recovery faster, low capacity to finance its recovery, and of course, high level of debt for many of these countries. What we see across the low income countries is, at this point of time, a very strong call for the international community to step up. And I'm pleased to say that there is response to this call. We have to do more. But there is a sense that if we don't act, if we allow this loss of achievements of Sub-Saharan Africa, it is loss of eight years of achievement, if we allow it to persist, it’s very bad for these countries, bad for their role in the world economy, but also very bad for global security, for peace and stability in our world. And when we are looking forward, we have presented to our members, what can be done? One, the countries themselves, they have a role to play. A crisis is an opportunity to accelerate reforms, and some of them are embracing this goal. But then they need to be helped. We need more grants and concessional finance. This is why institutions like the IMF are created, to step up. We also absolutely need to deal with this burden of debt. We now have the common framework for debt resolution that brings all creditors, the traditional periscope club craters, but also China, Saudi Arabia, the private sector. That framework has to squeeze debt levels when they're unsustainable and do it fast. For the benefit of everybody. We now have three countries that called for participation, Chad, Zambia, and Ethiopia, We have to make that work. And if we all work together, to give space for countries, to leapfrog on digital transformation, to embrace a climate resilient development, to clean up space for private sector to flourish, then on the other side of this crisis, they can come stronger. If we fail to act, it would be detrimental to this whole investment we have made. And you talked about it Fareed over the last decades. But most importantly, it would be a tremendous risk for stability in these countries and for their place in the world.

ZAKARIA:  Let me ask you about something you mentioned. You said that governments are partnering with the private sector, in some cases that has been very productive and stabilizing. There has however been also a rise of economic nationalism. And even once champions of free trade are talking about bringing back supply chains and things like that. I'm wondering, what do you in particularly given your background, you've seen that movie in Bulgaria where you were where you grew up. I saw it in India, where I grew up. What do you think of this move towards economic nationalism? And particularly, what do you think of the fact that the United States historically the leader of world trade, free trade around the world, now has the highest tariffs in place? Since the Smoot Hawley tariffs of the 1930s.

GEORGIEVA:  It is very important to recognize that trade is good for growth, it is good for jobs, it is good for poverty reduction. But if trade agreements are insensitive to unresolved problems, that would create fertile ground for nationalism. So, it's so very important that we don't shy away to identify what are the problems that need to be solved. Take, for example, the fact that ecommerce is not part of trade agreements, that services are out and yet this is the fastest growing part of economic activities all over the world. Or that within countries, not enough attention is being paid to who wins, who loses and how we can be more attuned to make sure that a global trade is also a fair fit, a fair proposition for everybody. So first we have my good old friend Ghazi now in WTO, all the power to her, but all of us we have to work towards resolving the obstacles, making sure that the ground is fertile for collaboration, and more reliance on us working together, not less. If we only say, oh trade is good, let's go for trade, that's not gonna do it. It will do it only if we are clear about the reasons why there is a push back and then both internationally and nationally, national policies, we address these factors. Let me say before, just to give you one analogy, I said that China and U.S. are the two economies that are driving the world forward. This is like two engines on a plane on which we fly. Well, we need this two hinges to work in sync. And we would go further and we would go faster. So to get to that point, I believe we need to zero in on what works but also even more so what has not worked and why.

ZAKARIA:  All right. Let us now move to questions from people, members of the Council, people who are listening to this. One thing to just remind you, identify yourself and your institution before you ask your question. Please do make sure it is a question and not a statement. We're hoping to get a number of these in. I will now turn it over to the operator who will send us some questions.

Operator:   (Gives queuing instructions) We'll take our first question from the Twitter user, Ian Douglas Ball, who asks, in relation to emerging from the pandemic and addressing challenges such as climate change and inequality, Mark Carney has said the most important buffer is fiscal capacity. Do governments have the fiscal buffers necessary to address these challenges?

GEORGIEVA:  Great question. So if you go to the days before the pandemic, there were countries that build buffers and strong fundamentals. They stepped into the pandemic in a much, much better position. And obviously, as we exit the pandemic, we have to pay attention to returning in the medium term to fiscal sustainability. What it relies on are two factors. One is restoring growth, lifting up incomes, and on that basis, rebuilding this fiscal buffers. And the second one is to look at our tax policies today, fully adequate to what is expected from them in the twenty-first century, but domestic taxation and international taxation. Fortunately for us, interest rates are very low. That has allowed governments a lot of space. And as we project the recovery, we can see return to fiscal sustainability and rebuilding these buffers where they have been depleted. And also looking at the world as a whole, our shareholders are now thinking of boosting the reserves capacities of the world through a $650 billion new allocation of special drawing rights. In other words, our small contribution to this building of global buffers. And then of course, we have to recognize that in that movement towards fiscal sustainability, there would be one particular question to be answered, and it is, how do we go about pricing carbon? And how that becomes part of the fiscal equation of the future?

ZAKARIA:  Are you saying that you think countries should implement a carbon tax?

GEORGIEVA:  The view of the front on this is very clear. We believe that there has to be price on carbon, whether it is done through tax, or trade, or it comes out of free base or other ways of pricing. Carbon is for individual countries to decide. All other things equal, carbon tax is the most efficient way to price carbon. But it is not the only way. The important message from the front is that to do the transition to a low carbon climate resilient economy, we have to put a price on carbon and provide forward guidance on how this price is going to go up. So businesses and consumers can adapt their behavior on a longer term basis. And we, Mark Carney and I actually on that issue are completely aligned.

ZAKARIA:  Let's get another question.

STAFF:  We'll take our next question from Grace Lykins.

Q:  Hello, my name is Grace Lykins and I'm a member of Visa's global government engagement team based in Washington, DC. It's been such an honor to hear you speak today. My question is about how the IMF is working to support micro and small businesses as they recover from the pandemic? You noted in your comments that small and medium enterprises have been hit hard, especially in emerging and developing markets. We're seeing that small businesses that are digitally enabled have fared better than those that rely solely on cash payments. And you discussed the importance of affordable access to internet and digital technologies. So I would love to hear more about how the IMF is looking to address digital equity and these systemic challenges Thank you.

GEORGIEVA:  Well, thank you very much for this question. We used to say the future is digital. And with the pandemic, the future has arrived. And that is something that we very strongly support through our policy engagement with countries, to give them an assessment of what policies they can deploy that can accelerate digitalization, while at the same time, make it equal opportunity. There are three particular angles of our work at the IMF. One is on financial inclusion. We have been a very strong voice and a respected voice to improve access to finance for everybody, everywhere, taking advantage of digitalization. Second is by making the case for private sector development that is vibrant, where small and medium sized enterprises and micro enterprises for that matter can flourish. Again, in our policy engagement with countries, we help them design policies that are inclusive for SMEs, at lift up SMEs. And third, we provide a significant capacity development to ministers of finance to central banks, and we help them see clearly where the SMEs are and how they can be helped.

ZAKARIA:  Alright, let's get another question.

STAFF:  We'll take our next question from Paul Sheard.

Q:  Thank you very much, Dr. Georgieva. I'm Paul Sheard from the Harvard Kennedy School. I wanted to ask you about the IMF itself. And you may have partially just answered the question. But do you see any ways in which the pandemic is going to impact the way the IMF itself operates and its nature as an institution?

GEORGIEVA:  I don't think anybody would be left untouched, and we make no exception. And the impact on the IMF is twofold. One, recognizing the big drivers of change. And we spoke about those quite extensively. They are both in terms of digitalization, the drive towards a low carbon climate resilient economy, and very important issue of inequalities and inclusion. And how that impacts the priorities of the IMF, what we do in our engagement with our members, how we support our members. And I can tell you that with our shareholders, we are discussing exactly these issues and how they can be integrated in the work of the IMF. But secondly, we changed the way we work. Like everybody else, the pandemic pushed us out of our comfort zone of coming every day to our offices to work from home. That started on March 13 last year. What we are going to have after this pandemic is a much more dynamic institution where what we do matters and how we do it is oriented towards a much more inclusive and engaged, but not necessarily traditionally in offices from nine to five, modus operandi. A big change for us is also how we think about the International Monetary System in the future given the impact digitalization has on central bank digital currencies. We had one country, the Bahamas that moved to central bank digital currency with the support of the IMF. And how we make payments in a secure manner, how we deal with problems like cybercrime that unfortunately are the ugly side of digitalization. Great time to be at the IMF, to be the institution that zeroes in on policies for people tomorrow, not what used to be life before.

ZAKARIA:  On that last point, what do you think of Bitcoin? Is it good or is it bad in helping?

GEORGIEVA:  It is a way for people to invest with some element of trust in that aspect. When we look at the bitcoins, we don't see it as a huge part or even big part of how the monetary system operates. And at the front, we are not in, shall I say, invested in Bitcoins.

ZAKARIA:  (Laughs) Alright, I think we have time for one final question.

STAFF:  Let's take our next question from Mona Yacoubian.

Q:  Thank you so much. Mona Yacoubian from the U.S. Institute of Peace. You've spoken about developing economies and the potential willingness to reform, and therefore access financing. I'm wondering what your thoughts are with respect to a country like Lebanon that's in the midst of a financial meltdown that's only been compounded by the pandemic, and yet evinces absolutely no willingness to reform? What are your thoughts on how to deal with a country like that?

GEORGIEVA:  I'm so so very sorry for the fate of the Lebanese people. They have gone through a horrible time and yet they have been such good friends to their neighbors. They're hosting refugees from Syria, but also from Palestine. What we have been striving to do in Lebanon is to build an alliance for the reforms the country needs to pursue. And unfortunately, so far, that has not happened. Your question? How we go about it? My answer is we persevere, but we need a partner to work with. And I so much, so much pray that we will have a partner in Lebanon so the country can get itself out of this tragic freefall it has been now for so long.

ZAKARIA:  Alright, on that slightly sad note, which I share. The tragedy of Lebanon is really a very sad story about a country that I don't know, fifty or sixty years ago was, I think, in the top twenty in terms of per capita GDP in the world. But that is for another day. Managing Director, you've been very kind with your time. This has been a fascinating conversation. I think people listening in on can see why I am such a big fan and we wish you all the best for the very important work you are doing. Thank you.

GEORGIEVA:  Thank you very much Fareed. Great to talk with you and the audience.

END

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