Category: Finance

Source: International Monetary Fund

October 22, 2024

Speakers
Chair: Ralph Recto, Secretary of Finance, Philippines

First Vice‑Chair: Candelaria Alvarez Moroni, Argentina, representing Ministry of Economy Luis Caputo
Second Vice‑Chair: Olawale Edun, Minister of Finance and Coordinating Minister of the Economy, Nigeria
Iyabo Masha, G‑24 Secretariat

Mr. Recto (Philippines): Thank you, all. We had a productive exchange of views and experiences on some of the most pressing issues, confronting the global economy today. We are hard‑pressed on multiple fronts. The suffering costs by conflicts and humanitarian crisis around the world is vast and the affected region’s recovery, the construction, and long‑term development, cannot wait. They demand immediate forceful multilateral action.    

While the global economy shows signs of stabilization, the outlook for many vulnerable nations, particularly in the global south, remains bleak. These weak economic prospects continue to haunt those already struggling to recover from the pandemic.      

Inflation may be easing, but rising geopolitical tensions are keeping the threat of commodity price spikes and elevated interest rates alive. These risks impair capital flows, fiscal stability and the very survival of economies on the brink.          

One thing is clear. Any slowdown in the global economy due to these new economic realities is bound to hit developing countries the hardest. While current circumstances have made it more difficult for us to achieve a sustainable and inclusive future by 2030, we believe that it remains possible with the right priorities and concerted international cooperation.         

Thus, we continue to call for a more agile and strong will IMF and World Bank. We need heightened development cooperation, scale‑up support, and innovative solutions as we now begin the headwinds to foster peace, stability, and prosperity for all. And the key issue that underpins our discussions is the 80th Anniversary of the Bretton Woods System.         

We acknowledge the significant evolution of the system over the decades. Yet, we must recognize that rapid transformations are occurring at an unprecedented base. We must therefore critically assess if the Bretton Woods System is adopting fast enough to the rapidly changing and increasingly volatile global environment.         

To this end, the G‑24 has identified four key reforms that will enhance the system’s effectiveness and empower both the IMF and the World Bank Group to better serve their members.              

First, the IMF must create a new mechanism to support countries with sound fundamentals during liquidity crisis.

Second, the immediate submission of eradicating poverty on a livable planet, the World Bank needs more ambitious goals for its concessional and non‑concessional windows, commensurate with the challenges of achieving inclusive and sustainable development by 2030.    

Third, the sovereign debt resolution framework must be reformed to deliver comprehensive, predictable, swift, and impactful debt relief, addressing the urgent needs of vulnerable economies.               

Fourth, we must accelerate governance and institutional reforms of the Bretton Woods Institutions, to increase the voice and representation of developing nations. Without improvements and both actions, decades of individual and global efforts to eradicate poverty and inequality, combat climate change, and invest in growth‑enhancing projects will be put to a halt, if not reversed. Thus, we are counting on our recently concluded meeting to set an unprecedented multilateral cooperation and action. All of these points are comprehensively discussed in the communiqué and press release we have prepared for your perusal. With that, we are now ready to take your questions. Thank you.         

MODERATOR: Thank you, Mr. Chair. So now moving on to the Q&A section, I would like to remind you that when you raise your hand, please identify yourself, your outlet, and please identify the Chair members that you would like to address the question to. Now moving on to the gentleman in the third row, please.       

QUESTIONER: Thank you so much. I have a question actually for the three of you. Mr. Recto, you talked about the need for liquidity and buffers. The Philippines serves as a really good example. You are one of the fastest growing economies in the developing Asia region. Business process outsourcing, revenues have passed $35 billion. I wanted to find out, what is the Philippines doing so well? Is it a well‑educated workforce or is it constant electricity; what is the secret; and is AI going to disrupt that going forward?        

For Candelaria Alvarez, reforms have been taking in Argentina. Javier Milei recently, I think it was in the last month, vetoed a bill that was going to increase financing for public universities, and students have been protesting. How patient do you expect the residents of Argentina to be with the reforms that are taking place?               

And for Mr. Olawale Edun, the CBN Governor, Olayemi Cardoso, at the last monetary policy meeting in Nigeria mentioned that the FAAC allocations, the Federation Account Allocation Committee, are causing—he noted they are causing the naira to depreciate when those disbursements are made. What do you think need to be done to address that?

Then, two, you recently, I think it was a month or two, you talked about the need for single‑digit interest rates in Nigeria. Do you think that is ever going to happen with inflation being in double digits and a hawkish monetary policy path in Nigeria? Thank you.              

MODERATOR: Thank you. Let me remind you that I hope that your question will be under the purview of G‑24 discussions but let ask the Chair to respond to the questions.               

Mr. Recto (Philippines): Thank you very much for your question. Thank you for noticing the Philippines. The Philippines at the second quarter grew by roughly 6.3 percent. For the first 2 years of this administration, we have grown about 6 percent. We are following our macro fiscal framework of reducing the deficit over time. We expect the good debt‑to‑GDP to be way below 60 percent by 2028. Today are roughly at 60 percent.               

On the expenditure side, we are spending roughly 5 to 6 percent on infrastructure, maybe a similar amount also for human resource development, particularly in health and education.               

You are correct that the BPO industry is growing by about—well, we collect roughly 35 billion in revenues a year. We also have a robust remittance of roughly the same amount, about $35 billion a year as well. That helps our consumption. 70 percent of the economy is household consumption. And public investments have also generated most of that growth as well.                 

AI is a challenge, but in the Philippines the BPO industry is already adapting to AI. So thank you for your question. Thank you.               

MODERATOR: Mr. Edun, would you like to address the question?              

Mr. Edun (Nigeria): Thank you very much. Let me answer it within the context of the discussions of the G‑24. Fundamentally, of course, foreign exchange and liquidity generally is very difficult. There are countries that are—they are reforming their economies domestically. They key into the rules‑based world trading system. And they do have debt sustainability in terms of debt‑to‑GDP. However, they have liquidity constraints, particularly foreign exchange with relation to debt servicing of the foreign debt but also their domestic debt. And I think to bring that—that is the context within which the questions of how to help. In fact, the IMF is specifically focusing on how to help is sort of a bridge financing that takes a question that does have its fundamentals right, but it gives it enough time for that adjustment and probably helps it with heightened debt servicing, which is just for a period.

Clearly with regard to Nigeria, the key about the foreign exchange market really is supply. And, of course, as you know we have the—we are an oil‑producing country. We just need to get our oil production up, and that will deal with that issue of foreign exchange supply, and pressure on foreign exchange every time there are large flows.                  

In terms of single‑digit inflation, of course, the western world, the rich countries, they have effectively defeated inflation. That is why the interest rates can come down. The Governor of the Central Bank in Nigeria, in the context of high inflation, is continuing with monetary tightening. That is the orthodoxy of the day. And it is one which is following. Thank you.               

MODERATOR: Ms. Moroni on Argentina.          

Ms. Moroni (Argentina): Thank you. Going back to the question on Argentina, just as an important framework, G‑24 has been working on the need for emerging market and developing economies to try to put their economies in the right place. The Minister mentioned the need for the international financial organizations to give liquidity or to provide access to liquidity for countries like Argentina and others to be able to get back on our feet. For the government of Argentina, it is really relevant. We do think there is a need for a fiscal anchor on that sense. What happened with the education law had to do with the idea to keep the budget where it has to be, and it has not to do with kind of cutting education. It has to do with evaluating costs and expenditure in the right way. I think that is it.          

MODERATOR: Thank you so much. Going back to the floor. The gentleman in the fourth row, please.            

QUESTION: Just turning to the U.S. election, obviously we have seen the U.S. follow suit on trade change to a more protectionist stance. We have seen more industrial policy. Regardless of who wins the election, how do you see the U.S. involvement with multilateral organizations represented here and the WTO; and what is the impact of maybe a lessen gauged, more transactional U.S. on the group of countries, the G‑24?           

MODERATOR: Mr. Chairman, maybe the Secretariat would like to respond?               

Mr. Edun (Nigeria): We are concerned that there will be a setback on multilateralism, particularly on trade as well. And we know the driver of global growth is more trade. So that is a concern. In the Philippines, we count on our relationship with the United States to do maybe more out‑shoring to the Philippines, and hopefully that will be done also with other members of the G‑24.            

Ms. Masha (Secretariat): If I can add, if you look at the communiqué, the last paragraph there actually addresses this issue. It is not just about the U.S. it is also about different countries all over the world implementing protectionist policies. And we have seen the impact of that in sectors that continue to build more to growth and development in many countries. So where do we go from here? What we are calling on is for the WTO to become the center of trade discussions, trade negotiations, and for the World Bank and the IMF to rise up to a much more multilaterally‑engaged organization that will be able to at least influence the kind of policies that countries take one way or the other. Thank you.            

MODERATOR: Thank you. We are going to go online. The question that was just received from Sri Lanka. Sri Lanka as a member of G‑24 is currently making attempts to emerge out of a crisis. What can you tell us about a G‑24 position to support countries like Sri Lanka and also for the island nations to secure financial facilities at reasonable conditions. Mr. Chair, maybe Iyabo?            

Ms. Masha (Secretariat): Yes. So I would say that Sri Lanka has come a long way from where it was 2 years ago. The last IMF Article IV Consultation assessment does show that growth is picking up, that fiscal buffers are coming up, and also import duties are rising, so that indicates that the countries are making some recovery.           

As for the position that the G‑24 takes on this issue, the way it affects Sri Lanka most is on the debt sustainability issue. So what we are calling for is that countries, especially middle‑income countries, should also have a framework, a forum where they can negotiate with their debtors. As it is now, the Common Framework only works for low‑income countries. Only low‑income countries are part of the Common Framework, but middle‑income countries can be part of another forum called the Sovereign Debt Resolution Roundtable, which is not really an association—an organization that delivers any form of debt relief. It just fosters common understanding. So that is what we are calling for. We want very timely, very comprehensive reduction in debt for countries, and also for both middle and low‑income countries to qualify. So that is where I see it working out. If things work out and the discussion in that area picks up quite fastly, then we can see the likes of Sri Lanka and maybe Lebanon and a few other countries benefiting from that. Thank you.          

MODERATOR: Thank you. Back to the floor. Maybe I will take one question from the side and come back to you. I’ve seen your hand, sir, in the third row. Sorry, the fourth row. Yes.               

QUESTION: Hi, there. Mr. Recto, you said that developing countries would be hit by the hardest by any slowdown. I am going to ask an uncomfortable question, but the U.S. election has two very different results, one of which will likely be much more inflationary and lead to more trade tensions. Could each of you tell me a little bit about how your economies are preparing or thinking about the possibility of a Trump victory and associated trade tensions and inflationary pressures that could be a headwind to growth?              

MODERATOR: Yes, please.             

Mr. Recto (Philippines): Well, in the Philippines, we do have a relationship with the U.S. We have a mutual defense treaty. We are hoping to leverage that relationship so that we do not get much affected. We understand that many U.S. companies are also interested to invest in the Philippines. We do have a partnership also, the U.S.-Japan-and the Philippines, with regards to our security arrangements. We expect more investments to take place also in the Philippines.             

MODERATOR: Anything to add from Mr. Edun or Ms. Moroni?             

Mr. Edun (Nigeria): Thank you. I think the issues that we are contending with in Africa, in many ways, we are bystanders to this all‑important election. Yes, we do have African Growth and Opportunity Act, which tries to open up the U.S. market to African‑manufactured products. I do not think that will be affected in any way by the results of this election. Generally, what we are finding is that at this particular time, the economies of trade generally, there is a reversal of globalization, of trade. There is a move to protectionism in these countries. There is on‑boarding of production. All these things tend to work against the developing world’s ability to benefit from expanding trade and thereby use that opportunity for investment, for growth, and for job creation and poverty reduction.            

Overall, I think that we are not that affected specifically or that in general we continue to ask for an improved global financial architecture that provides us with more concessional funding, add skill, particularly for those countries that, as I said earlier, are undertaking the macroeconomic reforms that everybody agrees are sensible and will lead to better lives for their people. Thank you.             

MODERATOR: Anything to add from the macro, broad perspective?             

Ms. Moroni (Argentina): Very briefly. What was mentioned by both Ministers is the right sentimenting in the emerging markets. We do think, at least for Argentina, the U.S. is a strategic partner and whatever the elections go, we do think that we need to keep having that channel open. Trade is quite a relevant issue. Financial issues are quite relevant. Governance issues in institutions also will be something sensitive to work with the new administration. We do think it is going to be something quite interesting to see in the short‑term. Thank you.           

MODERATOR: You, sir, in the second row right here.            

Question: My question is meant for Mr. Wale. Like Mr. Recto said in his opening remarks, a lot of G‑24 countries are having challenges implementing structural reforms and adjustment programs. I would like you to speak specifically to the case of Nigeria. What are the key lessons to learn from the structural reforms being implemented in Nigeria today. And looking back, are there better ways these reforms would have been implemented to limit the level of disruptions? Also, you met with the IMF MD and the team yesterday. We would like to know some of the discussions on that meeting and how does that relate to debt sustainability for Nigeria. Thank you.           

MODERATOR: Mr. Edun, would you like to respond?         

Mr. Edun (Nigeria): Thank you very much. When we talk about—I will take the last one—debt sustainability, and also reforms generally, the G‑24 I think is better to talk within the framework, to talk beyond Nigeria and more about developing countries as a whole. The requirement really for support from the international community, from the development partners, from the multilateral development banks is that you undertake reforms that lead to sustainability at the macro level.             

The key lesson that I think I would focus on is that in devising these programs and carrying out the reforms, what is particularly important — because the benefits over the longer term and the costs are frontloaded, it is important that the social safety nets that will help the poor and the vulnerable cope with the up‑front costs with a spike in their cost‑of‑living is adequately planned for and dealt with. So, it should not be an issue of it is an afterthought that you decide now that there need to be certain poverty alleviation initiatives. And linked to that, focus on helping the poor and the most vulnerable, [what can] cope with the cost is communication. I think one of the critical things in carrying out these economy reforms that are so fundamental and clearly they are necessary, otherwise they would not be implemented, is that communicating what is being done, what was to be expected, and also the timing as much as possible, the timing of the various activities, and then communicating what actually has been done so if it is a program to give direct benefits, direct transfers of funds to a group of people, then it should be published. There should be a dashboard that people can follow, thereby engendering and building public trust. I think those are the two important things that I would say you need to have for all of us at the G‑24 and developing countries in general. Thank you.         

MODERATOR: Thank you, Minister. I have time for two more questions. Let me go back to the far end of the room right there. Thank you.

QUESTION: Thank you. A question on climate change. Do you think the development banks, MDBs, are doing enough to tackle climate change? And especially our shareholders of MDBs, are they doing enough to tackle this issue? Thank you.            

MODERATOR: Thank you. Mr. Recto, you would like to comment?        

Mr. Recto (Philippines): The short comment is, it is never enough.     

MODERATOR: Minister, do you want to chime in or, Ms. Moroni, or Iyabo on climate change.        

Ms. Masha (Secretariat): Yes, I will say that the ambition is there. They really want to do a lot. The finance is just not commensurate with the level of ambition, so that is also one area where we have called on them to demonstrate the ambition. Thank you.     

Mr. Edun (Nigeria): Sorry. If I may, since you asked me.     

MODERATOR: Please.

Mr. Edun (Nigeria): The thing I would say on climate change, for a poor country such as Nigeria and others that are actually endowed with fossil fuels in particular, must take a realistic approach to climate change because it is the resources that we have that we must use to industrialize, to modernize our economies while being members of the global fight against climate change. We are signatories to the Paris Accord. We have our target for net zero, and while sticking to those, we must take a realistic view that we need to use our fossil fuels to develop our economies. Thank you.        

Ms. Moroni (Argentina): The recent issue we had been discussing on G‑24, G‑20, and other forums, the need for development banks to keep in mind their core objective. Then as you mentioned, there is a need to kind of—we do have an ambition, a climate agenda, but we do need to respect the emerging markets’ right to develop first. So, there is a need to—for financing for other development issues that are not directly linked to this, thank you.      

MODERATOR: Last question to the lady up‑front.       

QUESTION: Thank you. My question will be to Ms. Director and Mr. Olawale. Earlier on the World Economic Outlook, we were told that inflation is almost won, so I would like to know how the Group of Twenty‑Four is actually interpreting that, especially with the fundamentals in the developed world getting a little bit better; and what are the risks that are posed to the Group of 24. Also, to you, Mr. Recto, you rolled out four key reforms that G‑24 is asking from the World Bank and the IMF. Are you looking at timelines for these reforms? Then over to Nigeria’s Finance Minister and the Second Vice Chair. One of the reforms is heightened development support. That reform, what does it mean for African economies? For example, so I would really like you to take a look at that and perhaps what are the timelines that you are expecting? Is there a Nigerian agenda within these four key reforms?         

MODERATOR: Thank you so much. Also, I would like to invite Iyabo to address on the reforms of the Bretton Woods institutions as well, but first, the Director or Mr. Edun, would you like to respond on inflation?         

Mr. Recto (Philippines): On inflation, I think for next year, the global inflation rate will still be relatively high, lower than this year, but something like 5.8 percent, thereabouts. I still think that will be high, and because of that, the interest rate, while it is going down, it remains high. That is why we are also calling for the World Bank to reduce cost of borrowing. This will be very beneficial to the developing economies. On the time frame, maybe Iyabo can elaborate more.              

Ms. Masha (Secretariat): Yes. Yes, the Bretton Woods initiative itself, the reform, they just started, so now they are in the process of consultations, going around countries, going around regions, so I will say that at a minimum, maybe by next Spring Meeting, they will have an update on where they are in the process and maybe some final decision by the Annual Meetings. In any case, these things have to go through the boards of both the IMF and the World Bank for ratification.        

MODERATOR: Thank you. Mr. Edun.

Mr. Recto (Philippines): I think I think around this time last year, we were still dealing with heightened levels of inflation, particularly in the developed countries. That means elevated rates of interest as they put as their number one priority, the fight against inflation and tight monetary policy by the central banks. That has changed. And there is now as we are seeing monetary easing or at least easing of rates of interest by central banks, but that is in the developed world.

In the developing world, rates are still high and that fight against inflation means that the interest rates also will remain high. But as far as the developed world is concerned, lower interest rates translate to more affordability. Nobody wants to borrow. Nobody likes to borrow. But when it becomes necessary. It is something that must be managed as well as possible. So the first port of call is concessional financing; IDA financing, for instance, from the World Bank. And what the developing world continues to call for is larger sums that can really make a difference, not just to be able to help a country cope with its immediate payment needs, but to have funds to grow the economies. That is what the fight against inflation translates to for the developing countries. Victory therefore or success therefore in the developed world means that they should be able to make more resources available. I must note here that the IMF has reduced their charges. 36 percent reduction in the rates and the excess charges is significant, and it is in the right direction to help developing countries get the resources they need to develop and grow.

MODERATOR: Thank you so much, Minister and

Secretariat. Thank you so much for the questions. Unfortunately, we are out of time. Thank you so much again for joining this press conference. The G‑24 communique is being posted on IMF.org and the transcript of this press briefing will be made available later. Have a good rest of your day. Thank you.