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Preventing a great reversal: IMF’s Kristalina Georgieva on reasons to be optimistic

Filed under Coronavirus / Climate Emergency / Leadership case studies

A crisis like no other has generated a response like no other. That’s why IMF Managing Director Kristalina Georgieva believes there are grounds to be optimistic.

  • An incredible global response to economic impact of COVID-19
  • Financial lifelines to 75 countries already provided by IMF
  • 170 states will be worse off in 2020 than 2019. This means more debt, deficits, poverty & inequality
  • Important to invest in the fairness of our societies
  • “Unless we admit honestly the flaws in our global integration, we are not going to make progress in the future.”
  • A second stimulus is essential to invest in resilience & the “capacity to weather what inevitably will hammer us even more: climate.”

At Thinking the Unthinkable we highlight examples of global leadership. The COVID-19 pandemic has forced Kristalina Georgieva to transform IMF policy since she took over.

“Never in the history of the Fund we have done so much so fast,” she told Nik Gowing at the Bled Strategic Forum in Slovenia on 31 August 2020. The session engaged six prime ministers and a president from Europe. It was moderated by Nik.

For insights into the IMF’s $1 trillion role in averting a ‘great reversal’, read this lightly edited transcript of the conversation with Nik:

Nik Gowing:

I heard you on June 3; the launch of the great Reset at the World Economic Forum saying there’s still a danger of a great reversal. And that’s what you want to overcome at the IMF. What are the parameters now? What is the data looking like? Because you said we’ve got to be optimistic. Can you be optimistic?

Kristalina Georgieva:

What? Wonderful, wonderful to see. All of you. Can you hear me?


Yes, we can go ahead.


Great. And first and foremost, many thanks to (Slovene) Prime Minister Jansa for bringing us all even some of us unfortunately, being just on a screen.

Nik, the very last time you and I have communicated it was on the issue of thinking the unthinkable. And I hear you saying it as you engage with people on this theme as well. It came very handy this year because the unthinkable happened. Because of a pandemic we had to put the world economy in a standstill and trigger the worst recession since the Great Depression, which is, unfortunately, still with us.

So, you asked me about the numbers, the data, how we frame our thinking. Our projections are as follows: for advanced Europe, we expect minus around minus 10% growth this year, for emerging Europe, minus 6%. This is in a global context in which by the end of the year, 170 countries would be poorer than they started 2020.

But we do have a reason to stay optimistic. And let me make my case for it.

First and foremost, a crisis like no other has generated a response like no other. And that’s you and the leaders all over the world. What has been done is phenomenal. We have collectively put a floor under the world economy by pouring huge amounts of liquidity through central banks, and through actions of finance ministries. For the year, up to now, some $11 trillion of fiscal stimulus has been put in place. And that has been done really, really fast.

From the IMF, we have done our part, we have moved financial lifelines to 75 countries within three months. Never in the history of the Funds we have done so much so fast. We have about a trillion dollar lending capacity. We have extended 270 billion of which more than a third, just in this last month. Still we have fire power? And I want people to take pride of this incredible response. Because if we didn’t do it, there would have been a massive wave of bankruptcies. And by now we would have been in a massive turning into structural unemployment. (it) hasn’t happened.


But can I put it can I put it into this is more than money. This is about now the resilience of society. All this before the climate emergency.


You’re absolutely right. I am saying this only because I sometimes find us being less receptive of what we are learning action actually means. We do have now a chance to generate funding for a second stimulus. And this second stimulus Nik has to be make exactly about what you’re talking about right now. It has to be about investing in digital, investing in resilience, meaning education, skills, capacity to weather what inevitably will hammer us even more: climate. And very important investing in the fairness of our societies.

I heard [Hungarian Prime Minister] Viktor [Orban] talking about the need to have a sound foundation of research, which includes - in his words - military research that has been globally important to drive also civilian improvement. Yes. But I think it is also critical to think about the ability to retain a sense of fairness, because on the other side of this crisis, what is waiting, more debt, more deficit, certainly more poverty and potentially more inequality. And that would translate into more protests, more people saying, ‘we are not happy with you’.


Now, you have urged for the last few months, a new spirit of solidarity. Do you really think that there is a new spirit of solidarity, because you’ve used three key words; greener, smarter, fairer – when every country and most people are thinking of themselves rather selfishly.


You know, it’s true that every nation when hit by such a dramatic crisis, would have the natural tendency to say ‘I’m retreating behind my borders, I am retreating behind the walls of my house to be safe’. But I think that most urgent sense of let’s protect ourselves individually has passed. And the EU has proven this by passing the Next Generation 750 billion Euro package.

By the way, in Europe because it is so painful to reach a collective conclusion on anything, you remember the pain. Outside of Europe, people were very excited by what you have achieved, because it is an indication that solidarity is still alive and kicking.

We are now seeing a revival of trade. We need that very much because trade is an engine of growth, and it means jobs for people who would badly need that. And it is absolutely paramount that institutions like mine, drive this coming together. So far; so far; the Fund membership - 189 [nations] has been pretty good to stand by those who need to be helped in this crisis with our capacity to do it.


Final question if I may then because I know you have got to a meeting at the top of the hour. Is there globalisation? Is there a global will on this? Or are you facing real uphill barriers to bringing people together, to creating consensus? Because there is a perception that the globalised system, the multinational system, simply is crumbling at the moment.


Look! Unless we admit honestly, the flaws in our global integration, we are not going to make progress in the future.

And what are they?

One, it is not true that everybody benefits from globalization. There are winners and there are losers. And unless we figure out what we do for the losers and how they are not losers anymore, then we will have a problem.

Two, it is also critical to recognise that there has to be some revisiting of what we produce through value chains, and what we do need to have produced at home for the security and safety of our citizens. It is not possible to be in a world in which one country produces 90% of penicillin. It’s just not on.

So, I am very pragmatically a believer that as long as we recognise the pluses and the risks of globalisation, we will be able to keep the world together. And in my experience, honesty about values and risks pays off. We get on the same page, and then we succeed.

Watch the full leaders’ session from the Bled Strategic Forum below. It starts after 47 minutes.

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