Washington, DC: International Monetary Fund Managing Director Kristalina Georgieva delivered the following remarks at the third meeting of the G20 Finance Ministers and Central Bank Governors in Rio de Janeiro, Brazil:
"I would like to thank the Government of Brazil for its generous hospitality, and Minister Haddad and Governor Campos Neto for their stewardship of the G20 and their strong focus on tackling inequality, poverty, and hunger to build a more inclusive and prosperous global economy.
Brazil's economy has shown remarkable resilience—a testament to sound and credible policies, which have also helped bring inflation down. I have been impressed by the authorities' ambitious agenda for sustainable and inclusive growth, which holds the promise of significant gains for the Brazilian people.
I came to the G20 with a simple message: the global economy must avoid getting stuck in low gear, which would lead to a more unequal and more unstable world. I called for a renewed effort to strengthen the foundation for robust growth and job creation—sound fiscal and monetary policies; a stable and inclusive financial system; progressive taxation; and boosting support for vulnerable countries.
Global outlook
Global growth is expected to remain stable, but slow. In our latest projections, we expect global growth to reach 3.2 percent in 2024 and 3.3 percent in 2025, unchanged from our April forecast. World trade is recovering and is expected to grow broadly in line with GDP growth. While this is good news, it also means that trade is not yet the engine of growth that it used to be.
This brings me to my main concern: at just over 3 percent, we are facing the weakest prospects for medium-term growth in decades. Interdependent challenges—high debt, fragmentation, and complexities in navigating the digital and green transitions—are holding back greater prosperity.
A low growth world is likely to be an even more unequal world. New IMF analysis suggests that periods of stagnation lasting four years or more tend to push up income inequality within countries by almost 20 percent. This is a moral and ethical concern. It is also an economic concern—an unequal world is a discontented world that may not be up to the task of adapting to the unstoppable transformations underway.
Turning to inflation, there has been good progress, but the job is not yet done. Price stability is critical for sustainable and inclusive growth and thus needs to be restored. Central bankers must resist easing too early when price pressures remain persistent. They must also avoid waiting too long, and unnecessarily pouring cold water on economic activity. In this regard, preserving central bank independence is essential.
The time has come to rebuild fiscal buffers which have been depleted after years of shocks. Where possible, this should be done gradually, anchored on credible medium-term plans. It must be done in a manner that protects vulnerable people.
Financial Stability and Inclusion
With weak growth prospects over the medium term, a sound and stable financial sector is critical to turning this around. Yet, the financial sector faces heightened uncertainty, rapid evolution, and the emergence of new technologies, which bring transformative benefits but also risks.
Vigilant surveillance and robust supervision remain paramount to ensure that the sector can play its essential role in transforming savings into productive investments and harnessing the benefits of the new technologies. I highlight three policy priorities:
- First, vulnerabilities in Non-Bank Financial Institutions (NBFIs), which account for nearly half of total financial assets, need to be comprehensively addressed.
- Second, supervisors and regulators need to balance risks and opportunities from new technologies, including in cross-border payments and digital money. Artificial Intelligence holds the promise of transformation, but it may also test operational resilience and cyber risk management.
- Third, I want to echo calls to avoid fragmentation of the international payments system—the risk of so-called islands of technology, liquidity, or governance. Close collaboration among the G20 will be key, but also between the public and private sectors.
International Taxation Cooperation
The shared vision of G20 Ministers on progressive taxation is timely and welcome, as the need to rebuild fiscal buffers while also attending to social and development needs involves difficult decisions in many countries. Promoting tax fairness helps ensure the social acceptance of these decisions.
I want to extend my congratulations to the Brazilian G20 Presidency for the Rio Declaration on International Tax Cooperation, which calls for progressive taxation and supports existing work, such as the OECD's Two-Pillar Solution. The IMF stands ready to support efforts to further strengthen international tax cooperation, where we have long stressed the need to better reflect the interests of low-income countries.
The IMF is helping countries identify new sources of revenue. Our analysis shows that many countries have opportunities to more effectively tax high-wealth individuals by addressing loopholes, exchanging information, and strengthening taxes on capital income.
Advancing the Green Transition
I welcome the G20 Presidency's focus on the green transition and sustainable development, which provides vast opportunities for the creation of green jobs. We must seize this opportunity.
The IMF is doing its part through our lending, policy advice, capacity development, and data initiatives.
- On lending, our new instrument, the Resilience and Sustainability Facility (RSF), helps vulnerable countries to build resilience to climate change. We have approved 20 RSFs with total commitments of more than $9.3 billion, of which $2.5 billion has already been disbursed.
- On policy advice, we are helping countries improve macroeconomic stability and strengthen policy frameworks. We have also started incorporating climate risk in our Financial Sector Assessment Programs (FSAPs).
- Our capacity development is helping countries through training and policy diagnostics.
- On data, we are contributing to international efforts to strengthen the availability, reliability and comparability of climate data.
Finally, I welcome efforts to promote the use of climate resilient debt clauses (CRDCs), which strengthen the resilience of borrowing countries and may act as a steppingstone for a broader adoption of wider state-contingent debt instruments.
Financing Development
The unprecedented shocks over the past few years have taken a significant toll on low-income (LICs) and vulnerable emerging market countries. These countries are at risk of falling further behind.
According to our analysis, LICs need $820 billion over the next five year to cover their projected current account deficits and external debt repayments alone. Add to this the $500 billion of external financing needed to accelerate growth and convergence with advanced economies.
We are proposing a three-pronged approach to mobilize a range of existing and new tools to help vulnerable countries meet their development needs:
- First, countries need to implement reforms that reinvigorate growth and jobs, develop domestic financial markets to improve access to finance, and mobilize fiscal revenue in an equitable and sustainable manner. We know that two-thirds of financing needs will need to come from the countries themselves. This means relentless pursuit of reforms and resource mobilization.
- Second, we must address resolutely debt vulnerabilities in LICs. The median LIC is spending over twice as much on external debt service as a share of revenue than it did 10 years ago (14 percent at end-2023 from 6 percent 10 years earlier). So far, we have avoided a systemic debt crisis, and we have seen important progress on debt restructuring cases. The Common Framework is delivering, and the Global Sovereign Debt Roundtable is helping shape greater consensus. Yet more needs to be done, including to provide more predictability around the debt restructuring process and to expand the use of credit enhancements, debt buybacks, or other liability management operations to facilitate new inflows and reduce the cost of debt.
- Third, the international community must step up and the IMF will do its part. I am grateful to the G20 for their generosity in channeling SDRs to the IMF's instruments for vulnerable countries—the PRGT and the RST. Strong demand for IMF lending means that we have a strong income position and we have met our target for precautionary balances. Now we can deploy that income for the benefit of our emerging market and low-income members who rely on IMF financial support. We are reviewing our policy for charges and surcharges, and we are working to ensure that the PRGT is put on a sustainable footing. This is "mission critical" for us, and I am calling on the G20 to support us in this endeavor.
We must come together to help the countries that need us the most. By working together, we can avoid getting stuck in a low-growth and unequal world and create a better future for all.
