These countries have improved their policy frameworks and strengthened their institutions, and this has increased their resilience. But they are facing pressures from more expensive fuel and food. They're facing pressures from declining development assistance, from subdued foreign investor appetite for riskier investments, and in some cases, what they have won with hard work may be lost. What is our loudest call to policymakers right now? Make urgent repairs to the fiscal house before the cracks widen. Now is the time to enhance revenues, to rationalize spending, and improve public financial management. As energy and food prices rise, protect people, not prices. That means providing temporary and targeted support to the most vulnerable while preserving price signals. On monetary policy, we are urging central banks to stay laser-focused on their price stability mandates. The case for tightening is strongest where inflation remains above target and economic activity is high. Now may be a good time for a prudent hawkish bias in many countries.
On AI, we recognize it holds the promise of higher productivity, growth, and a boost to prosperity, but it also brings risks. Amara's law tells us that we tend to overestimate the short-term benefits of new technologies and underestimate the long-term gains. What does it mean? It means that in the short term, a disappointment is possible, and it brings with it the risk of disorderly market correction. AI-enabled cyber attacks are already in reality. I'm sure many of you have seen the news from France, where a cyber attack lifted up temperature in refrigerators, making it so that food is rotten. So we are already in this world where cyber attacks are more frequent. They can also target the functioning of the financial systems and, in that sense, present a financial stability risk. Authorities should strengthen cyber resilience and address excessive concentration linked to the technology cycle for AI adoption and more broadly for creating new opportunities and jobs. The role of the private sector is essential. For governments, it means improving the business environment, strengthening competition, investing in digital and energy infrastructure, and embracing active labor market policies. And this brings me to the role of the IMF.
A rapidly changing world requires us to change as well. This year, we have completed a set of policy reforms comprehensively addressing our ability to identify risks and analyze imbalances in surveillance, to strengthen support for high-impact and achievable reforms, to make it so that we are more country-specific in everything we do, and to upgrade our tools to assess debt sustainability and support our low-income members. We take to heart our responsibility to help our members navigate the crosscurrents of the global economy. We strongly believe this is best done when countries work together, and this is the spirit we bring to our meetings here in this beautiful host country of Thailand. So let me finish by wishing you a productive time and by thanking our Thai hosts for the excellent arrangements, for their warm hospitality, for making these meetings so well set that we would benefit tremendously. And I suggest that we end this start of our engagement today. Let's give a big round of applause to our host, Thailand.
Okay, with that, the floor is opened. Please raise your hand if you have a question, and when you're called on, someone will bring you the microphone. Please do provide your name and the outlet that you're affiliated with. All right, let's start right here in the middle, the woman in the white jacket.
Good morning. Thank you so much. Andrea Shalal with Reuters. Madam Managing Director, I just want to ask you a question. You've talked a lot, we've heard a lot here about the threats and potential divergence that is going to happen in terms of AI, or could happen, and that there's, you know, we need to guard against it. So my question is, at this point, what should the IMF and its richer member countries, including the United States, the largest shareholder, be doing to ensure that these overlapping crises don't overwhelm developing countries? And, you know, should there be some kind of new push, for instance, to increase funding in the CCRT, make that available for specific crises like Ebola? And, you know, at this point, it looks like the IMF is going to have net inflows next year. Is that appropriate at a time when so many countries are facing pressure and, you know, that are keeping them from spending on education and welfare? So is there any appetite here for some kind of debt relief or alleviation given the problems that the rich countries have as well? Thank you.
Thank you very much, Andrea. I do appreciate we start from low-income countries because the risk of divergence is most dangerous for those that are already further behind. What can we do, and what we will do during these meetings? First and foremost, we have to support low-income countries to strengthen their fundamentals so they can withstand shocks and create better opportunities to invest their own money as well as to attract money from others. And I can say bravo to many of the low-income countries. We have worked tirelessly with them in the last years so they can have a stronger position. Debt levels in low-income countries have gone slightly down. Let me be fair. It doesn't mean that service costs have gone down. On the contrary, because of the lift in interest rates globally, their service costs have gone up from 6% a decade ago to 14% of their revenues today. But we are seeing better performance. We are seeing that the investment... systematic, and I give credit to the countries we support, but it is the countries' investment in strong fundamentals is paying off. But as you indicated, this is not enough. We have seen development assistance dropping, and at the Fund, we recognize our responsibility to be available to finance countries when they need that financing. This is why we reformed the PRGT, the Poverty Reduction and Growth Trust, so we can triple lending to low-income countries when it is necessary. And here we will continue to pressure our members to complete their commitments. We are moving at a good pace, and actually many of the low-income countries have done their job to pledge. Malawi, I think, was the last to do it. So we as the Fund can be a source of financing. I do also very much encourage our members to think about replenishing the Catastrophe Relief Trust. We still have a bit of money in it, so we can still act, but we have so often had to rush to use the Catastrophe Containment and Relief Trust that indeed we are in need of replenishment, and we will be urging our better-off members to please help us in that regard. Last but not least, in countries where debt pressures are higher than they can bear, we need to support them to take steps to bring that to a sustainable level. Right now, we have done a number of restructurings successfully. Right now, Senegal requested that treatment, and we are deploying for the first time in recent years the so-called good offices of the IMF to bring the creditors and the debtor, all creditors, private sector, public, and the debtor together in an environment that generates trust and accelerates solutions. So a lot to be done. Help countries grow. Make sure that financial support from others is available. We also have the three-pillar approach for that. And for countries that need that treatment, make sure that that treatment is fast. It is a way to demonstrate that we recognize these countries have enormous, enormous difficulties. So thank you. You bring this as the first question, and I can tell you that would be the first message I will be conveying here: pay attention to those who need support the most.
All right. Let's go this side of the room. There's a woman, kind of gray jacket here. Third. Yep. Right there. So we go from white to gray. The black jacket person in the audience who wants the floor would get it next.
My name is Afalaku, and I'm from African News in France. Madam, you mentioned Senegal just now, and I'd like to know, well, they announced that they'll be having a debt restructuring. I'd like you to elaborate on how the IMF is involved in this program and how soon will this be concluded?
Yeah, thank you. Well, I want to start with the praise for the leadership in Senegal. The new president, when he was elected, the first thing he did was to bring honesty on the debt picture and to unveil a problem that has accumulated of undisclosed debt. That honesty allowed us to quickly move in identifying what the problem is, how the problem can be addressed, and work with Senegal to address it. We have reached a staff-level agreement on an IMF program. It would be in the order of 2.2 billion dollars, and it is there to help Senegal quickly come out of the fiscal situation it found itself in, mostly as a result of the undisclosed debt that that problem in the past. We are supporting Senegal to work out a debt treatment. Let me say two things. We are not part of debt negotiations. It is between the creditor and the debtor. But we play a very important role in providing objective analysis: how big is the debt, what is the structure of this debt, and then to use our good offices to create trust and accelerate solutions for Senegal. I am quite optimistic. I can tell you that my conversations with key creditors indicate everybody understands this is a test case to the playbook we have adopted through the Global Sovereign Debt Roundtable. You heard about this playbook. It is our first chance to play by the book, and it is very important that we demonstrate that yes, indeed, the G20 Common Framework is improved, enhanced, and it can deliver results quickly. Senegal deserves this. This is a very good country with wonderful people and a country that has tremendous potential. We need to move the debt obstacle out of the way.
All right. All right. Let's go back to the middle. The woman, sleeveless shirt, third row.
Thank you, Managing Director. Rosario with Bloomberg News. I would like to ask a question on global imbalances. Which imbalance right now is the more urgent for global risk? Is China's export surplus, which has dominated recent global summits, or the surge in yields and budget problems in developed economies, which seems to be the more prominent in the IMF's major reports this week? Thank you.
Thank you for this question. We have been ringing the alarm bell on excessive global imbalances growing. In 2025, they have grown up yet again to 0.7% of GDP. To answer your question, we need to look at who are the biggest contributors, and they are primarily China and the US. Some contribution comes also from European economies. So these are the places where action is most needed. For surplus countries, what they need to do is increase domestic consumption. That clearly applies to China's growth model: shift from export more toward domestic consumption. For deficit countries, they need to save more, cut debt, cut deficit over time. We don't expect any immediate action, but put the debt on a downward trend. And for some of the European countries where investment is underwhelming, they need to improve competitiveness, they need to increase investment. To put it very simply: China needs to spend more, the US has to save more, and Europe has to invest more.
All right. Okay. Let's go right to the end of this first row here. The woman in the black and white blazer.
Thank you. I'm Elizabeth from CNBC in Singapore. You talked about how rising debt and bond issuance in advanced economies are pushing up global borrowing costs. How much are the US and other advanced economies' fiscal choices constraining ASEAN's policy space, especially for debt-burdened countries? Are we, Thailand, let's look at that, you know, they're already facing high household debt. How can governments build resilience if borrowing costs stay higher for longer?
