IMF's Georgieva on the Growing Influence of EM, Decline of US Dollar

What we have seen over the last decade is emerging markets making huge progress in terms of monetary and fiscal policy, and their capacity to navigate in a world of uncertainty. And thank God they did it, because we are indeed at a time when geopolitics, technology, demography, and climate are all acting forcefully and creating this fog of uncertainty within which we operate. I'll give you two examples. The first one is when we look at the role of emerging markets in the world economy. They are now the bigger force, because since 2000 their size has doubled, more than doubled. Now they are measured in PPP at 56% of global GDP, and they contribute 75% of global growth. So they play an increasingly very important role for the world as a whole. And two, because they have invested in good policies and strong institutions, they are more capable to play that role. Yeah, I think it would be fair to say we all have to do more.

Well, we should not get carried away by short-term variations of the exchange rate of the dollar, and we should look closely as to why the dollar plays such an important role in the international monetary system. First of all, we have seen the dollar going up and down, and actually the dollar being somewhat down now is good for many emerging markets. Those that are borrowing dollars now have to pay a bit less. But also, what we know is that the reason the dollar plays such an important role is the depth and liquidity of capital markets in the United States, the size of the economy, the entrepreneurial spirit of the US. So I don't see a change in the role of the dollar anytime soon.

What has happened over the last couple of years is COVID, the war in Ukraine. They all led to governments spending more to support businesses and households, rightly so at that time. But what is the result? Fiscal buffers almost everywhere are depleted, and shocks are still to come. Therefore, what we say to everybody — to advanced economies, to emerging markets, and to developing economies — is that now is a somewhat better time. We have seen the world economy quite resilient to these shocks. Please concentrate on rebuilding these buffers. You need to have a medium-term prospect for how your fiscal position can be strengthened to withstand the shocks that will inevitably come. Are governments doing better than others? And I can tell you where I am particularly concerned: it is for vulnerable middle-income and low-income countries that are particularly stretched today. So what we want is not only for them to do the right thing, but also for the world to be mindful of these countries. We have seen development assistance going down. Well, we have a responsibility for stability and security in the world. Help these countries.

My expectation is that countries will be assessing relations with the Venezuelan authorities, and that this assessment is going to be done fairly soon. In the meanwhile, we are not sitting on our hands. We actually, throughout this period of time — we have not been engaged with Venezuela since 2019 — we have been monitoring the economic situation, and it is quite devastating when we look at the shrinkage of the economy from this big to only one third of what it was in 2018. When we look at the outflow of people: 8 million people leave Venezuela, as a percentage of the population, more than Ukrainians that fled a war. And when you look at the risks of inflation going up, the lack of data, our message is: the sooner we can have a better picture and an engagement with Venezuela, the better for the Venezuelan people.