We're seeing common things and we're taking action. And I view that as a positive development.
I very much agree. I think that the common vision around making sure that price stability is set and it gives that confidence to businesses and households that is so important for growth to continue. And yes, I agree that is one of the big messages from this meeting. We are running out of time. Is there anything you want to tell these people that I didn't have the wisdom to ask you?
So, Cristina did a wonderful job. I might invite you to my next press conference. These questions somehow are a little bit more cordial than some of the things I get. I'll just say this. I'll leave with a final comment, which is anyone that's at the Federal Reserve, particularly anyone that feels fortunate to sit in my chair, I feel an incredible amount of gratefulness. I feel as though the world is moving faster than ever. Changes to how we think about what happens in our economy are subject to differences now that might have been hard to believe five or ten years ago. But I'm grateful. I'm grateful for my colleagues at the Federal Reserve. I'm grateful for the staff, and I'm also grateful for the remarkable openness to new ideas. I have felt it in my private meetings with you. I felt it from my G20 colleagues. Our objective is to get policy right. Our objective is to think anew about questions. And the thing that we don't hear and we don't want to hear is, well, this is how we've always done it, or this is what the model says, or the model says this will happen after that. I prefer frameworks to going to mean regressing models.
And I think with your help, Cristina, with the help of our incredibly strong colleagues around the world, we're going to get through a time of huge consequence. And I believe, optimistically, you might think naively, at least in the US, we're going to come out of this stronger with a more durable economy, more capable of leading the world on economic growth. So it's not zero sum. And hopefully we're going to come up with some new ideas that other countries, with their own decision-making, will say those work for us too. So thank you.
Well, ladies and gentlemen, Chairman Kevin Walsh, the defender of price stability. Thank you. Thank you very much, everybody. Thank you.
If countries pursue the right supply-side reforms. These include improving the business and regulatory environment, refocusing scarce fiscal resources on productive infrastructure and human capital spending, increasing competition and trade integration across the region, accelerating digitalization and technology adoption. And you can see the power of technology adoption here in Asia. So we've already seen some of these reforms bearing fruit across the region. I would note Argentina and Ecuador, El Salvador, Honduras and elsewhere are moving in this direction and trying to tackle these difficult supply-side reforms. Finally, I want to emphasize the IMF's role in the region. We stand ready to support the people and governments of this region as they address their own macroeconomic imbalances and navigate the current difficult global environment. As you may know, we now have Fund arrangements in 10 countries that span North, South, and Central America as well as the Caribbean. They use up the full toolkit of the Fund's lending resources, from precautionary arrangements, staff-monitored programs, standby arrangements, EFFs. You'll have seen recently the IMF's board approval of the program review in El Salvador. We've renewed our flexible credit line in Chile, and we have new programs in Barbados and Bolivia. We are also very engaged across the region with our capacity development and training programs, including through a training center that we have in Paraguay that serves the governments of the region. And finally, as in every region of the world, the Fund continues to engage through Article IV consultations with all member countries, where we can bring a cross-country perspective and provide an opportunity for in-depth discussions of the challenges and policy options that the countries face. And so, with these remarks, I'll turn to your questions. Thank you.
Thank you, Nigel. So we have a very broad and diverse region, and also many countries to cover. So we're going to start first with a first round of regional questions. So if you have a question on the region, not on a country-specific topic, please raise your hand. When I call on you, please identify yourself and the media outlet that you represent. Okay? So I'm going to be compiling those three questions on regional outlook. I'm going to start with the gentleman here in the first row.
Thank you. Good morning from Latin Finance. Do you expect more sound, orthodox macroeconomic policies from policymakers in the region to build buffers and sustain economic growth, and also address the fiscal issue as you mentioned, as external shocks continue? Thank you.
I'm going to continue with the gentleman next.
Okay. Good morning, Antonio Vargas.
We're going to need some interpretation here.
Should have done this earlier.
What we can do also, it's okay. Let's see. Is it working?
Bueno. Okay. Very well then.
Good morning. This is Antonio Vargas and I come from Medellin, Colombia. It's a small medium called Chucho knows it, which is a newsletter, and I have been covering business affairs for many years. And I have been participating in these meetings with the IMF and the World Bank since October 2013. So finally we've seen each other, maybe not with all of you, but we met in Lima, Bali, Marrakesh, and now in Thailand, and obviously in Washington. Sir, Mr. Chalk, this is a question addressed to you. When hearing what you said, what I'm really concerned about is that the growth in the region is lower than the one in the world, 3.1 as we were told by the IMF and the World Bank. And it turns out that our countries are growing very little. Colombia and others under two and a half percent. And the government in the case of Bogota in Colombia has said that the ideal situation would be to grow at six percent. What is still limiting growth in the region? Thank you very much. And that is my question.
Two and then we go through another round, or do you want me to continue compiling?
Yeah, let me take the two questions.
So the first question was on what we expect in policies in the region and particularly on the fiscal. So I think it's fair to say we have seen a shift in policy direction across many countries in this region in the past, I'd say, couple of years. I'd also say we've had increased interest in the Fund's toolkit. I mentioned some of the new programs that we have across the region and the support we're providing to the region. I think this increase in interest in the Fund reflects both a desire to shift policies to a, I'd say, more orthodox direction, a more conservative fiscal policy to bring down debt, to stabilize economies, but also in part reflects the fact that the global environment facing the region is far more complex, far more difficult, far more prone to shocks than it has been in the past. So we do see a shift in policy direction, and I think we see our role as supporting that shift towards more socially conscious, more fiscally responsible, more market-oriented policies in the region. And I get the sense there's also much more support in the region, both for the role of the Fund, but also I think for the role of multilateralism more broadly, and you're seeing that with some of the other IFIs. The question on growth and being left behind. Yes, I think we share your concern. We have growth this year of two, as I said, two and a quarter this year and next year. You look at the region and you see it has natural resources, it has a large population, it has generally pretty good education systems, an entrepreneurial culture. These things should be generating higher growth. It's sort of puzzling why that's not the case. If you look in the decomposition of the growth, the key difference I think you find with other emerging market regions, including here in Asia, is Latin America has just struggled to get productivity higher. So the solutions are not one solution. I think there's no silver bullet to fix that problem. I think the solutions, as I mentioned in the outset, they involve improving the business environment, tackling labor market informality, rethinking the tax systems to be less distortionary, more efficient. I think there's an important role for improving governance and crime prevention across the region. That's a key constraint on growth. There's shortages of infrastructure and logistics. There's a need to invest in education, human capital. And as you see here in Asia, tech adoption is super important to drive productivity and growth. So there's a long list of things to do. These aren't easy things. They require political will and social consensus to do these things. But as I said at the start, I am somewhat optimistic that we are seeing across a number of countries in Latin America, particularly Latin and Central America, particularly a real shift towards an appetite to take on these difficult reforms. And I think part of that is people can see and governments can see that they really pay off. We can see here in Asia that the countries that have done those reforms, they're growing faster. Living standards are rising. They're converging to the level of income of the advanced economies. And I think there's a lot of potential in South and Central America and the Caribbean to do the same.
Okay, so we're going to go to the lady in the third row.
Good morning, Manuela Doas from Bloomberg, based in Argentina. I wanted to ask along these lines of what Nigel explained of greater engagement in the region, there's also a greater alignment, a political alignment with the Trump administration in the US. I'm wondering what kind of engagement is there in these programs with the US administration, be it State Department, Treasury, and also we see it in Argentina, but I think we see it across the region with these rising yields. How much of what typically the market would absorb is the IMF able to take on? Where is the limit in this increasingly difficult global market? Thank you.
Okay. So I think when we look at the region, yes, there has been a shift in policy direction in many countries. That policy direction, I think, well, that's created two things. One is there's a greater appetite for the Fund's involvement, and that involvement may be through our surveillance operations, through providing policy advice. That involvement can be through our capacity development operations and also through Fund financing. So you mentioned Fund financing, but there's a number of ways that we're working to help the region. So that's one thing, there's a greater appetite for Fund involvement. And the second thing is I think the policy direction is something that we think we can support institutionally. As I said, it's more consistent with market-oriented, fiscally responsible, socially conscious reforms that will, we believe, create macroeconomic stability, support growth, improve living standards. So I think that alignment of both interest and willingness to engage with the Fund and with a policy platform that we think works and we've seen work in other countries has meant that we're quite involved in the region, as I mentioned, and increasingly so. In terms of the yields, so I think Fund financing plays a role in trying to meet financing gaps the countries face, but it's not the important role. That's a temporary relief in providing a little less debt supply from countries onto the market. What's really important, I think, in the Fund program structure is that we provide a framework where countries can responsibly change their fiscal positions. So not that they're issuing less debt today, but there's an expectation over time they'll be issuing less debt, and that means that debt's more scarce, and that tends to compress yields and make the financing situation easier for the country. So we play a role in providing some financing, but I think the role we play in providing a framework for responsible macroeconomic policies through our programs is far more important. And we've seen that in a number of countries in the region, in Argentina, in Ecuador, in Bolivia now we have a new program. And I think communicating that sort of medium-term fiscal adjustment is very important for shaping expectations and changing the financing and reducing spreads even as global rates are rising. The region can reduce spreads and reduce its own financing costs.
Okay. So now we're going to start the round of country-specific questions. So if you have any question, country-specific question, raise your hand and I will call on you. I'm going to start with the gentleman here on the second row.
Hello, New Economy Magazine from Bolivia.
Bolivia come back to IMF. Bolivia come back to IMF after 20 years of broken relationships. I want to ask you what is the feeling for that?
Okay. Is there any other question on Bolivia in the room? I see two gentlemen. So let's go first here and then we will go to the other side.
Hi, thanks for taking my question. My name is Magnus Sherman. I'm with Octus. I wanted to touch on the subsidy reforms in Bolivia. They obviously come at quite a tricky time with the current oil prices we have. The GDP figures that you have set out for Bolivia, do they assume no protest, no public pushback against these reforms? Yeah, thank you.
And we have a third question on Bolivia.
Sure. Thank you, Lucian Chovin from Latin Finance. When we look at what you have approved for Bolivia, could that be used as a template for other countries, say Colombia or even Venezuela?
Okay, let me take the broader questions and maybe I would turn to Anna to handle the question on the subsidy reform. And so the question about how do we feel about our re-engagement with Bolivia? I think it's been a very positive dialogue that we've had with the economic team and the country authorities. I would like to point out just the courageous actions that this past administration has taken over the past year since they've come into power. It's not often you see a country that has realigned its exchange rate and floated its exchange rate, put in place a new monetary framework, restructured its market debt, reduced its subsidy bill, has a plan to adjust its fiscal path, handled an overhang of foreign currency forwards that the previous government had placed with the banks, and is in the process of building reserves. I think the courageous policy actions and the big shift towards more responsible policies is hugely commendable. As I said, we've been working well with Minister Morales and with the economic team. The program was approved just before the annual meetings. I would like to highlight also the fact that in Congress, so the governance in Bolivia was such that the Congress gets to approve, which I think is right, is a governance matter, to approve the Fund's program and debate the Fund's program. And so there was an active discussion, political discussion, social discussion about the Fund program. And at the end of the day, two-thirds of the political forces in the country said this was the right direction for the country. So I think we can see not only is there an administration that is reformist and pushing in the right direction, but I think you have a genuine ground support among the population for policy change, for reducing public debt, for stabilizing the economy, moving to a more modern, transformed system. So I think that's very important. In terms of a template, I think the Fund, we're very reluctant to think of templates because every country's situation is very, very different. I think in a template sense, in a sense of pursuing responsible fiscal and macro policies, for sure Bolivia is a fantastic example of that, as I just highlighted. But I think every engagement we have with the region is very, very different. Every engagement we endeavor to work with the government to define policy priorities, but ultimately it's the government's policy priorities. It's not the Fund coming and dictating policy priorities. We're there to help. We're there to support. Sometimes that's through financing. Sometimes that's through advice. Sometimes we offer cross-country experience. But ultimately it's the country that defines the policies. And so in a sense, having a Fund template doesn't matter because it's the domestic ownership and domestic decisions that really matter for that. Let me turn to Anna to...
Thank you. I'm going to address the question on fuel subsidy reform and social risks. Certainly, fuel subsidy reform has been a core objective of the authorities' program that is being supported by the IMF program. So I think the strong ownership demonstrated by the government has been fundamental in being able to roll out this important reform. The reason for the need for this reform is that fuel subsidies are by design untargeted. They're very costly, and in the case of Bolivia, they were actually leading to a lot of excess demand and rationing. So there was a lot of scarcity in the fuel market driven by this misalignment in prices. So it's been, as Nigel said, one of the very courageous measures taken by the authorities. And what has been critical was accompanying this huge subsidy reform with a very big effort in better targeting social protection, increasing resources for social safety nets that go to the more vulnerable households, as well as a lot of structural transformation in the social safety net that will bring also results further down the line. So fuel subsidy reform in its own is very difficult to do, but if accompanied with very well targeted and efficient measures to protect vulnerable households, has a very high chance of success. And we're hoping this will mitigate any risks of further disruption on the social cohesion. Thank you.
Okay, so we're moving on from Bolivia. Let me... We will get there. Please, let's respect the room. I'm going to go with them with the second row here.
Good morning, Andre Huey, Television Caribbean, St. Kitts and Nevis. The St. Kitts economy has largely depended on tourism. If you could just give us your projections or your assessment of the economy, the current state of it at this time, and also in light of the fact that the citizenship by investment program, which is one of the biggest revenue earners for the country, is somewhat under threat because of threats from or ultimatum issued by the European Union regarding programs in the Caribbean to end by 2028. If you could just comment on that as well.
