Exclusive: IMF chief says Biden-Xi engagement an important signal for world to cooperate

International Monetary Fund Managing Director Kristalina Georgieva said on Friday this week’s meeting between U.S. President Joe Biden and Chinese President Xi Jinping is a badly needed signal that the world needs to cooperate more.

“It sends a signal to the rest of the world that we must find ways to cooperate on those challenges where no country on its own can succeed,” Georgieva told Reuters in an interview on the sidelines of the Asia-Pacific Economic Cooperation summit.

Biden and Xi agreed on Wednesday to open a presidential hotline, resume military-to-military communications and work to curb fentanyl production, showing tangible progress in their first face-to-face talks in a year.

The meeting did not alter a growing array of national security-driven trade and investment restrictions between the world’s two largest economies, but Georgieva said the resumption of communications was important at a very uncertain time for the global economy.

Georgieva said revived U.S.-China communications will also help foster cooperation on global challenges, especially climate change, with the COP28 climate conference due to start at the end of November.

GAZA WAR IMPACT

U.S. President Joe Biden and International Monetary Fund (IMF) Managing Director Kristalina Georgieva listen, as Peruvian President Dina Boluarte speaks at the Leaders Retreat during the Asia-Pacific Economic Cooperation (APEC) Summit in San Francisco, California, U.S., November 17, 2023. REUTERS/Loren Elliott Acquire Licensing Rights

Israel’s war against Hamas continues to be “devastating” for the population and economy of Gaza, with “severe impacts” on the West Bank’s economy, Georgieva said as well.

It is also putting pressure on the neighboring economies of Egypt, Lebanon and Jordan, which are seeing reduced tourism and higher gas costs, she said.

Israel, too, will see an economic slowdown, as nearly 8% of its workforce has been diverted to military service, she said.

For Egypt, the IMF is “seriously considering” a possible augmentation of the country’s $3 billion loan program due to economic difficulties posed by the Israel-Hamas war. An IMF staff team is currently holding virtual consultations with Egyptian authorities on the program.

The Israel-Hamas war has had “a very, very limited impact” on the global economy as an initial run-up in energy prices was not sustained, but impacts could grow if there’s an “accident” that widens the conflict or it is prolonged, Georgieva said.

“We are already seeing the impact of antisemitism and Islamophobia, raising their ugly heads all over the world. The sooner this war ends, the better,” she said.

IMF SHAREHOLDING REFORMS

U.S. Treasury Secretary Janet Yellen said during meetings last week with her Chinese counterpart that a key outcome of U.S.-China economic engagement was Beijing’s support for a 50% increase in IMF quota-based resources, without an immediate rise in shareholding for China.

Georgieva said it was important for the IMF to start quickly on revamping its shareholding formula to boost the representation of fast-growing developing economies: “The world needs an IMF that is financially strong, and that is also legitimate.”