BAKU, Azerbaijan, June 12. The
International Monetary Fund (IMF) is encouraging countries of the
Caucasus and Central Asia (CCA) region to adopt a new growth model
that reduces the role of the state and empowers the private sector,
Managing Director of the Fund, Kristalina Georgieva, said in an
interview with Trend.

During her inaugural visit to Kazakhstan, Kristalina
Georgieva attended the Astana International Forum, which took place
on June 8-9.

Outcomes and expectations from the visit to
Kazakhstan

“I am delighted to be making my first visit to
Kazakhstan as Managing Director of the IMF. This is a chance to
strengthen the IMF’s partnership with Kazakhstan as well as the
broader Caucasus and Central Asia (CCA) region. Kazakhstan has made
great progress in building a prosperous society since becoming an
independent nation in the early 1990s. I remember how challenging
the transition was in my home country, Bulgaria, so I salute the
courage of your policymakers and the resilience of your people,”
she said.

Georgieva noted that she looked forward to meeting
with the President of Kazakhstan Kassym-Jomart Tokayev, as well as
policymakers, women business leaders, and students.

“I want to share the IMF’s views, but primarily, I am
here to listen,” she said.

According to her, there are several critical issues on
the agenda: what is Kazakhstan’s growth strategy? How can the
region diversify its economy away from oil, and promote inclusive
growth? Kazakhstan is also heavily exposed to the costs of
geoeconomic fragmentation and climate change. How can it tackle
these challenges?

“Countries in the CCA region made impressive reform
strides after gaining independence. However, as the pace of
market-oriented reforms slowed, so did growth. Then the region was
hit by the pandemic and the spillovers from the war in Ukraine. We
are encouraging countries in the region to adopt a new growth model
that reduces the role of the state and empowers the private sector.
The goal is to create more jobs and raise standards of living
across society. That is the best way for CCA countries to insulate
themselves in a shock-prone world,” she said.

A highlight of her visit was the formal opening of the
Caucasus, Central Asia, and Mongolia Regional Capacity Development
Center (CCAMTAC) in Almaty. According to her, the center is already
a hub for capacity development and training in the region. The
managing director also noted that she was looking forward to
participating in the Astana International Forum, which is a key
vehicle for engagement and reaffirmation of IMF’s commitment to the
region.

Global economic outlook

When it comes to the IMF’s assessment of the global
economic outlook now and the challenges policymakers and central
bankers need to focus on for growth, she said that the Fund
projects global GDP to grow 2.8 percent in 2023 and 3 percent in
2024. Inflation has proven to be sticky, and financial-sector
pressures have added to the uncertainty in the global economy. High
debt levels, geoeconomic fragmentation, and climate change pose
significant challenges. In her opinion, this clouds everyone’s
prospects—especially the most vulnerable.

Global inflation is forecast to be 7 percent in 2023,
but core inflation is not expected to drop to central banks’
targets until 2025.

“With this in mind, we are urging central banks to
keep monetary policy tight. Fiscal policy in many countries has
room to be tightened to help ease inflation pressures, restore debt
sustainability, and rebuild fiscal buffers. Any additional fiscal
support should aim to help the most vulnerable,” she said.

She went on to add that the economies in the CCA
region performed relatively strongly in 2022, yet due to the war in
Ukraine and the increased risk of fragmentation, the outlook
remains highly uncertain. For Kazakhstan, the Fund projects growth
to accelerate from 4.3 percent in 2023 and to 4.9 percent in 2024.
This rather strong activity is encouraging because it comes mostly
from the non-oil sectors of the economy.

“Despite the strong recent economic results, it will
be important for countries in the region to accelerate
market-oriented reforms. At the IMF, we found that structural
reforms could boost CCA output by 5 to 7 percent in the medium
term. On my trip, we plan to release an IMF paper that contains
those findings. Reforms to reduce the role of the state, for
example, could significantly boost medium-term growth—helping
cushion the economy against future shock,” Kristalina Georgieva
said.

IMF’s key objectives and priorities in
supporting economic stability and growth

“On the bright side, most major economies have avoided
slipping into recession, despite higher inflation and rising
interest rates. However, we can’t afford to be complacent. Global
growth remains weak by historical standards—both in the near and
medium term. To brighten the growth outlook, we need to fight
inflation and protect financial stability, while investing in human
capital and the green transition, boosting international
cooperation and trade, and supporting vulnerable countries,” she
said.

In her opinion, Kazakhstan’s recent strong growth
helped the country to raise living standards and reduce poverty.
However, the uncertain global environment calls for
well-coordinated macroeconomic policies. Monetary policy should
ensure that inflation is firmly on a downward path and that
inflation expectations are anchored. Fiscal policy should aim for
gradual consolidation to preserve buffers and support
disinflation.

“Efforts to strengthen the bank supervision and
resolution frameworks will benefit from recommendations from our
Financial Sector Assessment Program, a comprehensive diagnostic of
the financial sector currently underway,” she added.

Finally, increasing the level, resilience, and
sustainability of economic growth requires economic diversification
with less reliance on the oil sector. To achieve this, the private
sector will need to play a central role, which calls for a
transformation of the public sector and a reduction of its
footprint in the economy.

“The IMF is doing everything we can to help the
region–just as we did during the early years following
independence, and later during the global financial crisis and the
pandemic. Our response to the COVID shock was swift and sweeping.
Overall, we provided $800 million in emergency financing to
low-income countries in the region. We stand ready to help as you
continue on your journey to achieve robust, sustainable, inclusive
growth,” she said.

IMF’s assistance to Kazakhstan in building
resilience and managing macroeconomic vulnerabilities

“We have strengthened our partnership with Kazakhstan
in recent years, helping the authorities manage the impact of
multiple shocks and build economic resilience. Our regular dialogue
is structured around Article IV consultation missions and staff
visits to Kazakhstan, and increasingly, through virtual exchanges.
Our policy advice is aimed at preserving economic stability and
highlighting the necessary reforms to improve the resilience of
Kazakhstan’s economy and promote sustainable, inclusive growth,”
the managing director said.

Furthermore, she added that in 2021, the IMF supported
Kazakhstan through a Special Drawing Rights allocation of about
$1.6 billion. The allocation was used to boost reserves and support
Kazakhstan’s already large external buffers. Capacity development
and training is another pillar of IMF’s support to Kazakhstan,
which has also intensified recently, thanks to the CCAMTAC.

“We have supported your efforts to modernize your
institutions and strengthen monetary policy, financial supervision,
public financial management, and statistical frameworks. For
example, we have provided extensive input into the first Fiscal
Risk Statement published last year with the 2023 budget, as well as
advice to strengthen the recently established Agency for Regulation
and Development of the Financial Market,” Kristalina Georgieva
said.

IMF’s role in supporting Kazakhstan’s goal to
achieve carbon neutrality

“Climate change is a grave threat to macroeconomic and
financial stability. For a country so heavily reliant on fossil
fuels, we see Kazakhstan’s climate-related commitments as
commendable. Like many other countries, Kazakhstan will need a
comprehensive set of reforms to adapt to the impact of climate
change, mitigate carbon emissions, and prepare for an economic
transition away from its dependence on fossil fuels, given global
decarbonization. These transformations toward a greener, more
diversified economy will require a combination of higher fossil
fuel prices, and increased public and private investment,” she
said.

The IMF can support Kazakhstan’s efforts in this area
along several dimensions.

“On the fiscal front, our analytical tools provide
comprehensive assessments of various policy options, and our
experts provide advice to improve the quality of public investment,
including building low-carbon and climate-resilient infrastructure.
IMF technical assistance can help strengthen Kazakhstan’s social
safety net and alleviate the impact of the transition on the most
vulnerable. Finally, on the financial sector front, we can help
Kazakhstan to develop a climate risk assessment framework, as is
the case as part of the current Financial Sector Assessment
Program. We are more than happy to work with the government on all
of these issues,” she concluded.