International Monetary Fund chief Christine Lagarde on Russia’s role in the organization, its response to the low oil prices and projections for Russian economic growth
- Madame Lagarde, thank you so much for this interview with TASS and Russian Television. We are talking prior to the Spring Meetings of the IMF and the World Bank. But not everyone in Russia knows what they do. So, in a few words, what is the IMF and why is it needed?
- Okay. Well, first of all, I’m delighted to do this interview with you, and to explain to the Russian people what the IMF is. So it’s the International Monetary Fund, of which Russia actually was a very important member, and has been a key partner for many years now. I have to tell you that the Dean of the Board of the IMF, Mr. Mozhin, is a Russian National, and he has been the longest serving member of the Board.
The IMF’s purpose, as it was established after the Second World War, was to maintain stability and prosperity in the global economy. I think the founding fathers of the institution thought that war was not helpful, trade war was not a good idea, protectionism did not work, and therefore, it was much better to have a forum where all the member states could actually talk to each other and could respectfully inspect their economies.
They also gave us a mission to actually lend to countries when they are in trouble. And finally, over the course of time, we have given technical assistance and training, and capacity building to most members of this institution. And there are now 189 of them who are members of the International Monetary Fund.
- You said that for many years Russia had been a member.
- How has its role changed? What is Russia’s current role in the IMF?
- You know, back in the 1990s, Russia was a net debtor to the IMF, because at the time of the big transition that the Soviet Union went through to become Russia, the economy that it is today, it faced a lot of hardships. It was a difficult process, during which it asked the IMF to come and help in terms of economic policies, in terms of financing as well, so we did help Russia as much as we could in the 1990s.
Now, since 2005, Russia has completely reimbursed any of its obligations to the institution, and is today a net creditor of the IMF.
So, effectively, when a country is in trouble - you know, one of the African countries where we have a lot of programs at the moment or some of the European countries where we have programs in place - Russia actually participates in the financing, and is ultimately reimbursed together with interest.
- Oil prices are low. For the Russian economy this is not good. How do you view Russia’s response? Are we doing the right things? Are we out of the woods yet?
- When the price of oil went very suddenly, from almost - sometimes I think more than $100 per barrel, to a low, $27/$28 per barrel, the response by the Russian economy was very comprehensive. They took the right fiscal measures. They kept inflation under control. They adopted a very good monetary policy, which included the floating of the currency, making sure that the financial sector was stable. And that helped the country move from a very difficult crisis, with oil prices divided by four, and the sanctions that applied as a result of the invasion of Crimea.
The Russian economy was exposed. But it gradually moved from those negative territories back in 2015/2016, into what we believe is going to be positive territories now in 2017, where we see the Russian economy growing after those few years of difficult times.
- So what are your new projections for Russia? Is it true that you’ve improved them again?
- Well, as I said, it’s positive territory. It’s more than one percent, but I’m not going to give you exactly the number because it is supposed to be released in a few days.
- You’ve met many times with our Head of State, President Putin. What do these meetings do for you? Do they help you understand Russia and the Russian economy better?
- You know, first of all I would say as a French National and a lover of literature and music, I have huge respect for Russian culture. Culture, history, and the arts of your country.
- French and Russian culture, so many similar things…
- Yes. Voltaire certainly contributed to some of the most -
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- If you asked me who are my favorite writers, I would certainly mention Tolstoy and Dostoyevsky. My favorite musicians would include Rachmaninoff and others. I’m saying that not to flatter you or to compliment Russia, but I think it’s very much part of the country as it is today, and the aspiration and ambition of its people today. It is fueled and fed by these very deep roots into your culture.
And your geography is also equally important, I think, to understand the country – the space, the distance, the richness of resources. All of that explains a lot – the very complex great nation that Russia is. Your president is someone whom I meet on a regular basis at many of those meetings around the world, and we have had several very deep and good conversations to understand better the country and its economic policies.
- We are a couple blocks away from the White House which is now occupied by a new president. Have you had a chance to meet with President Trump? What do you think of the first steps taken by his economic team?
- I have not met the new president of the United States, and I’m sure I will be meeting him probably in July at the time of the G20 in Hamburg.
- Will you be there?
- Yes, I will be there. We are observing all the new policies that are not so much announced but those that are actually taking place or being implemented, because that is what we have to assess, not just the words, but the actual implementation. This is the most important thing.
- Let’s get back to the IMF. It’s a UN institution. But what sort of an institution? Is it purely technical, economic or a political one as well?
- The IMF is not a political organization. It is focused on financial stability, economic prosperity. It is developing major areas, surveillance, policy advice, lending for those countries in very bad situations, and technical assistance, but we do not take a political view in any respect. The strength, I think, of the institution, is that unlike the United Nations, we have a weighted voting system where we can function, even though sometimes here or there, there is opposition occasionally. I think that is the strength of the institution.
- I would like to ask you a question about Ukraine, it’s a very close neighbor. There are a lot of difficulties, financial dilemmas, problems with banks, with the Donbass region. And you have a program there. Are you sure this current program with Ukraine will materialize?
- The relationship between the Ukraine and the IMF has a long-standing history…
- That’s why I’m asking this question…
- We have made many attempts to help and stabilize the economy over the course of time. I think this is the first occasion when the Ukraine program makes so much progress – to the point that we can actually approve a third review of the program. It is a fact that despite the instability and difficult situation, which I hope can be resolved in compliance with… whether it’s the Minsk-2 or another agreement, I don’t know, this is again the political part of things, but it matters for financial stability.
Despite that situation, under President Poroshenko’s leadership, there has been progress in relation to Naftogaz, in relation to the monetary policy and currency floating, in relation to the subsidies and the rates of gas and oil sold in the country.
But there is still a lot more to be done. There is clearly a need to eradicate corruption and to make sure this effectively happens. But I’m encouraged by what I see. And I very much hope that going forward the Ukrainian authorities will maintain a sound, stable financial system which is safe for all banks, safe for all depositors, and which is endowed with enough liquidity so the system can function, irrespective of the capital ownership of the banks.
- Russia, America, Ukraine. Now on to France. Do you monitor political events in France? Do they give you more hope or concern?
- Well, I’m always concerned with uncertainty anywhere in the world. And in relation to France, there is a degree of uncertainty which is causing concern, and I would certainly hope whoever is elected on May 7, there will not be major disruption and cause for more concern as a result of decisions that will be made by the new president.
- Do you see a political role for yourself in France in the future?
- You know, I have given six years of my life to the French Government, and I have really given all my energy and all my limited competencies to being a good Secretary of Trade, a good Minister of Finance. And I think that’s what I do here at the International Monetary Fund, serving the international community, and being accountable to the entire membership, is exactly where I should be. And nowhere else.
- You lead an organization of 189 countries, a crucial one at that. You know a lot of world leaders personally. In your opinion, what qualities define a true leader?
- I think any leader should have a combination of energy, confidence, courage, and dedication to the good of the people and the good of the international community.
- You’re fit and in great shape, what helps you do your job very well?
- Well, thank you. I think as much as you should be confident – and I think I have a degree of confidence – I try never to be over confident, because I think you are only as good as your last speech, your last decision. And you should always carry inside yourself that little doubt which will stop you from making a mistake when you are over confident. But do you want to know the secret?
- Yes. Just between you and me.
- Of course. I drink a lot of tea.
- What kind of tea?
- Green in the morning, black in the afternoon.
- What kind of black tea?
- Darjeeling, after 5 o’clock.
- Not Earl Gray?
- Earl Gray, before 5 o’clock. And I try to practice as much sports as I can when I can.
- What sport?
- I used to be a very good synchronized swimmer. The Russian team was always very good in synchronized swimming, by the way.
- They told me you were one of their favorites…
- I still swim. I cycle. I don’t like to run at all.
- Me, too. But on a more serious note, you were the first woman to become France’s Minister of Finance. You are the first woman serving as Managing Director of the IMF. What’s your opinion on the state of gender equality in the world at this time?
- I believe that in almost all countries of the world, we are wasting talent. We are wasting energy. We are wasting confidence, because women are underemployed, exploited, underpaid, and often discriminated against.
I’m sorry to say but it’s a complete waste of energy, confidence, and talent. I will continue to identify in all countries where we operate how we can facilitate the contribution of women to the economy, so that they are respected, and they have a chance to give the best they have.
- Madam Lagarde, we intend to air this interview for our program, the Formula of Power. What does ‘having power’ mean to you? What does it feel like?
- It means having the ability to help people. I think we can all do that, but there are certain positions, certain institutions where you can leverage the talent of staff, the desires of the membership. And when I speak on behalf of the institution, I speak with their research, their talent, their energy, and the authority that is given to me by the membership.
So, it’s that combination of attributes that will actually help me tell the leaders: “you should do that”, or “please, don’t do that”. That is where power is meeting the force of good.
- Madam Lagarde, thank you very much.
- Thank you.