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Transcript: IMF Managing Director Kristalina Georgieva on "Face the Nation," March 13, 2022

IMF chief expects "deep recession" in Russia
IMF chief expects "deep recession" in Russia due to sanctions 06:43

The following is a transcript of an interview with Kristalina Georgieva, managing director of the International Monetary Fund, that aired Sunday, March 13, 2022, on "Face the Nation."

MARGARET BRENNAN: Last week, harsh financial sanctions and trade restrictions were put in place to punish Russia and cripple its economy. Among them, the banning of all Russian imports of oil, gas, and coal, as well as goods like vodka and caviar. Joining us now is the managing director of the IMF, Kristalina Georgieva. Welcome to FACE THE NATION. 


MARGARET BRENNAN: I wonder how you can calculate the total impact of all of these restrictions that have been put on Russia. I mean, it- will Russia default on its debts and what impact will that have to the global economy?

KRISTALINA GEORGIEVA:  Let's remember that the reason they're unprecedented sanctions is because the unthinkable happened, a devastating war in Ukraine. And the impact of the sanctions is quite severe for the Russian economy. We expect a deep recession in Russia, and this abrupt contraction is affecting already how the Russian population is taking the heat on them. The ruble depreciated significantly. What does it mean? Real incomes have shrunk. Purchasing power of the Russian population has significantly diminished. In terms of servicing debt obligations, I can say that no longer we think of Russian default as improbable event. Russia has the money to service its debt, but cannot access it. What I'm more concerned is that there are consequences that go beyond Ukraine and Russia.

MARGARET BRENNAN: Right. I mean, you have said that the crisis in Ukraine could cause famine in Africa, for example, you look at the wheat imports and the price spikes there. Which countries around the world are you most concerned about? Is this going to destabilize other governments?

KRISTALINA GEORGIEVA: What we are mostly concerned about are the immediate neighbors of Russia and Ukraine, the Central Asian republics, the Caucasus, Moldova, because they have trade relations with both Russia and Ukraine more than the rest of the world, and because of this outflow of people refugee wave in Europe, that is of the order of magnitude of what happened in the Second World War. So there the impact is most significant. Beyond the immediate neighbors, there are two groups of countries we are very worried. The first group are countries that have yet to recover from the COVID-induced economic crisis. For them, this shock is particularly painful. And the second group of countries are those that are more dependent on energy imports from Russia, because there the impact on consumption, but also on inflation is going to be more prominent.

MARGARET BRENNAN: Are we looking, because of the debt levels you talk about, the vulnerability, are we looking at the potential of this becoming a financial crisis for the rest of the world?

KRISTALINA GEORGIEVA: For now, no. When you look at the total exposure of banks to Russia, it is about a hundred and twenty billion dollars. Not negligent, but definitely not systemically relevant. And to what we are also seeing is that while inevitably we are going to downgrade our growth projections for 2022, it is still going to be a positive growth rate. For countries that have been fast to recover from the COVID crisis, like the United States, growth is robust. It is those that were falling behind where the impact is more severe. And let me say this, yes, war in Ukraine means hunger in Africa, but war in Ukraine also has social implications for many, many countries through the three channels that are already demonstrably impactful. One, commodity prices, energy, grains, fertilizers, metals to the impact that has on inflation and in countries where inflation has already been high, this is dramatic--

MARGARET BRENNAN: --like the United States, 

KRISTALINA GEORGIEVA: Like United States, like many emerging market countries, think of Brazil, Mexico and three, what do we do when we have to fight inflation? We tighten financial conditions.

MARGARET BRENNAN: I have a question for you. You've been working on emergency funding for Ukraine. If that government falls, can Russia seize that money? If Russia installs a puppet government in Ukraine, can they get access to that money?

KRISTALINA GEORGIEVA: We are thinking of our internal interactions with Ukraine as being very productive. We have provided 1.4 billion dollars in emergency financing into the Ukrainian special account with the IMF. In other words, it is being drone by the government of Ukraine and nobody else can touch it. And we see that the Ukrainian authorities have been remarkable. Margaret, we had negotiations on this 1.4 billion and my staff tells me they can hear the air raid sirens and yet works go on. I have family in Ukraine. They tell me they can still pull money from back home. That's even in the city of Kharkiv that is the second-largest, heavily bombarded city. So bravo to the Ukrainian authorities for what they do.

MARGARET BRENNAN: Director, thank you for your time this morning. 


MARGARET BRENNAN: We'll be tracking that ongoing story.

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