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‘Clearly’ Russia’s economy has suffered, IMF chief Christine Lagarde says

May 1st, 2014
12:32 PM ET

By Mick Krever, CNN

There have “clearly” been consequences for the Russian economy because of the crisis in Ukraine, Christine Lagarde, managing director of the International Monetary Fund, told CNN’s Christiane Amanpour on Thursday.

The IMF said Wednesday that the Russian economy was in recession, and is expected to grow by only 0.2% in 2014.

“If you look at the monetary policy, if you look at the capital flows, if you look at their own forecast, there have been consequences on the Russian economy as a result of the geopolitical situation, the uncertainty, and the sanctions that have been decided,” Lagarde told Amanpour.

In a key sign of international support for Ukraine, the International Monetary Fund approved a $17.1 billion bailout for the country on Thursday.

The bailout, Lagarde, said, is “obviously not without risk, but it's a necessity to respond to a member's request.”

Part 1: Christine Lagarde talks Ukraine, Russia

Lagarde applauded the interim Ukrainian government’s efforts, including agreeing to allow its exchange rate to fluctuate and reforming the way the government draws up contracts.

And the $17 billion, she said, will be disbursed over the course of two years – not in one lump sum.

“It will not be enough, let's face it. But as usual, the IMF has to intervene in times of crisis. And when we do so, we take all the precautions we can and then we try to catalyze additional support.”

Amanpour asked whether Lagarde believes the economic consequences will have any impact on Russian President Vladimir Putin’s calculations about future plans.

“It's not the business of the IMF to get involved in that side of the equation,” she said. “We look at the economic terms; we look at the economic consequences; we offer policy advice.”

The European Union passed a new round of sanctions on Russia Tuesday, targeting 15 individuals but stopping short of industry-wide measures.

It is clear, Lagarde said, that European countries are to varying degrees dependent on Russia, and that “any hardening of the sanctions” would have an effect on their economies.

“Our hope, given the fragile recovery that we are seeing around the world, particularly out of the eurozone, is that these matters can be resolved otherwise than through escalated sanctions that clearly will hurt the economy.”

Amanpour challenged Lagarde on whether the international community has a duty to uphold the rules of “sovereignty and territorial integrity,” no matter the economic consequences.

“That is for sovereign states to decide,” Lagarde insisted.

Part 2: Lagarde: China won't have hard landing

China: Soon world’s largest economy?

It has long been clear that China will one day overtake the United States as the world’s largest economy, but new figures released by the World Bank indicate that that could happen as soon as this year.

(The International Monetary Fund, which unlike the World Bank does not take into account the variation in the purchasing power of a single unit of currency between countries, gives that occurrence a longer time frame. In other words, the difference is just a matter of which indicator they are looking at.)

“We still see China at 7.5 and continuing to grow, probably at the slightly reduced pace over time in the next five years or so because the country's developing so much,” Lagarde said.

The fact that Chinese growth will slow, she said, “is not a bad idea, actually, because the focus from the Chinese authorities would be to produce more quality growth than quantity growth.”

“We are not of those that believe that China will have a hard landing,” on the idea that growth will suddenly collapse.

The IMF has a “really solid partnership and dialogue” with the Chinese government, she said, and praised their efforts to focus on domestic consumption, rather than investment and exports, as the engine of the future Chinese economy.

Part 3: IMF chief warns of inequality's danger

Inequality: The economic issue du jour

It is not every day that a 600-page economic book, dense with statistics, becomes a best seller.

But French economist Thomas Piketty’s tome on inequality, “Capital in the Twenty-First Century,” has done just that.

It has pushed the economic, and political, worlds to pay attention to the issue.

Piketty writes that inequality could "radically undermine the meritocratic values of which democratic societies are based.”

Lagarde said that was a bit of a “political economic” statement.

“Our job is to look at the economic consequences of rising inequality. And we believe that it could have macroeconomic consequences that would undermine the sustainability of growth and the stability of the social fabric of society.”

It is a surprising statement for an IMF director, representing an organization that has long advocated that emerging economies stick to traditional programs of market liberalization.

“I'm of those who believe that excesses in all matters are not a good idea, whether it's formation of bubbles, whether it's excess in the financial market, whether it's excess of inequality, it has to be watched, it has to be measured and it has to be anticipated in terms of consequences.”

Contrary to traditional orthodoxy, she said, well-calibrated economic redistribution is not bad for growth.

“Our studies show that good redistributions – making sure that people have access to health, making sure that people have access to education, making sure that there is a progressive taxation not too high, not to disincentivize people, but progressive enough so that there is an element of distribution – that all of that is actually not counterproductive from a growth point of view.”

So, Amanpour asked, does she agree with Piketty’s conclusions about the danger of inequality?

“I have not finished his 600 pages. So I certainly would not want to agree with conclusions of a book that I have not finished.”

“He has some very interesting data. He has some good analysis. He has some very good and solid points. But I'm not going to say that I agree with all his conclusions.”

IMF chief says Egypt reforms 'a must'

Egypt ‘economic reforms will be a must’

As Egypt approaches an election that former military chief Abdel Fatah el-Sisi is all but assured to win, the country’s economic situation – which has been a large cause of the country’s unrest – remains dire.

“The relationship with Egypt is not broken,” Lagarde told Amanpour. “We do have a relationship. We do provide technical assistance at the moment.”

“What we are seeing at the moment is rather – it's not comforting, but it's encouraging – you know, their determination to reform the energy subsidy.”

No matter who the next leader of Egypt is, she said, “economic reforms will be a must.”

“And if that is done thoroughly, decisively, I'm sure that there will be growth and investment. But the reform stage is certainly a condition to that.”


Filed under:  China • Christiane Amanpour • Economy • Egypt • Latest Episode • Russia • Ukraine
soundoff (26 Responses)
  1. Kerry

    Bill Browder is smiling.
    "Browder tells a story of thievery, vengeance and death worthy of a Russian novel. He's a thorn in the side of Vladimir Putin and he has torn a rift between Moscow and Washington. When you hear what he has to say about Russia you'll know why Russia thinks of Bill Browder as an enemy of the state."

    May 1, 2014 at 3:08 pm | Reply
    • Gazza

      Browder is a crook who illegally traded in Gazprom shares using Russian dupes as intermediaries. He knew it was illegal under Russian law, but the greedy mongrel couldn't help himself as he could make a killing. Magnitsky was a flunky whose job was to throw the Russian government off the scent by incriminating Russian politicians and government officials, but they rumbled him and he was jailed.

      Will US corporate media ever tell the truth? Not a chance...

      May 2, 2014 at 9:26 am | Reply
  2. D.Bose

    Thus, IMF is supporting a Nazi government in Ukraine. This loan is to influence the outcome of the next election on 25th May. Otherwise IMF could wait.
    In 1996 IMF also gave $4 Billion loan to Yeltsin Government, when there was a strong chance that the Communist Party would win.
    Thus, IMF is a Western political organization. Thus, its forecasts on Russian economy are not reliable.

    May 1, 2014 at 5:54 pm | Reply
    • Roeskidmore

      Absolutely. The IMF is clueless, this money will pay off some of 15 trillion in debt to Russia? USA supported overthrow of democratically elected government in Ukraine, thus the chaos. Will not be in an Armanpour discussion on CNN. They only report western propaganda, no balance. Stuck in Cold War mentality.

      May 2, 2014 at 6:32 pm | Reply
  3. rory

    IMF is the tool for the western capitalism and expansion.

    May 1, 2014 at 6:53 pm | Reply
    • Joe

      Regardless, IMF will fail. $17B is nowhere near enough to cover the costs of a civil war in Ukrain. Besides, the price the western arms merchants will demand for their anti-tank/aircraft missiles will be extortionate. So the most efficient use for the money would be for the nazis in keiv to grab the lot and run for it.

      May 2, 2014 at 5:09 am | Reply
      • Johndoe

        there was some news that not appeared in cnn.. but in papers worldwide..
        It mentioned the OTAN boss asking the EURO group to raise their money support for the OTAN due of "dangers of Russia".
        Clearly they are gonna set the bill equally in most Euro NATO countries.

        May 2, 2014 at 2:16 pm |
    • Madex

      The IMF loan will go back to the west in the form of electioneering campaign and arms purchase for the on-going civil war between Kiev and the East Ukraine.
      It is a lose-lose situation for ordinary Ukrainians.

      May 2, 2014 at 5:38 am | Reply
      • Joe

        Indeed. A weakened country is easier to control. This is why you get the same in Iraq, Afghanistan, Syria, Sudan, and so on. Except, on this occasion they want to play with the Russians. Their gambling will have a very high chance of losing this time. This is good for the world. I hope they go large or go all in.

        May 2, 2014 at 5:53 am |
    • Roeskidmore

      Most definitely.

      May 2, 2014 at 6:33 pm | Reply
  4. B

    Can I please get a bailout? I have been suffering for just as long and am a fairly honest tax payer. Not to the tune of 15B, I'll settle for something a million times less, just 15K would ease most suffering.

    May 2, 2014 at 12:10 am | Reply
  5. Carol

    The EU brokered IMF loan was going to be less than $1 Billion if and when Ukraine met all the weird conditions of EU (including letting some political person get medical treatment in Europe). Moreover, the EU was setting all these meaningless deadlines for the Ukraine to meet. How things change. Now they are throwing money at the Ukraine and the carrot is much bigger.

    Everything the EU has done in this matter in the last two years has totally backfired. They were too eager to play the economic hit man game.

    May 2, 2014 at 12:46 am | Reply
  6. duu daa

    The IMF just approved a loan to the Ukraine so they can pay Russia the 16 billion they owe. The only profession that can lie even more than a used car salesman and a lawyer is a banker! Clearly bankers have become the worst of the worst. Soon they will replace Satan as the ultimate evil.

    May 2, 2014 at 12:58 am | Reply
  7. Arnold Lockshin

    The IMF has come to town!

    Hurray for the international banksters! They're the ones who will get the money.

    Woe for the Ukrainian people.

    Arnold Lockshin, political exile from the US living in Moscow

    May 2, 2014 at 1:43 am | Reply
  8. Madex

    Lagarde; Russians don't care about economics when they feel that their security is threatened by NATO in Ukraine.

    May 2, 2014 at 5:32 am | Reply
  9. folake

    The loan is just for Ukraine to pay his debt to Russia which is not good enough for Ukraine again lmf is just not been objective and Mrs lagarde and lmf is putting is money in Ukraine but how will they pay back .is clear that the Russia economy is not good for now,but still they went to take over ukraine by all means and they don't care about the west or nato

    May 2, 2014 at 6:12 am | Reply
  10. Joseph Rabanes

    i hope it will not happen to my Country in the Philippines, because
    we our so much low in Economy and here comes the so called
    Political Corruption

    May 2, 2014 at 6:39 am | Reply
  11. amit mishra

    absolutely amazing!

    May 2, 2014 at 3:11 pm | Reply
  12. steve

    I am amazed that there is not a single supportive comment for if action. Question to Ammonpour why? Where are all the Ukrainian and European and American in these discussions?

    May 2, 2014 at 11:08 pm | Reply
  13. silvo

    this 17 bilions dollars is thrown away into nothing like in grece.

    May 3, 2014 at 9:24 am | Reply
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    May 3, 2014 at 11:54 am | Reply
  15. aurelius

    "The Russian economy has suffered" is not the correct tense. More accurate would be "The Russian economy will suffer". They ain't seen nothing yet.

    May 4, 2014 at 10:06 am | Reply
  16. Joanne

    MOre aboaut this annoying Amanpour. All I hear are complaints.

    May 6, 2014 at 12:47 pm | Reply
  17. Matt Norris

    I'm curious to know how a recession in the Russian economy is tied to Ukraine? Russian activities can't be that expensive, because all they've done is pass out some weapons and deploy some troops on the border (and maybe put some KGB agents or military special units inside of Ukraine). From within Russia, Putin has massive support for his activities in Ukraine.

    Since "sanctions" that have been passed amount to nothing more than a temporary "fine" on a handful of individuals in Russia, I don't understand how the recession and Ukraine are related. I will agree with the IMF on one thing: Passing sanctions that affect all Russians is a poor idea and has typically been a poor idea for decades. Sanctions are great for stopping a given nation with a fledgling military from massing a huge modern conventional military force. They are otherwise ineffective.

    May 13, 2014 at 9:40 pm | Reply
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    June 6, 2014 at 9:45 am | Reply
  19. Terence Hale

    Hi,
    Madam Laggard knows or should know sanctions against Russia are not in the interest of the western economy. The British hypocrisy in respect to Sri Lanka who they will not sanction. America is to far away to know what is happening in Europe, is a war a solution for the west?

    July 22, 2014 at 3:36 pm | Reply

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