KwaZulu-Natal, South Africa: International Monetary Fund First Deputy Managing Director Gita Gopinath delivered the following remarks at the third meeting of the G20 Finance Ministers and Central Bank Governors KwaZulu-Natal, South Africa:
"Sincere thanks to the Government of South Africa for hosting this week's G20 meeting, and Minister Godongwana and Governor Kganyago for leading fruitful discussions across several important economic and financial sector issues. High levels of policy uncertainty remained a key theme in these discussions. But so too did the shared objective to navigate through this uncertainty and seek ways – domestically and collectively – to spur growth.
Global Outlook: Resilient so far, but far from certain
Our April WEO forecast projected global growth of 2.8 percent in 2025 and 3.0 percent in 2026, well below the historical average of 3.7 percent. This included significant downgrades to major economies such as the U.S. and China, owing to greater policy uncertainty, trade tensions, and softer demand momentum. Global headline inflation was projected to decline, but at a slower pace, reaching 4.3 percent in 2025 and 3.6 percent in 2026.
Since April, economic indicators reflect a complex backdrop shaped by trade tensions. We have seen strong evidence of front-loading ahead of tariff increases and some trade diversion. We have also seen an improvement in global financial conditions as select trade deals lowered average tariffs. On inflation, cooling demand and falling energy prices point to a continued decline, albeit with variation across countries.
While we will update our global forecast at the end of July, downside risks continue to dominate the outlook and uncertainty remains high.
Policy Priorities: Building resilience and boosting medium-term growth
Against this backdrop, policymakers should focus on resolving trade tensions and implementing macroeconomic policies to address underlying domestic imbalances. This includes restoring fiscal space and ensuring debt is on a sustainable path. To maintain price and financial stability, monetary policy must be carefully calibrated to country-specific circumstances and use clear and consistent communications. Central bank independence must be protected. Structural reforms remain essential to lift medium-term growth and offset demographic shifts, by boosting productivity, supporting job creation, and leveraging new technologies.
Strengthening Public Finances
The IMF welcomes the renewed focus on domestic revenue mobilization, which is indispensable for strengthening public finances and helping countries, especially here in Africa, to achieve development goals. Our analysis suggests that Low-Income Countries could raise an additional 7 percent of GDP if they achieved their estimated tax potential.
The IMF is playing its part by supporting countries in reforming domestic tax policies and broadening tax bases, strengthening administration to improve tax collection and their efficiency, and improving tax legal certainty, to attract foreign and domestic investment.
We also support a stronger focus on public spending efficiency, which is vital for investing in sustainable development within tight fiscal constraints. The IMF is helping through governance diagnostics, macro-fiscal framework design, and improvements to public investment management and the management of state-owned enterprises.
Managing Capital Flows and Debt
While capital flows to EMDEs have remained broadly resilient in 2025 despite the increased financial market volatility and policy uncertainty, they remain sluggish, and for many borrowers, financing conditions remain tight.
To lower the cost of capital and attract private investment, the work starts at home with domestic reforms. But we recognize that some countries, whose debt is sustainable but currently face high debt service costs, may need a pathway to help them create fiscal space until the benefits of reform take effect. That is why the IMF is advancing our joint work with the World Bank to implement the 3-pillar approach.
For countries with unsustainable debt, proactive moves to restore debt sustainability are essential. To do so, efficient and timely restructuring mechanisms need to be in place. On that note, good progress is being made. The publication of the Global Sovereign Debt Roundtable's "Restructuring Playbook" as well as the G20 note outlining the steps for debt treatment under the Common Framework are helpful and complementary documents for countries considering a debt restructuring. But further progress in restructuring mechanisms is needed, including to cover middle-income countries and secure predictability.
Financial Sector issues
Even though financial conditions have eased since April, with trade and geopolitical uncertainty still elevated, financial stability risks remain in focus. Asset valuations are once again stretched, the use of leverage remains high in parts of the financial system, and periodic pressure observed on government bond yields and market functioning carries the risk of broad repercussions, particularly against a backdrop of large fiscal deficits and increased illiquidity.
Vigilant surveillance and robust supervision remain paramount and recent progress in financial sector oversight must continue, particularly for NBFIs which now account for more than 50 percent of the financial sector.
Improving cross-border payments systems, including through new financial technologies, can help boost growth and strengthen macro-financial stability.
Finally, the IMF also welcomes the Presidency's focus on bolstering Africa's growth potential, including by addressing macroeconomic vulnerabilities. With its young population and abundant natural resources, leveraging this potential requires reforms and investment that can drive growth and development across the continent. Continued international support also remains critical through adequate concessional financing, capacity development, and help to address debt vulnerabilities and the IMF is committed to playing its role in this regard."
