2023 Michel Camdessus Central Banking Lecture by Lesetja Kganyago,
Governor of the South African Reserve Bank,
at the International Monetary Fund,
Washington, DC, 11 July 2023
The contribution of capital flows to sustainable growth in emerging markets
Thank you for the honour of inviting me to give this lecture. Considering the people
who have previously spoken at this forum, considering the stature of the audience
here today, and also considering the legacy of Michel Camdessus, who led the
International Monetary Fund (IMF) for so long, it is a great privilege for me to be here.
My subject today will be the role of capital flows in emerging market growth.
I want to start with a problem that has often bothered me. As the South African central
bank Governor, I regularly meet with global investors to discuss economic conditions
and policy settings in my country. The fundamental goal of these engagements is to
encourage investment. Then I return from these meetings, and we have policy
sessions where staff want to talk about the dangers of capital flows. But the investors
I just met are the people who are responsible for the capital flowing. So, I wonder -
which part of my time am I wasting? Do we want these capital flows or not?
This is a global discussion, and one that has evolved significantly over my time working
in macroeconomic policy.
Twenty or 30 years ago, the mainstream view was that financial globalisation was
good. Global markets could provide more financing, at lower rates, than countries
could achieve by relying on their own resources. They would allow for better risk
sharing, and they would create better incentives to get policy right. The standard policy
recommendation was that controls on capital flows should therefore be liberalised, and
where they were being applied, this was probably to cover for some other policy error.1
Nowadays, the mainstream view has shifted. The IMF encourages policymakers to
keep capital flow measures in their toolkits, both for pre-emptive purposes and to
address capital flow surges.2 The guidance is nuanced, and there is still appreciation
for the benefits of capital flows - but as Christine Lagarde put it a few years back,
"[This] is not your grandmother's IMF" 3, and there has clearly been a big shift in the
policy advice.4
Outside of the IMF, attitudes to capital flows have been more bluntly critical. One part
of this is unhappiness with spillovers from United States monetary policy, sometimes
when the stance is loose, as in the 'currency wars' era after the global financial crisis,
and sometimes when financial conditions tighten, as they did in the 2013 taper tantrum
and as they have been doing during the current period. Another is the geopolitical
tensions that have made 'deglobalisation' a buzzword. There have also been shifts in
the realm of ideas, with even some mainstream economists condemning most forms
of capital flows. For instance, in October 2022, Arvind Subramanian published an op-
ed arguing that, "capitalism must be saved from its financial rentiers, and financial
deglobalisation is a good place to start".5
Altogether, the reputation of capital flows is at a low ebb.
1
An interesting retrospective discussion on this may be found in David Lubin's interview with Larry
Summers, titled, 'Thinking aloud on emerging markets: is the international monetary system bad for
EM?', 2 August 2022.
2
'Review of the institutional view on the liberalization and management of capital flows', IMF Policy
Paper No.2022/008, March 2022. Available at:
https://www.imf.org/en/Publications/PolicyPapers/Issues/2022/03/29/Review-of-The-Institutional-View-on-The-Liberalization-and-Managementof-Capital-Flows-515883
3
Christine Lagarde, Opening address to the Conference on 'Challenges for Securing Growth and
Shared Prosperity in Latin America', 5 December 2014. Available at:
https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp120514
4
Note the title of an IMF blog post on this advice: Tobias Adrian et al., 'Why the IMF is updating its
view on capital flows', 30 March 2022. Available at:
https://www.imf.org/en/Blogs/Articles/2022/03/30/blog033122-why-the-imf-is-updating-its-view-oncapital-flows
5
Arvind Subramanian, 'The case for structural financial deglobalisation', 28 October 2022. Available
at:
https://www.project-syndicate.org/commentary/financial-deglobalization-emerging-developingeconomies-federal-reserve-by-arvind-subramanian-2022-10
We should, nonetheless, respect the enormous opportunity presented by access to a
global financial system. Indeed, taking a blue-sky approach, capital flows look much
too small.
There are studies of optimal current account deficits for small economies, and they
yield extraordinary estimates, for instance that it would be optimal to run annual current
account deficits up to 60% of gross domestic product (GDP).6
Relatedly, if you think about it, it is strange that interest rates in developing countries
are not orders of magnitude above those in rich countries. Even in middle-income
countries, capital stocks are typically less than a third of those in the United States, on
a per capita basis.7 It would make sense to pay radically higher rates to attract more
investment, which would then raise the productivity of labour.8 Yet real rates are not
so far removed from advanced country levels: over the past two decades, real policy
rates in rich countries have averaged about -1%, compared to just under +1%, on
average, for middle-income countries.9
Obviously, these observations are not policy recommendations. They do not pass
reality checks. But they can help us approach the question of capital flows and financial
integration with a more open mind.
Considering the empirical cases, critics of capital flows often point to the successes of
Asian countries, most recently China. These fast-growing economies were typically
6
Sebastian Edwards, 'Does the current account deficit matter?', in Sebastian Edwards and Jeffrey A
Frankel (eds), Preventing currency crises in emerging markets, Chicago, IL: University of Chicago
Press, January 2002. Available at: https://www.nber.org/system/files/chapters/c10633/c10633.pdf
7
For 2019, a simple average of the capital stock per capita was 31.7% for a sample of middle-income
emerging markets, as compared to the United States. The sample comprises Brazil (28.61%), China
(33.64%), Indonesia (30.63%), India (11.76%), Turkey (55.06%), South Africa (23.01%) and Mexico
(39.37%). These data are sourced from the Penn World Tables and refer to investment as a GDP
concept, not financial wealth.
8
This specific point was raised recently in a blog post by John Cochrane, 'Bob Lucas and his papers',
17 May 2023. Available at:
https://johnhcochrane.blogspot.com/2023/05/bob-lucas-and-hispapers.html
9
For the period 2003-2023, using policy rates less annual inflation rates from the IMF's World
Economic Outlook, the US real policy rate is -1.17%. The UK is -1.0%, while the euro area is at
0.87%. An average of Brazil, China, India, Indonesia, Mexico, South Africa and Turkey is 0.74%, with
a high of 5.2% (Brazil) and a low of -3.36% (Turkey). South Africa is at 1.45%.
capital exporters, despite starting off poorer and with smaller capital stocks than the
economies in which they invested their surplus savings. These countries also suffered
crises when they opened to financial flows in the 1990s, disrupting their remarkable
development trajectories.
Where are the poster children for proponents of capital flows?
There are countries that have enviable growth records, and which have relied for many
years on capital inflows. These include the United States, Canada, New Zealand, and
perhaps the clearest case of all, Australia.10 As one study from the Reserve Bank of
Australia pointed out, "Sizeable current account deficits have been recorded in
Australia in almost every decade for at least 150 years".11 These large and sustained
capital inflows have allowed for a higher level of investment than could have been
achieved with only local savings. And the success of the economic model is hard to
dispute. Australia's living standards have ranked among the highest in the world since
the middle of the 19th century, and towards the start of the 20th century they were
probably the highest of any country.12 It is highly unlikely that Australia would have
performed better in the absence of capital flows.
Of course, we cannot read Australian economic history as one long vindication of free
capital movements. Both the depression of the 1890s and the economic crisis of the
1920s had symptoms familiar from modern emerging market crises, including balance
of payments pressures and foreign debt stress.
We also cannot say Australia has always been happy with large current account
deficits. In the late 1970s and early 1980s, these deficits were a major concern for
policymakers, especially because they were being driven by fiscal policy and were
draining foreign exchange reserves.
However, significant current account deficits persisted even after the floating of the
Australian dollar and fiscal consolidation.13 This gave rise to the so-called 'consenting
adults' thesis, that current account deficits produced by private sector decisions could
be optimal and sustainable, and policymakers would not have to worry about them.
Reflecting on other country experiences, the simple fact that deficits were privately
contracted seems insufficient. We know private sector flows can be dangerous: clear
recent examples are Spain and Ireland's experiences during the euro area crisis. It
therefore seems relevant that foreign investors in Australia were willing to accumulate
claims denominated in Australian dollars, and that the Australian dollar floated.
Another crucial fact appears to be a bedrock of investor confidence, based on credible
macroeconomic policies - including a reasonable degree of price stability - and a
resilient financial system.
One also senses some deeper mechanism here, which ensured capital was
channelled into productive assets that generated good returns. Of course, this reflects
more than the resource endowment, as we could name many countries with ample
natural resources which have not absorbed capital flows productively. There has also
been something else going on, since at least the 19th century, that has made capital
in Australia productive, whereas that same capital deployed elsewhere would have
produced boom-bust cycles and default.
Part of this is a story about the quality of institutions as well as the human capital
available and empowered to run them.14 Another theme is the development of local
capital and financial markets, and their capacity to turn capital to productive purposes.
As I will discuss below, these capacities intersect with policy choices, with capital flows
supporting or weakening the productive potential of an economy.
On the whole, the Australian case teaches us that a country can absorb large capital
flows over very long periods of time, and use these to support high levels of prosperity.
This contrasts starkly with the Asian examples, where a range of countries likewise
achieved impressive gains in living standards, but mostly did so without foreign capital.
Most of the world's countries would be happy if they could be Asian tigers, and ecstatic
if they could be Australia. But many of us have a long way to go. What attitude to
capital flows would help us on our way?
In South Africa, we have long favoured the Australian option.15
Given ample investment opportunities and limited domestic savings, growth and
capital inflows have typically been correlated. In 1985, when the apartheid government
was hit with sanctions, access to capital flows was largely cut off.16 Of course, this was
not a developmental policy for South Africa; it was a punishment. When sanctions were
lifted at the end of apartheid, we looked forward to restoring access to global financial
markets. We also appreciated that the end of sanctions did not mean the taps were
open. Foreign investors all loved South Africa, but they would not invest based on
warm feelings. And there was going to be a limit on how much investment we could
attract, even with good policies.
With a low domestic savings rate, if the public and private sectors were both borrowing
heavily, this meant we were going to hit a balance of payments constraint. Specifically,
we anticipated an unsustainable current account deficit, which would weaken the rand
and drive up inflation. Interest rates would then have to rise to rebalance savings and
investment, slowing growth. This was the core problem statement of the
macroeconomic strategy adopted by the Mandela government in 1996. The goal was
to attract more foreign savings, apply some fiscal discipline to improve the country's
investment profile and reduce government's demands for savings, thereby permitting
lower interest rates to allow more private sector investment.
In hindsight, I would say the strategy was mostly successful.
We experienced some of the downsides of openness to capital flows. These included
a huge depreciation of the rand in 2001, which only loosely reflected fundamentals, as
well as a phase of currency strength during the mid-2000s, which may have affected
export competitiveness. The stronger currency and low interest rates also fed dramatic
house price appreciation and risky mortgage growth - a dynamic arrested by the 2008
crisis.
Despite those blemishes, it was still a success. Indeed, as time has gone by, it looks
more and more like a golden age of South African macroeconomic policy. Living
standards were rising and growth was outpacing the global average.17 Our investment
rate rose from around 15% of GDP at the end of apartheid,18 to around 20% of GDP,
even as the domestic savings rate remained low at about 15%. This naturally entailed
significant net capital inflows, much of it through portfolio flows rather than foreign
direct investment. These we de-risked, in large part, by committing to a free-floating
currency and minimising foreign currency borrowing across the economy.
It seems extremely unlikely that we could have had better results by closing ourselves
to global capital. What causes me great concern, by contrast, is what happened next.
The 15 years from 2009 onwards are almost a mirror image of the first 14 years of
democracy. From 1994 onwards, we achieved steadily high investment and growth,
interrupted by temporary setbacks; from 2009 onwards, we have had steadily lower
investment and growth, punctuated by incomplete recoveries. The IMF's projections
have 2023 investment at 16% of GDP - far below the ratio needed for adequate
growth. And yet even this level of investment is posing a serious funding challenge
because the domestic savings rate is just 13% of GDP - the lowest level since at least
1980 - and the investment case for external investors has weakened significantly.
Growth is projected at a mere 0.1%.
This is where the capital flow story comes in.
For much of the decade after the global financial crisis to date, South Africa had ample
access to foreign capital, helped by ultra-low interest rates in major economies. The
average current account deficit, until the onset of COVID-19, was over 3% of GDP.
The financing for this deficit mainly came from portfolio flows, as it did before the global
financial crisis. However, the composition of investment for this period shifted markedly
towards government debt, and away from private sector assets such as equities.
During the boom of the 2000s, government and public corporations absorbed just 16%
of portfolio flows. In the next decade, this rose to 78%.19
Recalling the Australian case discussed earlier, what we see is that South Africa
moved away from a 'consenting adults' arrangement, where a stable fiscal position
and a current account deficit were driven by private sector decisions, to a classic twin-
deficit situation.
This had three destabilising implications.
First, the volumes of money available to South Africa after the global financial crisis
undermined good policymaking. In the 1990s and 2000s financial markets helped with
fiscal discipline; in the 2010s they enabled excess. The underlying problems were
homegrown, but the ready availability of foreign savings after the global financial crisis
made it harder to win policy battles. Investor scrutiny is good for policy: it obliges
everyone to double-check the figures and cut back on things you do not really need.
But when you know the money is coming anyway, it becomes much harder to insist on
policy rigour.
Second, these flows permitted the build-up of a large sovereign debt position. Debt,
famously, is a troublesome form of financing because the lender shares relatively little
risk with the borrower - unlike, say equity investments, where unsuccessful projects
directly affect share prices and dividends.20 Sovereign debt is particularly problematic,
because declining government creditworthiness also spills over to the credit profiles
of firms and households. With time, it leads to higher taxes and lower public sector
investment to accommodate higher interest payments. An unsustainable fiscal position
can therefore become a drag on the whole economy.
Third, capital flows eroded potential growth. We often talk about the importance of
institutions to growth, but debt can be used to weaken institutions by funding systems
of patronage and corruption, driving out skilled and diligent public servants. Many
private sector firms will also follow the money, redirecting their efforts from productive
enterprise. Through these two channels, capital flows helped subvert the market
incentives and competent bureaucracies that power modern economies. Our macro
framework delivered resilience through a floating exchange rate, low foreign currency
debt exposures, and careful regulation of the financial sector. But resilience is not
enough; if you are going to absorb capital flows, you also need to get allocation right.
Huge non-resident flows into public sector debt can actually make this more difficult.
Today, we face the consequences. With too much borrowing, not much domestic
saving and limited non-resident appetite for our assets, interest rates must rise to
restore balance. The alternative is an inflationary balance of payments problem, which
is plainly against the South African Reserve Bank's mandate. This does not make the
Reserve Bank popular, but facts are facts. We have gotten ourselves back in the trap
we escaped in the mid-1990s.
Reflecting on this whole experience, it is easy to sympathise with Daron Acemoglu's
argument in a recent Project Syndicate piece, that South Africa shows how capital
flows, instead of promoting good government and development, can 'facilitate' a
"hollowing out [of a] country's economy and institutions...".21
Nonetheless, I do not think we should jump from diagnosing bad consequences to
urging a prohibitionist approach to capital flows, and giving up on the benefits. I would
much prefer a risk management approach. A source of inspiration here is the airline
industry, where regulators and companies work together to fly as many planes as
possible, as safely as possible, rather than responding to the occasional accident by
adopting a zero-tolerance attitude to risk, which would sharply reduce the number of
flights and blow up costs.22 I think this is the right way to approach capital flows.
A great strength of the IMF's 'institutional view' is that it acknowledges the benefits of
capital flows upfront and then moves on to risk control,23 using a toolkit of capital flow
and macroprudential measures.24
A shortcoming in using these tools, however, is their weakness where the problematic
flows spill over into the public sector. And these cases are hardly outliers. Capital flows
into sovereign debt have been a major source of crises since at least the 19th
21
Daron Acemoglu, 'The great debt cleanup', 23 June 2020. Available at:
https://www.projectsyndicate.org/commentary/plan-to-navigate-emerging-market-debts-by-daron-acemoglu-2020-06. The
full quote is as follows: "Far from checking autocrats, international finance has been facilitating them.
For example, in South Africa between 2009 and 2018, foreign funds continued pouring in even after it
was obvious that then-President Jacob Zuma's kleptocratic government was hollowing out the
country's economy and institutions. When Zuma was finally kicked out of power, it was because his
own party, the African National Congress, took steps to remove him. The whip of international markets
had little to do with it."
22
Jón Daníelsson, The illusion of control, New Haven and London: Yale University Press, 2022. See
for instance p. 252: "What is lacking [in financial regulation] is risk culture. The financial authorities
could do well by learning from their counterparts in other fields, like aviation. The airline industry is
regulated with a view to simultaneously maximise the benefits to society and keep risk under control,
and we see the outcome. The cost of flying is steadily falling while safety gets better every year. The
central banks and regulators need such a risk culture."
23
For instance, see the comment: "The key challenge is macro risk management" in Tobias Adrian,
'Policy responses to capital flows', 11 October 2018. Available at:
https://www.imf.org/en/News/Articles/2018/11/15/sp101118-policy-responses-to-capital-flows
24
For an IMF taxonomy of capital flow measures (and other comparable measures), see
https://www.imf.org/-/media/Files/Data/2020/update-of-imf-taxonomy-of-capital-flow-managementmeasures.ashx
century.25 The ongoing African 'funding squeeze' is fundamentally about government
borrowing.26 Nonetheless, the IMF's 2022 review paper on capital flow measures says
relatively little about fiscal policy. The word 'fiscal' appears only nine times in that
document, compared to 119 instances of the word 'bank'. The policy advice is simply
that if fiscal policy is the problem, it should be adjusted.27
Fair enough, but what if that does not happen? Do we have additional policy tools to
manage these risks?
One option is to adjust the regulatory treatment for government bond holdings, for
instance by obliging banks to hold capital against them instead of treating them as
riskless. But this would not directly affect non-resident investment decisions.
A second tool is developing a proper sovereign bankruptcy procedure.28 This would
give lenders stronger incentives to scrutinise borrowers. Where debts become
unsustainable, countries would also have a better option than prolonged debt distress
which delivers restructuring only after years of misery.29 Still, I have limited faith in the
25
Consider, for instance, this summary: "Sovereign debt defaults and renegotiations have been the
bread and butter of Latin American countries since the first defaults in the 1820s. During the first
period of financial globalization (1820-1931) there are sixty seven defaults across all countries from
the richest, like Argentina, to the poorest, like Bolivia." Graciella Laura Kaminsky and Pablo
VegaGarcía, 'Varieties of sovereign crises: Latin America, 1830-1921', April 2014. Available at:
https://www.nber.org/system/files/working_papers/w20042/revisions/w20042.rev0.pdf
26
The title of the IMF's April 2023 Regional Economic Outlook for Sub-Saharan Africa is 'The big
funding squeeze'. Available at:
https://www.imf.org/en/Publications/REO/SSA/Issues/2023/04/14/regional-economic-outlook-for-subsaharan-africa-april-2023
27
The nine references to 'fiscal' contrast with 119 instances of 'bank'; 33 of 'house', 'housing' or
'household'; and 28 for 'corporate' or 'corporations'. Of the fiscal instances, three are versions of
advice to 'adjust fiscal policy'. There is one mention of fiscal revenues as a comparator for the size of
banks' external assets; one comment on capital flow measures generating fiscal revenue; and one
reference to fiscal policy as an incentive, among others, for locals to borrow in foreign exchange.
There is one discussion of themes which would count as macro-critical and therefore relevant for IMF
surveillance, with fiscal policy included on that list. There is one mention in the context of the different
tools in the integrated policy framework. The last use of 'fiscal' is in the reference section. Similarly,
work done by the IMF in 2011 on the capital flows toolkit has six references to 'fiscal' and 139 to 'bank'
- see Jonathan Ostry et al., 'Managing capital inflows: what tools to use?', IMF Staff Discussion Note.
11/06, 5 April 2011. Available at: https://www.imf.org/external/pubs/ft/sdn/2011/sdn1106.pdf
28
This point was made strongly by IMF leadership over two decades ago - see Anne Krueger, 'The
evolution of emerging market capital flows: why we need to look again at sovereign debt
restructuring', 21 January 2002. The design of the mechanism might have been suboptimal, but the
issue is still here with us. Available at:
https://www.imf.org/en/News/Articles/2015/09/28/04/53/sp012102
29
David Malpass, 'Remarks by World Bank Group President David Malpass at the Breaking the
Impasse on Global Debt Restructurings Conference', 26 April 2023. Available at:
ability of lenders to exercise adequate caution in the boom phase of the cycle. And
where government debt is an asset held throughout society, default is probably a cure
worse than the disease.
A more benign tool is foreign exchange reserves. Standard accounts traditionally
emphasise the role of reserves in meeting balance of payment needs,30 especially in
the context of inflexible exchange rate arrangements. But foreign exchange reserves
are arguably more important for risk management, especially now that floating
exchange rates are normal practice. A new wave of research is now also making direct
connections between foreign exchange reserves and sovereign debt vulnerability.31
With floating exchange rates and reserves financed in local currency, negative shocks
to the country generate positive valuation effects on foreign exchange reserves.32
Central banks can therefore accumulate reserves to hedge the public sector balance
sheet against adverse outcomes, driven by factors that include unsustainable fiscal
policies. Furthermore, central bank independence provides a technology for protecting
these assets from spending demands.33
This reserve accumulation approach may well work better than trying to restrain
surges with capital flow measures, in a general sense, with reserve growth during
inflow phases and the option to release reserves during outflows.34 And it is a
particularly useful option where flows are going to government debt and regular capital
flow measures are not viable.
https://www.worldbank.org/en/news/speech/2023/04/26/malpass-president-breaking-impasse-globaldebt-restructurings-conference
30
See, for instance, the discussion by the IMF, 'Clarifying the concept of reserve assets and reserve
currency', BOPCOM-15/14, 27-29 October 2015. Available at:
https://www.imf.org/external/pubs/ft/bop/2015/pdf/15-14.pdf
31
Laura Alfaro and Fabio Kanczuk, 'Debt redemption and reserve accumulation', IMF Economic
Review 67(2), June 2019. Available at:
https://www.hbs.edu/ris/Publication%20Files/redempt180504_6.21.18_da35aab6-70e6-4893-b94c94ea6ac519c1.pdf
32
César Sosa-Padilla and Federico Sturzenegger, 'Does it matter how central banks accumulate
reserves? Evidence from sovereign spreads', NBER Working Paper No. 28973, June 2021. Available
at: https://www.nber.org/papers/w28973
33
Agustin Samano 'International reserves and central bank independence', Policy Research Working
Paper No. 9832, 2021. Available at: https://openknowledge.worldbank.org/handle/10986/36483
34
Olivier Jeanne and Damiano Sandri, 'Global financial cycle and liquidity management', BIS Working
Papers No. 1069, January 2023. Available at: https://www.bis.org/publ/work1069.pdf
In addition to these tools, we should consider our macro policy narratives. For a start,
we need to rediscover the dangers of government borrowing. Responsible
policymakers never forget that fiscal debt is risky. But the nature of policy discussions
is that while many claims are valid, some points get more emphasis than others. In the
past decade, one such point was that fiscal consolidation hurts growth and is therefore
self-defeating. Another was that higher government debt levels were safer than
previously thought. I have personally observed these claims justify sustained fiscal
slippage in South Africa. If we had felt the urgency of debt sustainability more keenly,
we would have had a wiser conversation. We need a more responsible set of
narratives around fiscal risks.35
We also need to think more clearly about allocative efficiency. One of the strongest
lessons I have learnt as a policymaker is that poor countries are poor not simply
because they do not have money, but because they do not use money effectively. Too
often, there is a tendency to look at a problem, cost out a solution and focus on raising
the cash. Implementation is just a black box. But good policymaking starts with
implementation and the financing need should reflect what can be used efficiently.
Indeed, one might cast the volatile and often damaging history of capital flows as a
conflict between budget constraints and capacity constraints. Capital flows provide
spending power and can radically shift the budget envelope, but implementation
capacity is stickier, and budgets can easily overshoot capacity.
This point is relevant, once again, in the global dialogue about climate change justice
and the financing that should be directed from rich countries to poor ones. There is a
strong focus on costing the climate change impact for poor countries and using those
estimates to lobby for massive inflows. But we have seen many times that the sum of
money is secondary to the quality of policies, the incentives they create and the
capacity of the institutions available to invest funds. The capital flow sceptics and the
climate justice activists should exchange notes.
Ladies and gentlemen, to conclude, I remain impressed by the power of global capital
flows to support investment, reduce financing costs and accelerate convergence in
developing economies - especially where domestic savings are below investment
needs. Nonetheless, this is a force that is dangerous as well as useful and powerful.
The South African case shows both sides of the coin: intelligent use of capital flows in
one period, and abuse in the second.
For countries where investment opportunities exceed local savings rates, doing
without capital flows means giving up on significant growth. It is not an attractive
strategy. A better one is to welcome capital flows, control risks and nurture institutions
that can deliver productive investment choices. That applies to climate finance, too.
We need to remain optimistic about capital flows and vigilant about the risks, rather
than pessimistic about the flows and allergic to the risks, or naïve about the flows and
blind to the risks. My hope is that when the next boom comes, we will have learnt
lessons that make that boom as safe, as long and as large as possible.
Thank you.