The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, reaffirmed this Thursday that the risks to financial stability are increasing throughout the world and for the coming year the uncertainty remains exceptionally high.
“Even when growth is positive for many people, it will feel like a recession because of rising prices and falling real incomes,” Georgieva said.
After the IMF cut its global growth outlook to 2.7 percent in 2023, Georgieva took to Global Policy Agenda to call on fiscal policymakers to “act with a sense of urgency now.”
Georgieva emphasized inflation as one of the decisive aspects to ensure the financial stability of countries. “We know that rising interest rates come at a cost to growth. But we also know that not tightening enough to curb inflation would mean interest rates stay high longer, resulting in even more damage to growth and people,” she pointed out.
According to the Bulgarian economist, there are multiple monetary policies that countries can implement in unity to address the mismatch between demand and supply that is driving up prices.
“I am convinced that if we do not restore the balance in prices, we will have to diminish the growth prospects even more,” Georgieva said, adding that this would cause uncertainty for investors.
“Inflation is a tax on the lower-income part of society and therefore cannot be allowed to continue for longer,” he said.
Georgieva’s expressions took place within the framework of the annual meetings of the IMF and the World Bank in Washington DC. The managing director of the IMF assured that in a moment of financial crisis, developing countries and emerging markets must have special attention from the world.
“It is difficult for everyone, but it is even more difficult for countries that are now affected by a stronger dollar, high borrowing costs and capital outflows, a triple blow that is particularly hard for countries that have a high level of investment. debt. This week we are focusing on debt, especially for low-income countries where more than 60% are at or near debt distress,” Georgieva said.
According to data revealed by the IMF, since the start of the pandemic they have provided 260,000 million dollars in financial support to 93 countries. On the other hand, since Russia’s invasion of Ukraine, they have allocated 90,000 million dollars in 18 emergency care programs.
In the coming year, the entity’s priority will be to address food insecurity, which affects 345 million people; climate change, digitization and inequality.
Georgieva also announced the creation of the new Trust Fund for Resilience and Sustainability (RSTF), which is now operational and designates $40 billion, as well as staff-level agreements for the first three countries: Barbados, Costa Rica and Rwanda.
For his part, the president of the World Bank, David Malpass, also emphasized that the slowdown in the world economy impacts developing countries, especially low-income citizens.
“One of the things that we are promoting now is that countries in the developing world should use this crisis to improve their structural policies so that they can produce more in their own countries.”
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