IMF Assures Of Stronger Collaboration With Members To Tackle Global Headwinds

The International Monetary Fund (IMF) has said it is collaborating with 190 countries across the world to facilitate international trade, contribute to high levels of employment and real income, promote exchange stability, and help member countries address payments imbalances. In spite of uncertainty of global outlook, the IMF noted, the world economy has shown resilience, but in most countries near- and medium-term growth outlooks remain subdued and downside risks are elevated. In its 2023 report, the IMF stated that tightening monetary policy stances to bring down inflation continues to weigh on most economies. The Bretton Woods Institute noted that the impact of the Russia-Ukraine war has impacted on macro-financial stability, including financial sector stress, adding that though inflation has moderated somewhat, underlying price pressures remain sticky. “Debt vulnerabilities are elevated, with 60 percent of low-income countries and 25 percent of emerging market economies in or at risk of debt distress. Debt-restructuring processes have been sluggish. Meanwhile, inequality persists within and across countries, and a record 350 million people in 79 countries face acute food insecurity. “Rising geoeconomic fragmentation risks are making it more difficult to respond to shared challenges, which calls for decisive steps to rebuild trust. The global peace dividend is shrinking, and with it, the resources available to support the vulnerable. Protectionism is on the rise, hampering global trade and eroding hard-won gains from integration. Confronting shared challenges, such as the climate crisis and digitalization, will require overcoming differences and boosting international cooperation,” it said.   The lender said it is committed to collaborating with its members to find pragmatic solutions to move the global economy onto a sustainable upward trajectory. “Ensuring sound domestic policies, bolstering global trade, and strengthening institutions will counter uncertainty and fortify macroeconomic resilience. Stepped-up international assistance and solutions to address high debt burdens will support vulnerable countries. Investing in digital technologies will help build a more prosperous and inclusive future. And jointly tackling climate change will sustain our planet,” the report stated. 

Increasing global protectionism could heighten economic shocks –IMF

The International Monetary fund has warned increasing protectionism could further heighten global economic shocks. A new report in its IMFBlog titled: “The High Cost of Economic Fragmentation”, the Fund said greater international trade restrictions could reduce global economic output by 7 per cent.    According to the Bretton Woods Institute, greater protectionism could lead to fragmentation, and even split nations into rival blocs just as fresh shocks expose the global economy’s fragility. “While estimates of the cost of fragmentation vary, greater international trade restrictions could reduce global economic output by as much as 7 percent over the long term, or about $7.4 trillion in today’s dollars. That’s equivalent to the combined size of the French and German economies, and three times sub-Saharan Africa’s annual output,” the Fund said. Calling for more deliberate global cooperation, the global lender noted that international institutions can play a vital role, bringing countries together to help solve global challenges. The Fund noted that signs of cooperation are faltering as new trade barriers are introduced annually hitting almost 3,000 in 2022. IMF research has shown that geopolitical alignments increasingly influence both foreign direct investment and portfolio flows. “Other forms of fragmentation—like technological decoupling, disrupted capital flows, and migration restrictions—will also raise costs. In addition, global flows of goods and capital have leveled off since the global financial crisis. “The IMF continues to underscore that the international community, supported by global institutions such as ours, should pursue targeted progress where common ground exists and maintain collaboration in areas where inaction would be devastating. “Policymakers need to focus on the issues that matter most not only to the wealth of nations but also to the economic well-being of ordinary people. They must nurture the bonds of trust among countries wherever possible so they can quickly step up cooperation when the next major shock comes,” Kristalina Georgieva, IMF President said.