WASHINGTON: After a week hosting the International Monetary Fund’s (IMF) annual gathering of economic leaders, managing director Kristalina Georgieva sums it up for the 190 member countries: “Buckle up, and keep going.”
As the talks ended here on Saturday, finance ministers and central bankers, seeking to sustain the world economy’s shaky recovery from the pandemic, worried Russia’s invasion of Ukraine will continue to destabilise Europe and stymies efforts to boost growth.
But the stalwarts of the post-World War II global order also took a scalding.
The UK’s whiplash on tax cuts – which rattled markets and led to the ouster of Chancellor of the Exchequer Kwasi Kwarteng midway through the gathering – and the US Federal Reserve’s (Fed) dollar-boosting interest-rate hikes also dominated discussions.
Members of the group also sparred over Saudi Arabia’s decision to lead an Organisation of the Petroleum Exporting Countries Plus or Opec+ oil output cut, which was seen as risky when Europe struggles with an energy crisis and the United States tries to rein in the hottest inflation in four decades.
Doug Rediker, a former IMF executive board member, noted a lack of high-level engagement from China, the second-biggest economy and top creditor to developing countries, “stymied the ability to make actual progress.”
“It was an overall fairly pessimistic week,” he said.
Similar to the IMF’s spring meetings in April, the Group of 20 (G-20) failed to issue a communique given the split on Russia.
Russia also prevented the IMF’s advisory body from reaching consensus over a joint readout.
“I regret very much that due to Russia’s blocking any chance of consensus, we don’t have unanimity,” said Spanish Economy Minister Nadia Calvino, who chairs the panel.
Speaking at the same briefing, Georgieva said “the predominant mood in the room was we cannot possibly allow fragmentation to happen because everybody would be poorer.” It would be “devastating for low-income and poor emerging markets.”
With about 60% of the world’s 75 poorest countries already in or at risk of debt distress, finance chiefs ranging from Treasury secretary Janet Yellen to Zambia’s Situmbeko Musokotwane urged richer nations to do more to help vulnerable ones restructure their debt.
Yellen criticised the slow progress on a G-20 initiative to bring creditors from the Paris Club of traditional rich countries together with China to try to restructure the debts of certain low-income countries. China hasn’t participated in the effort.
“What we face today is a complex situation that’s not going to be easily resolved,” said Martin Guzman, a former Argentine finance minister.
“I don’t think we’re going to have a proper resolution of that crisis until there is an international formal framework for solving the crisis when we’re not going to have it in the near future.”
“People expect central banks to keep pressing the brake until something actually breaks in the expansion,” economists at JPMorgan Chase & Co wrote over the weekend.
“The biggest risk remains a central-bank-induced recession.”
The Fed’s rate hikes have helped spur a surge in the dollar, which is punishing other countries by raising the cost of their imports and driving up their inflation. — Bloomberg
