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IMF chief: Prospects for medium-term global growth weak

by Swati Gupta

July 23, 2023 10

The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, expressed concerns about the slowing global economic activity, especially in the manufacturing sector, and highlighted the weak medium-term growth prospects during a meeting with financial leaders from the Group of 20 nations on Tuesday.

Speaking to G20 finance ministers and central bank governors in Gujarat, India, Georgieva emphasized that the divergence in countries’ economic fortunes remains a persistent issue.

While inflation has started trending downward, she cautioned that “headline inflation is still too high and core inflation remains sticky despite the significant monetary policy tightening.”

Georgieva warned that inflation could remain higher for a longer period, necessitating further policy tightening. She stressed the importance of staying the course on monetary policy to avoid reversing the progress made so far in the disinflation process.

The IMF Chief underlined the significance of lowering inflation as a top priority for countries, along with efforts to rebuild fiscal buffers and implement growth-enhancing reforms.

In support of these reform efforts, the IMF plans to expand its work on mobilizing domestic resources, improving the quality of country spending, developing deep capital markets, and creating a favorable environment for both domestic and foreign private investment.

Georgieva highlighted the need for strengthening the global financial safety net, including a review of the IMF’s quota resources, which are critical for ensuring predictability of the IMF’s firepower, especially since it has shrunk in relative terms.

Furthermore, she pointed out the progress made on restoring debt sustainability, citing a recent agreement on Zambia’s debt restructuring. However, Georgieva stressed that the debt restructuring process needs to be more efficient and timely. Delays in reaching agreements on necessary debt treatments disproportionately burden borrower countries and their people, who are least equipped to bear such a burden.

During the meeting, the IMF Chief also discussed the importance of enhancing the global financial safety net and supporting vulnerable economies in their recovery and development efforts.

The G20 finance ministers and central bank governors engaged in discussions on a range of economic challenges facing the world, including tackling inflation, addressing debt sustainability, and promoting growth and stability.

As the global economic landscape continues to evolve, the IMF remains committed to providing guidance and support to member countries to address their economic challenges effectively. The collaboration and coordination between nations will be crucial in navigating the current economic uncertainties and building a more resilient and sustainable global economy.