The global economy is at a difficult crossroads, pounded by multiple shocks including rising inflation, rising interest rates and a growing threat of a full-scale debt crisis, but IMF Managing Director Kristalina Georgieva told AFP institutions are better prepared are able to weather this storm.
Below is an excerpt from an interview conducted ahead of next week’s IMF-World Bank annual meeting in Washington:
Could the fallout in 2023 be worse than the 2008 global financial crisis?
What we had today is (a) much stronger banking sector than then and that has proven to be a source of resilience for the global economy. We also have something very important: stronger central banks, truly independent with the experience they have gained since the global financial crisis. And that shows in how central banks react to signs of inflation.
Does the IMF have enough instruments and financial resources?
In the last year since Covid, we have lent about $270 billion. We have $1 trillion in credit capacity. This gives us space to continue supporting members. Not surprisingly, we are seeing an increase in requests for fund programs. Immediately since Russia invaded Ukraine, we have provided approximately $90 billion in financial assistance to 16 countries, and we are currently reviewing approximately 21 applications… My message to countries: act early. Come to us for precautionary tools to build your position in this very difficult period to protect your economy against the risks to come.
China is a major creditor, are they doing enough to help with debt relief?
We have… very extensive cooperation with China in relation to the countries applying for treatment under the Common Framework. And we made good progress with China co-chairing the Zambia creditors’ committee and getting an agreement for Zambia, and now we expect the same for Chad. What we have to acknowledge is that Chinese institutions are still working their way through debt problems. There are many lenders in China. Only recently, the Ministry of Finance and the central bank, the People’s Bank of China, have been given the coordination mandate, and it will take some time to achieve this coordination.
But time is not our friend. And we have made it clear that we do not want individual defaults to become the gateway to a debt crisis. And it’s not in China’s interest.
