WASHINGTON, US
Countries must do more to avert the costly consequences of growing global trade fragmentation and help avert a “second Cold War,” the International Monetary Fund’s managing director said Thursday.
“I am among those who know
what are the consequences of a Cold War: it is loss of talent and contribution
to the world,” Kristalina Georgieva said during a press conference at the
official start of the World Bank and IMF’s spring meetings.
“I don’t want to see that repeating,”
she said, adding that the world should “rationally accept there will be some
cost, there will be some fragmentation, but keep these costs low.”
Georgieva was born and raised
in Bulgaria, a former Soviet satellite state.
Multilateral institutions like
the World Bank and IMF have an important role to play in preventing the world
from splintering into different blocs with severe economic consequences, she
said.
An IMF report earlier this
week predicted that growing trade fragmentation resulting from events like
Brexit, the US-China trade war and the Russian invasion of Ukraine could make
the global economy as much as seven percent smaller than it otherwise would
have been.
Policymakers had a crucial
role to play to “defend the interests” of their citizens, Georgieva said.
“If we fail to be more
rational, then people everywhere will be worse off,” she said.
Progress has been made on a
number of key issues for the World Bank and IMF, the Bank’s outgoing president,
David Malpass, said earlier Thursday at an event marking the official start of
the spring meetings.
Member states agreed on
several steps to boost the World Bank’s financial capacity, he said, freeing it
up to lend “as much as $50 billion of new financing” over the next decade.
French President Emmanuel
Macron will host a summit in June which will look to extend some of these new
rules to other financial institutions and build a “new financial framework,”
the country’s finance minister, Bruno Le Maire, told reporters at the IMF early
Thursday.
Progress was also made during
a debt roundtable discussion on Wednesday, Malpass said. For the first time,
these talks included not only creditor countries but also the private sector,
and representatives from Zambia, Ghana, Ethiopia and Sri Lanka, which are all
facing debt challenges.
India currently holds the
presidency of the G-20 group of countries, and co-chaired Wednesday’s meeting.
Indian Finance Minister Nirmala Sitharaman said Thursday that she expected a
resolution for “many” debtor countries “at the earliest” opportunity.
The Bank and IMF’s leaders
said progress had also been made on replenishing lending facilities for
low-income countries which have been depleted by the twin impact of the
Covid-19 pandemic and Russia’s invasion of Ukraine.
Ireland, Saudi Arabia,
Britain, Portugal and Japan have all already come forward with “substantial new
pledges or contributions” towards replenishing these funds in recent days,
Georgieva said.
Georgieva and Malpass both warned
that inflation remained too high in many countries around the world.
“We expect central banks to
stay the course in the fight against inflation, holding a tight stance to
prevent a de-anchoring of inflation expectations,” Georgieva said.
Governments also needed to
work to reduce their budget deficits, and do more to improve sluggish growth
prospects for the world economy in the medium term, she added.
Georgieva called on member
states to speed up digital transformation in many countries, improve the
business environment, and accelerate the green energy transition.
“We estimate $1 trillion a
year is needed just for renewable energy and investment that can translate into
growth and jobs,” she said. - AFP
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