BUSINESS

IMF chief warns against ‘second cold war’ amid BRICS’ challenge to USD, China-US trade tensions

Kristalina Georgieva, the International Monetary Fund’s managing director said on Thursday that countries must do more to avert the costly consequences of growing global trade fragmentation and help avert a “second Cold War.”

Georgieva’s comments came 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.”

She said that multilateral institutions like the World Bank and IMF have an important role to play in preventing the world from dividing into different blocs with severe economic consequences.

An IMF report earlier this week predicted that growing trade fragmentation resulting from events like Brexit, the US-China trade war and the Russa-Ukraine war could make the global economy as much as seven per cent 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.  

Meanwhile, the French President Emmanuel Macron will host a summit in June which will deliberate upon building a “new financial framework,” the country’s finance minister, Bruno Le Maire, told reporters at the IMF early Thursday.

The Bank’s outgoing president, David Malpass, said earlier that progress has been made on a number of key issues for the World Bank and IMF. 

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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.

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.

(With inputs from agencies)

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