Spring Meetings: Insights from Kristalina Georgieva, IMF

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Despite headlines on inflation coming out of the spotlight, the cost-of-living crisis still affects billions as increasing geoeconomic fragmentation will continue to be an issue for governments and banks.

IMF Managing Director, Kristalina Georgieva, provided a curtain-raiser for this week’s IMF Spring Meetings. Ryan Heath, POLITICO’s Senior Editor, moderated the conversation.

Here are some top takeaways from the program:

1. The Mammoth Task of Reining in Global Inflation

Stubbornly high core inflation remains a critical risk and element of the global economic system. While the banking sector is not as unprepared as it was during the 2008 crisis, agility and coordination will be required to keep inflation at bay.  "Now is not the time for complacency" pointed out Georgieva. Central banks have interest rates as their weapon of choice, along with crafting financial policies that focus on providing liquidity where it is needed most.

2. Improving Medium-term Prospects for Growth and Fighting Fragmentation

Projected global growth could be stuck around 3% over the next five years, which is the IMF’s “lowest medium-term growth forecast since 1990.” Solutions include structural reforms and accelerating the digital revolution. Closing the gender gap could increase economic output by an average of 35% in countries with greater inequality, while an estimated $1 trillion a year is needed for renewable energy alone. Trade fragmentation could cost as high as 7% of global GDP, and up to 12% in some countries if technological decoupling between the U.S. and China is factored in. Countries should diversify their supply chains, halving potential economic losses from supply disruptions, Georgieva encouraged.

3. The Spirit of Bringing People Together is Crucial to Reducing Global Disparities

About 15% of low-income countries are in debt distress, 45% face high debt vulnerabilities, and a quarter are facing “default-like” borrowing spreads. The IMF’s goal is to provide stability through programs such as the Catastrophe Containment and Relief Trust and Poverty Reduction and Growth Trust, committing over $100 billion. Still, the most vulnerable depend on the support of their wealthier allies to realize such promises.

4. The Decoupling of the U.S. and China, and the Commitment to Multilateralism

During her recent visit to China, Georgieva met with Beijing’s new economic team, including Premier Li Qiang. “China is committed to multilateralism. They’re committed to trade that is based on rules. And they’re committed to play a constructive role vis-a-vis the developing world, including debt restructuring”. Georgieva, however, believes that more can be done with debt obligations to China as there are too many institutions involved, taking too long to solve problems, such as with the example of Ghana’s debt.

5. It Takes Two to Tango: Africa’s Tremendous Financial Crunch and the IMF’s Responsibility to Help

Zambia is being held back by unsustainable debt, Mali is fighting jihadis and climate change in the Sahel, and a robust recovery remains elusive, especially for the most vulnerable. The IMF has increased its lending in the continent thirteen-fold, but Georgieva indicated that authorities must be willing to act on difficult topics that come with IMF programs. These include taxing the wealthy, investing in human capital and young entrepreneurs, fostering IT innovation, fighting internal corruption, and being relentless with structural reforms.