Managing Director of the International Monetary Fund, Kristalina Georgieva speaking to journalists in Chile. (Photo: CMC)
SANTIAGO, Chile (CMC) — The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, has expressed concerns that low income countries are falling further behind in a more fragmented world with less trade and less fluidity of the flow of capital.
“So for the first time in many decades, what used to be a convergence process, poorer countries doing better and coming closer to those that are ahead; for the first time this process seems to be reversing,” Georgieva said. She was speaking during a press conference with journalists attending an IMF-sponsored training programme on financial reporting being conducted by the Thomson Reuters Foundation.
“What does that all mean? It means that economic cooperation, global cooperation in this uncertain world, a world of divergence is so much more important. And yet, what we see is a more fragmented world with less trade, and less fluidity of the flow of capital to go into countries that need this capital the most,” she said.
Georgieva said the global economy has gone through “an exceptionally complicated time over the last years” with the pandemic followed by the war in Ukraine, a cost of living crisis and the Israeli-Gaza conflict, all of which have implications for the economy.
“And often these implications swing from one position to another very quickly, making it so difficult for ordinary people to figure out what is happening in the world and what that means for them,” Georgieva added.
She said that despite the tremendous uncertainty and the repetitive shocks, the world economy has proven to be remarkably resilient, noting that the most recent projections for global growth were slightly upgraded to 3.2 per cent this year, about the same as for 2025.
“Secondly, what we have seen is that inflation that has been hitting especially poor people dramatically is going down almost everywhere. But it is not gone. And that means attention to bringing inflation down remains an overwhelming priority in many countries.”
Georgieva’s third point was that while growth is in positive territory, it is weak by historical standards.
She highlighted that global growth over the next five years is slightly over three per cent in comparison to the previous decade before COVID when the average was 3.8 per cent.
The IMF chief said this slow growth means that in many places, the aspirations of people for a higher standard of living would be hard to meet.
“And on top of it, we live at a time of growing divergence in economic fortunes within economic groups of countries across economic groups of countries and, of course, within countries.”
She said that in the advanced economies, the United States is doing really well whereas the Eurozone is falling somewhat behind.
“When we look at emerging market economies, countries like India, Indonesia, most of the ASEAN countries, Mexico here in Latin America are doing quite well.
“But there are many economies in the emerging market world that are struggling…and the most troubling group of countries are low-income countries that as a group are falling further behind,” Georgieva stated.
Georgieva said the most important role of the IMF in light of global realities “is to keep the world together, to bring our members together, present them with objective, unbiased analysis of the economic situation and help them define policies for this fairly, suddenly changing world that we all operate in”.
She said it has always been very important for the IMF to be “even-handed, to treat all members equally, even more so today, when we are faced with that more fragmented world”.
The IMF, Georgieva said, is “the only institution that is trusted to keep a hand on the pulse of each and every one of our members, collect the vital signs of the economies and on that basis, provide advice on the country level, and then aggregate the picture for the world and present it for everybody to see”.
She said the IMF is a financial institution and has to support effectively members who face balance of payment problems.
“And I can say quite proudly that the IMF, since we got hit by COVID, has stepped up financially and acted with exceptional speed and scale,” Georgieva said, adding that since the pandemic, the IMF has provided US$360 billion in lending to an estimated 100 countries.
“And we also have done the largest allocation of Special Drawing Rights (SDR) in our history — $650 billion equivalent. In other words, in total, we have injected a trillion dollars in liquidity and reserves, which for many of our members, was absolutely essential to retain economic activity.”