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Buckle up, and keep going, says IMF chief as outlook for world economy dims


After a week hosting the Monetary Fund’s annual gathering of economic leaders, Managing Director summed it up for the 190 member countries: “Buckle up, and keep going.”

As the talks ended in Washington on Saturday, finance ministers and central bankers seeking to sustain the world economy’s shaky recovery from the pandemic worried Russia’s invasion of Ukraine continues to destabilize Europe and stymies efforts to boost growth.

But the stalwarts of the post-World War II global order also took a scalding.

The UK’s whiplash on tax cuts — which rattled markets and led to the ouster of Chancellor of the Exchequer Kwasi Kwarteng midway through the gathering — and the US Federal Reserve’s dollar-boosting interest-rate hikes also dominated discussions.

Members of the group also sparred over Saudi Arabia’s decision to lead an OPEC+ oil output cut, which was seen risky as Europe struggles with an energy crisis and the US tries to rein in the hottest inflation in four decades.

Doug Rediker, a former IMF executive board member, noted a lack of high-level engagement from China, the second-biggest and top creditor to developing countries, “stymied the ability to make actual progress.”

“It was an overall fairly pessimistic week,” he said.

Here is a rundown of the key takeaways:

War, Fragmentation

Similar to the IMF’s spring meetings in April, the G-20 failed to issue a communique given the split on Russia.

Russia also prevented the IMF’s advisory body from reaching consensus over a joint readout. “I regret very much that due to Russia’s blocking any chance of consensus, we don’t have unanimity,” said Spanish Minister Nadia Calvino, who chairs the panel.

Speaking at the same briefing, Georgieva said “the predominant mood in the room was we cannot possibly allow fragmentation to happen because everybody would be poorer.” It would be “devastating for low-income and poor emerging markets.”

Debt Deadlock

With about 60% of the world’s 75 poorest countries already in or at risk of debt distress, finance chiefs ranging from Treasury Secretary Janet Yellen to Zambia’s Situmbeko Musokotwane urged richer nations to do more to help vulnerable ones restructure their debt.

Yellen criticized the slow progress on a G-20 initiative to bring creditors from the Paris Club of traditional rich countries together with China to try to restructure the debts of certain low-income countries. China hasn’t participated in the effort.

“What we face today is a complex situation that’s not going to be easily resolved,” said Martin Guzman, a former Argentine finance minister. “I don’t think we’re going to have a proper resolution of that crisis until there is an formal framework for solving the crisis when we’re not going to have it in the near future.”

Rates, Recession and the Dollar

The IMF lowered its outlook for global economic growth, warning that central bank efforts to cool inflation might cause even greater harm. That’s because higher rates slow business activity and hurt the economy, seen as a necessary trade-off to get prices under control.

“People expect central banks to keep pressing the brake until something actually breaks in the expansion,” economists at JPMorgan Chase & Co. wrote over the weekend. “The biggest risk remains a central-bank-induced recession.”

The Fed’s rate hikes have helped spur a surge in the dollar, which is punishing other countries by raising the cost of their imports and driving up their inflation, setting off their own cycle of tightening. That left Fed officials hearing a constant barrage of concerns from other nations about how damaging a strong greenback has been, although the US central bank seems set to keep hiking.

“Everyone seemed very worried,” said Paulo Guedes, Brazil’s minister. “Some were saying central bankers need to have hearts, and remember that behind every rate increase there’s people suffering.”

Policy Coordination

On the other end of the policy spectrum, fiscal chiefs were urged to coordinate with their monetary policy counterparts to ensure they weren’t working at cross purposes.

The IMF’s Georgieva urged finance ministries to come up with “targeted and temporary” measures to ease the pain caused by higher rates, without complicating the efforts of central banks, a sentiment echoed by European Union Economic Affairs Commissioner Paolo Gentiloni, who cautioned that not all countries in the bloc are managing to avoid a clash between the two.

“One of the themes of this week for the advanced economies is how do you match those two policies — the fiscal and monetary policy — so they don’t conflict with each other,” World Bank chief David Malpass told Bloomberg Television.


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