The International Monetary Fund and the World Bank began their annual spring meetings, which were overshadowed by the consequences of the pandemic and Russia’s war of aggression in Ukraine. This year’s meeting will be decisive for the financial and social future of the entire world.
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). (Photo: dpa)
Photo: Xu Jinquan
The International Monetary Fund and the World Bank began their annual spring meetings, which were overshadowed by the consequences of the pandemic and Russia’s war of aggression in Ukraine. Fighting inflation, developing the global economy, combating the pandemic and preventing a new hunger crisis in poor countries will likely be the main topics in deliberations starting on Monday. The meeting brings together finance ministers, central bank governors, officials, and finance and development experts from around the world.
Participants from Germany include Finance Minister Christian Lindner (FDP), Bundesbank President Joachim Nagel and Development Minister Svenja Schulz (SPD). The international meeting in Washington will take place partly as a face-to-face event and partly online. High-ranking politicians from Ukraine are also expected.
According to the International Monetary Fund (IMF), the Ukrainian conflict can fundamentally change the global economic order. In addition to the short-term consequences such as higher inflation as growth slows, the long-term effects are conceivable, the Washington-based organization explained on its website.
“War has the potential to fundamentally change the global economic and geopolitical system with shifts in energy trade, shifting supply chains, dismantling payment networks, and reassessing its foreign exchange reserves,” the IMF said. After the invasion of Ukraine, Western countries cut off Russia from the international payments network Swift, froze the central bank’s currency reserves and announced that it would buy less oil and gas from there in the future.
In addition to the human suffering and the large influx of refugees, the war also has economic consequences. “The conflict is a major blow to the global economy that will hurt growth and raise prices,” the International Monetary Fund said. It could also trigger uncertainty among investors, slump in assets, worse financing conditions and capital outflows from emerging markets.
The International Monetary Fund has already indicated that it will cut its previous forecast for global economic growth by 4.4 percent for the current year. New forecasts are due on April 19. Countries in the Caucasus and Central Asia that have close trade and financial ties with Russia are likely to be affected more by the expected recession there and the sanctions likely to affect trade, remittances, investment and tourism.
The International Monetary Fund has cited a higher risk of unrest in some regions, from Africa to Latin America to the Caucasus and Central Asia. At the same time, food insecurity will increase in parts of Africa and the Middle East, where countries like Egypt import 80 percent of their wheat from Russia and Ukraine.
The International Monetary Fund also expects a deep recession in Ukraine and Russia. In Europe, there may also be disruptions to natural gas imports and major disruptions to the supply chain. Capital outflows can occur in the Middle East and Africa. Countries with high levels of debt and large financing needs will also have to reckon with headwinds.
The 2007-2009 financial crisis, which was the first global recession since the 1930s, prompted many calls for action to prevent similar crises in the future. Regulations have been tightened somewhat, but the risk of instability remains due to excessive debt and speculation. The World Economic Forum’s (WEF) vision for a “Great Reset” acknowledges that what it takes to tackle these crises goes beyond economic reform, climate action or fighting the pandemic. According to the World Economic Forum, it strives to take action on seven major issues: environmental sustainability; fairer economies “technology for good”; future work and the need for retraining; Making a better healthy future with equitable access to the health care system for all; and “beyond geopolitics” – national governments working together globally.
International Monetary Fund chief Kristalina Georgieva said in a statement: “Today we are facing a new Bretton Woods moment.. A pandemic has killed more than a million people so far. An economic catastrophe that will shrink the global economy by 4.4 percent this year and remove an estimated $11 trillion from production by next year. And unspeakable human despair in the face of great turmoil and increasing poverty for the first time in decades.”
It is quite possible that, as part of the new “Bretton Woods moment”, an “IMF currency” could be introduced, for example, as the new global reserve currency. The remaining central banks will then offer their own central bank digital currencies (CBDCs), which will be pegged to the “IMF currency” (here).