## Facing Crisis Upon Crisis: How the World Can Respond

_IMF News, April 14, 2022_

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**Canonical URL:** [Facing Crisis Upon Crisis: How the World Can Respond](https://www.imf.org/en/news/articles/2022/04/14/sp041422-curtain-raiser-sm2022)

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## Bibliographic details
- Authors: Kristalina Georgieva
- Published: April 14, 2022

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### Introduction
- Speaker: Kristalina Georgieva, IMF Managing Director.
- Location and date: Washington, DC, April 14, 2022.
- Core framing: The world faces a crisis on top of a crisis—first the pandemic, and now Russia’s invasion of Ukraine—compounded by a growing risk of fragmentation of the world economy into geopolitical blocs.
- Human impact highlighted:
  - Over 11 million displaced people from Ukraine.
  - The war is hitting the world’s most vulnerable people hardest, exacerbating existing struggles from lower incomes and higher energy and food prices.
- Key systemic risk: Fragmentation into different trade and technology standards, payment systems, and reserve currencies would incur painful adjustment costs, with poor countries and poor people bearing the brunt.

### Bigger Challenges, More Difficult Choices
- Pre-war and pandemic context:
  - In January, the IMF cut its global growth forecast to 4.4 percent for 2022.
  - Since then, the outlook deteriorated substantially due to the war, inflation, financial tightening, and frequent, wide-ranging lockdowns in China.
  - IMF will be projecting a further downgrade in global growth for both 2022 and 2023.
- Scope of impact:
  - The impact of the war will contribute to forecast downgrades for 143 economies this year—accounting for 86 percent of global GDP.
  - Prospects vary greatly across countries: catastrophic economic losses in Ukraine; a severe contraction in Russia; spillovers via commodity, trade, and financial channels for many others.
- Commodity and inflation effects:
  - Before the war, Russia and Ukraine provided 28 percent of global wheat exports.
  - Russia and Belarus supplied 40 percent of exports of potash.
  - Grain and corn prices are soaring; food insecurity is a grave concern.
  - For advanced economies, inflation is reaching a four-decade high and is now projected to remain elevated for longer than previously estimated.
- Medium-term and distributional consequences:
  - Output for most countries is now expected to take even longer to return to its pre-pandemic trend.
  - Most emerging and developing countries face scarring from the pandemic, including job losses and learning losses—costs borne mostly by women and young people.
- Elevated uncertainty: The outlook is extraordinarily uncertain—beyond normal range—with risks that the war and sanctions could escalate, new Covid variants could emerge, and crops could fail.
- Policy dilemma posed succinctly: How can policymakers rein in high inflation and rising debt, while maintaining critical spending and building foundations for durable growth?

### Policy Action to Safeguard the Recovery and Build Resilience
- Immediate priorities (enumerated):
  - End the war in Ukraine.
  - Confront the pandemic.
  - Tackle inflation and debt.
- End the war / support Ukraine and neighbors:
  - IMF emergency financing to Ukraine: $1.4 billion to help meet immediate spending needs.
  - IMF launched a special account to provide a secure way to deliver further funding to Ukraine.
  - Preparations underway, with international partners, for massive reconstruction efforts.
  - Support to neighbors: example—Moldova, a country of just 2.6 million people which has already welcomed over 400,000 refugees.
  - IMF is stepping up support for the 20 percent of our member countries experiencing fragility or conflict.
- Confront Covid:
  - IMF staff and partners’ recent analysis: a comprehensive toolkit (vaccines, testing, anti-viral treatments) can be deployed for a modest $15 billion this year, and $10 billion each year thereafter.
  - Principle: health security is economic security.
- Tackle inflation:
  - Central banks should act decisively, monitor the economy closely, adjust policy appropriately, and communicate clearly.
  - Emerging and developing economies face added risk from spillovers of monetary tightening in advanced economies, including higher borrowing costs and risk of capital outflows.
  - Country-level tools recommended include extending debt maturities, exchange rate flexibility, foreign exchange interventions, and capital flow management measures—aligned with the Fund’s recently updated institutional view.
  - International efforts needed to help economies move safely through the monetary tightening cycle.
  - Liquidity importance:
    - IMF lending—currently over $300 billion.
    - Last summer’s $650 billion SDR allocation.
    - Low-income countries are using up to 40 percent of their SDRs on Covid-related priorities, like vaccines and other essential spending.
- Address debt:
  - Spending must be carefully prioritized—on safety nets, health, and education—and targeted to the most vulnerable.
  - A credible medium-term fiscal path, including equitable tax policies, is key to preserving debt sustainability while delivering support.
  - For many countries—especially among the 60 percent of low-income nations already in or near debt distress—debt restructuring will be required.
  - The G-20’s Common Framework for debt treatment must be improved with clear procedures and timelines for debtors and creditors, and expanded to other highly-indebted vulnerable countries that can benefit from creditor coordination.
  - Timely and orderly debt resolution is in the interest of both debtors and creditors.
- Structural transformations to seize:
  - Green transition:
    - Actions required: carbon pricing, investment in renewables, and compensation/new opportunities for those adversely affected by the green transition.
    - These measures can bolster energy security.
    - IMF action: creation of a new Resilience and Sustainability Trust to provide affordable longer-term funding and catalyze private investment to address macro-critical challenges such as climate change—and future pandemics.
  - Digital revolution:
    - Priorities: reskilling workers, unlocking innovations such as central bank digital currencies, and strengthening regulatory frameworks around crypto-assets.
    - Over 100 of our member countries are actively investigating this area; the IMF is assisting with policy advice and capacity building.
    - The digital future is presented as delivering new sources of productivity, growth, and jobs.

### Conclusion: Indivisible
- Synthesis of risks: In seven weeks the world experienced a second major crisis—a war on top of a pandemic—risking erosion of progress made recovering from Covid, and threatened further by fragmentation into geopolitical and economic blocs.
- Interconnected consequences stressed: war in Europe can create hunger in Africa; pandemics and emissions are global in impact.
- Core prescription: The only effective remedy is international cooperation; efforts to solve global challenges must be indivisible.
- Institutional role: With near universal membership, the IMF positions itself as a tried and tested platform for global collaboration, providing policy advice and financing to those hardest hit.
- Historical resonance: Quote from Bretton Woods context—U.S. Treasury Secretary Henry Morgenthau’s “elementary economic axiom”: “Prosperity, like peace, is indivisible.”
- Closing: The challenges are indivisible; so must be our efforts to solve them. Thank you.

*Source: Speech by Kristalina Georgieva, “Facing Crisis Upon Crisis: How the World Can Respond,” Washington, DC, April 14, 2022.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
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- [Ukraine and the IMF](http://www.imf.org/external/country/UKR/index.htm)
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_Source: https://www.imf.org/en/news/articles/2022/04/14/sp041422-curtain-raiser-sm2022_