Development Committee: The Managing Director's Written Statement April 2022
Policy Papers, April 24, 2022
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- Development Committee: The Managing Director's Written Statement April 2022
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Bibliographic details
- Published: April 24, 2022
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9781513507750.007
Global economic impact of the war in Ukraine
- The war in Ukraine "risks derailing the global economic recovery" at a time when many countries have yet to overcome the consequences of the Covid-19 pandemic.
- Disruptions have already "a severe impact on commodity markets, trade, and financial conditions."
- "Inflation has become a major challenge in many countries and is adding to social pressures."
- The combination of shocks "amplifies complex policy trade-offs that require astute macroeconomic management."
Effects on Emerging Market and Developing Economies (EMDEs) and Low-Income Developing Countries (LIDCs)
- For EMDEs, policy adjustments include "preparing for higher interest rates that would translate into costlier terms of borrowing."
- "Fuel and food price increases as well as food insecurity affect vulnerable populations the most, especially in low-income developing countries (LIDCs)."
- "Many LIDCs have only minimal or no policy space to absorb the war’s economic and financial spillovers."
- LIDCs face "often elevated debt burdens" and need international support to finance priority expenditures.
Policy recommendations and IMF role
- Reallocating spending and raising more revenues is "paramount."
- Advancing reforms that "promote resilience" is emphasized.
- "LIDCs also need support from the international community to finance priority expenditures and deal with often elevated debt burdens."
- "Multilateral cooperation is more important than ever, and the IMF stands ready to help its members through policy advice, capacity development, and, where needed, financial support."
Summary points and thematic tags
- Summary (verbatim): The war in Ukraine risks derailing the global economic recovery at a time when many countries have yet to overcome the consequences of the Covid-19 pandemic. Disruptions have already a severe impact on commodity markets, trade, and financial conditions, while inflation has become a major challenge in many countries and is adding to social pressures. The combination of shocks amplifies complex policy trade-offs that require astute macroeconomic management, for Emerging Market and Developing Economies (EMDEs), this includes preparing for higher interest rates that would translate into costlier terms of borrowing. Fuel and food price increases as well as food insecurity affect vulnerable populations the most, especially in low-income developing countries (LIDCs). Moreover, many LIDCs have only minimal or no policy space to absorb the war’s economic and financial spillovers. Reallocating spending and raising more revenues is paramount, as is advancing reforms that promote resilience. However, LIDCs also need support from the international community to finance priority expenditures and deal with often elevated debt burdens. Multilateral cooperation is more important than ever, and the IMF stands ready to help its members through policy advice, capacity development, and, where needed, financial support.
- Subject tags: Climate change; COVID-19; Debt sustainability; Environment; External debt; Food prices; Health; Inflation; Monetary policy; Political economy; Prices
- Keywords: Climate change; COVID-19; Debt sustainability; food insecurity affect; Food prices; Global; Inflation; lending activity; multilateral cooperation; policy trade-off; priority expenditure
Content in this bundle
- Policy Paper