Sentiments at the International Monetary Fund have long been pessimistic. In just the last year alone, the global body responsible for keeping the world economy stable has kept a gloomy outlook.
Of course, the data certainly supports such a negative attitude. Supply-chain obstacles have contributed to—but are not solely responsible for—rising inflationary concerns. In addition to this, the new Omicron variant has complicated a return to somewhat normal operations, as things started to look better towards the end of last year.
Unfortunately, the current military conflict in Ukraine has thrown a giant, proverbial wrench in the mix. Indeed, this was not an issue the Washington-based advisory group had anticipated when it published its most recent international assessment only a few months ago.
Currently, then, the IMF has noted that the Russian invasion of Ukraine has led to slower growth and higher inflation, though metrics suggest these were already in progress to grow. Concurrently, though, the IMF has also warned the war has already exacerbated at least two complicated policy obstacles.
First of all, the IMF advises that central banks—which include the Bank of England and the US Federal Reserve—have to figure out a way to address the astronomic rise in the cost of living without depleting the as-yet incomplete recovery efforts from the pandemic.
Secondly, and most importantly, the IMF advises that finance ministers must focus on protecting the most vulnerable while repairing the fiscal damages that came out of public Covid-19 spending. Of course, the IMF appreciates just how difficult this is, despite its necessity.
Accordingly, the organization said, “Following a huge and necessary fiscal expansion in many countries during the pandemic, debt levels are at all-time highs and governments are more exposed than ever to higher interest rates.”
This, they go on to say, reinforces the need to consolidate existing debts. More importantly, though, the IMF notes that this effort should not prevent international governments from placing higher priority of spending with well-targeted support for the most vulnerable. This includes “refugees, those struggling because of commodity price spikes, and those affected by the pandemic.”