‘Buckle up’ as inflation fight threatens growth, IMF chief warns

Published Thu, Sep 22, 2022 · 07:52 AM

INTERNATIONAL Monetary Fund (IMF) managing director Kristalina Georgieva said she expects slowing growth from higher borrowing costs will make next year feel like a recession for millions of people, even if the global economy avoids a technical downturn.

“Increased interest rates will bite and we will see the impact on growth,” Georgieva said in an interview on Wednesday (Sep 21) in New York with Bloomberg Television’s Francine Lacqua.

“For hundreds of millions of people it will feel like a recession, so buckle up,” she said. “Hopefully, if we get inflation under control, then we can see a foundation for growth and recovery.”

Surging prices have forced central banks worldwide to tighten monetary policy, which is expected to cool inflation but risks tipping economies into recession. In the US, Federal Reserve officials pivoted to aggressively lifting rates to tame the fastest price increases in 4 decades.

Rate hikes in the US have also helped strengthen the dollar, which makes it harder for countries to service dollar-denominated debt and worsens their own inflation pain.

Georgieva also said in the interview there was “no doubt” the IMF’s board would soon approve a so-called food-shock window, a mechanism to help countries hit by the supply crisis spurred by Russia’s invasion of Ukraine, which has disrupted grain shipments.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

VIEW ALL

The war-torn country could be one of those to benefit from the effort, Georgieva said on Sep 13 after speaking with President Volodymyr Zelensky. Ukraine could get aid similar to the US$1.4 billion in emergency resources received in March, just days after the war began, Georgieva said previously. The nation faces a fiscal gap of as much US$5 billion monthly, according to government’s estimates. Kyiv is also scheduled to repay about US$4 billion in debt to the IMF by 2024.

The IMF will start a mission to Ukraine in October, Prime Minister Denys Shmyhal said on Tuesday. Last week, he criticised the Washington-based lender for being too slow to reach a new deal now that Ukraine is fighting back against a full-scale invasion by President Vladimir Putin’s troops, which started in February.

Kyiv officially applied for a new IMF loan programme in August and hoped to get an initial disbursement as early as November. BLOOMBERG

KEYWORDS IN THIS ARTICLE

READ MORE

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to  t.me/BizTimes

International

SUPPORT SOUTH-EAST ASIA'S LEADING FINANCIAL DAILY

Get the latest coverage and full access to all BT premium content.

SUBSCRIBE NOW

Browse corporate subscription here