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(PHOTO: IMF PHOTO)
Russia’s invasion of Ukraine is taking a horrific human toll, but the war is also fueling inflation and shaking financial confidence with far-reaching consequences for the world economy, IMF Managing Director Kristalina Georgieva said on Thursday.
The impact of the war, sanctions and spillovers means that the IMF is likely to downgrade its forecasts for global growth when it releases its next outlook in April, Georgieva told a media roundtable.
In Ukraine itself, there has been massive damage to infrastructure, supplies of food, medicine and electricity are running short, and millions of refugees are fleeing the country, she said.
“Even if hostilities were to end right now, the recovery and reconstruction costs are already massive.”
--Emergency Financing: On Wednesday the IMF’s Executive Board approved $1.4 billion in emergency financing for Ukraine to meet urgent balance of payment needs arising from the war and to provide critical support in the short term while playing a catalytic role for financing from other partners.
This followed a $2.7 billion allocation in Special Drawing Rights issued to Ukraine as part of last year’s general allocation to all members and an additional $700 million disbursed in December.
“Financing needs are large, urgent, and could rise significantly as the war continues,” Georgieva said.
--Global Growth:Â The IMF is likely to cut its global growth forecast to account for the economic consequences of the conflict, Georgieva told CNBC in an interview.
"We think that we would be downgrading our growth projections as a result of the crisis, but we still expect the world to be in positive growth territory."
In earlier comments, Georgieva said that higher prices for commodities, especially energy and food, are fanning existing inflation pressures.
This will reduce purchasing power, shake consumer and financial confidence, and increase pressures on the real economy.
The crisis comes at a delicate time for Africa, just as the continent is beginning to recover from the ravages of the pandemic, Georgieva has said.
--Policy Tradeoffs: Monetary authorities will need to carefully monitor the pass-through of rising international prices to domestic inflation to calibrate appropriate responses, according to IMF staff.
Fiscal policy will also need to support the most vulnerable households to help offset rising living costs.
“This crisis will create complex policy tradeoffs further complicating the policy landscape as the world economy recovers from the pandemic crisis.”
📺 Watch Georgieva talk to CNBC about how money sent to Ukraine is being spent, Russian debt, global downgrades, and more.
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Find all the IMF's statements, remarks and social media posts about the Ukraine conflict here.
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International Women's Day
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(IMAGE: CANVA / ANADABGD GETTY IMAGES SIGNATURE / WORDFOTO)
International Women’s Day, first recognized by the United Nations in 1977, grew from early 1900s labor movements for better working conditions and women’s right to work. Now, as the continuing pandemic puts female roles in the labor market again in flux, attention to gender has never been more urgent.
“My heart goes to all the women bracing the horror of war, protecting their children, caring for the wounded, sacrificing for their countries, their communities, their families,” IMF Managing Director Kristalina Georgieva said in remarks to a special session of the United Nations Security Council on Tuesday.
“Today this is the fate of our sisters in Ukraine. We admire your courage, we share your pain, we stand with you.”
--Gender Round-Up: IMF research has consistently underscored the benefits of equality, including greater productivity and financial stability. To mark this International Women’s Day, we presented a round-up of our most recent blogs, podcasts, and research on gender, including how tax policy affects gender equality, the legal impediments to women’s economic empowerment, and unleashing the potential of women and girls’ human capital in Africa.
🎙️ Listen to a podcast of Georgieva's remarks to the United Nations Security Council in which she stresses women's economic inclusion as a key to building peace.
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(PHOTO: ISTOCK / FRANCESCOCH)
The growth of the social state is a puzzle for modern economics but has deep evolutionary roots, University of California, Berkeley, professor Emmanuel Saez writes in the March issue of Finance & Development Magazine.
According to standard economic models, rational individuals in a market economy with functioning credit markets should be able to manage largely on their own, but this has never been a reality for anyone except the wealthy elite.
“Standard economics gets its logic backward: it worries about the growth effects of large social states, whereas their rise in the middle of the 20th century came with extraordinary and equitable growth in Western countries.”
“It worries about the social state reducing individual incentives to work, whereas societies voluntarily decided to reduce work for the young and the old through mass education and retirement benefits and for the overworked through labor regulations.”
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Check out our newly published March Issue of Finance & Development, which focuses on "Rethinking Fiscal: Public Finance and Fairness in a Changed World".
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