IMF policy committee warns war, trade tensions and rising debt threaten global economy

The policy-setting committee of the International Monetary Fund has warned that economic growth has turned out stronger than expected, but the global economy still faces risks from war, trade tensions, disruption to energy supplies and rising debt.

A statement was issued on Saturday after the 54th meeting in Bangkok. In it, the International Monetary and Financial Committee (IMFC) said economic stability cannot be taken for granted, as governments are grappling with several geopolitical and economic challenges at once.

In the committee's words, "the global economy has absorbed recent shocks better than expected", but it would not be right to assume this will always remain so. The statement was issued under the chairmanship of Saudi Arabia's Finance Minister Mohammed Al-Jadaan. It refers to the economic impact of ongoing conflicts, disruption to global supply chains and growing pressure on vulnerable countries.

According to the committee, wars and conflicts are causing heavy human and economic losses, and poorer countries are bearing the brunt.

The committee also cautioned that rising geopolitical tensions could further disrupt international trade routes, push up prices and worsen energy and food security problems. The assessment comes at a time of growing uncertainty over global energy supplies, trade policies and the economic impact of prolonged conflicts. The committee said that despite repeated shocks, the global economy has largely sustained steady growth, but governments' capacity to deal with further disruptions has weakened.

The committee listed some more risks to financial stability. These include rising returns on government bonds, high government debt and refinancing pressure, that is, taking new loans to repay old ones. These conditions could be especially difficult for countries that need to borrow on a large scale or have limited access to international capital markets.

The committee also discussed the growing influence of technologies such as advanced artificial intelligence. It acknowledged that rapid technological progress is boosting investment and trade and could improve productivity. But it also warned that uncertainty over the economic and financial consequences of the technology could add to existing vulnerabilities.

The IMFC stressed the need for strong macroeconomic policies, credible financial frameworks and sustained cooperation between governments and international financial institutions. It urged countries to address their fiscal vulnerabilities, protect vulnerable sections and maintain investment needed for long-term economic growth. It also said central bank independence is important for keeping policy credible and inflation expectations stable.

The statement also welcomed the "Bangkok Blueprint", an initiative launched to keep digital finance secure, strengthen cybersecurity and promote international efforts against digital fraud.

The committee called for greater cooperation to address large global imbalances, trade tensions and other distortions affecting international trade. The statement also stressed the need for secure and resilient energy supplies and the importance of freedom of navigation for global economic stability. The committee reiterated its commitment to improving sovereign debt restructuring, particularly for low-income countries and vulnerable middle-income economies. It called for greater transparency from borrowers and lenders and for a debt restructuring framework that is predictable.