By Adedapo Adesanya
As policymakers and business leaders gather at the World Economic Forum in Davos, the International Monetary Fund (IMF) has tasked them to focus on trade, debt, and climate action, which are what matter most amid the current global reality.
In a new blog by its Managing Director, Ms Kristalina Georgieva, titled Confronting Fragmentation Where It Matters Most: Trade, Debt, and Climate Action, the lender called for more actions as the global economic slowdown, climate change, cost-of-living crisis, high debt levels, geopolitical tensions have made it even more difficult to address vital global issues.
She noted that, “Dislocations from trade and technological change have harmed some communities. Public support for economic openness has declined in several countries. And since the global financial crisis, cross-border flows of goods and capital have been levelling-off.”
The IMF chief further warned that trade tensions between the world’s two largest economies – the United States and China – have been rising amid a global surge in new trade restrictions, in addition to Russia’s invasion of Ukraine, which “has caused not only human suffering, but also massive disruptions of financial, food, and energy flows across the globe.”
This has been further compounded by supply chain disruptions during the COVID-19 pandemic have also increased the focus on economic security and making supply chains more resilient.
These and more could see countries lose up to 12 per cent of GDP, with lower-income consumers in advanced economies would lose access to cheaper imported goods while emerging and developing economies would no longer benefit from technology spillovers that have boosted productivity growth and living standards.
“Instead of catching up to advanced economy income levels, the developing world would fall further behind.
“Small, open-market economies would be hard-hit. Most of Asia would suffer due to its heavy reliance on open trade,” she noted.
To confront this, she presented three priorities – strengthening the international trade system, helping vulnerable countries with debt, and setting up climate action.
She said, “Strengthening the role of trade in the global economy begins with vigorous World Trade Organisation reform and by concluding WTO-based market-opening agreements. But finding agreement on complex trade issues remains challenging, given the diverse World Trade Organisation membership, increasing complexity of trade policy, and heightened geopolitical tensions.”
To support those with debt, she said the IMF, World Bank and Indian G20 presidency are working with borrowers and public and private creditors to quickly establish a global sovereign debt roundtable, where we can discuss current shortcomings and make progress to address them.
For climate action, she said a potential game-changer could be an international carbon price floor among major emitters. It would focus on carbon pricing or equivalent measures in an equitable process that would complement and reinforce the Paris Agreement.
