MARRAKECH (Reuters) – The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, expressed deep concern over the Israel-Hamas conflict, describing it as “heartbreaking” and warning that it could cast a shadow over the already fragile global economic landscape.
Georgieva stated, “We are closely monitoring the situation’s development, particularly its impact on oil markets.” She pointed out that there have been fluctuations in oil prices and market reactions, but it remains too early to ascertain the exact economic repercussions.
She continued, “Undoubtedly, this presents a new challenge for the world economy, further darkening the already uncertain horizon – and it’s an unwelcome development.”
A senior government official from this year’s G7 group chair, Japan, had earlier indicated that the finance leaders of the Group of Seven (G7) advanced nations might discuss the global economic implications of the escalating Middle East tensions.
While it wasn’t officially listed on the agenda for the G7 meeting on Thursday, the aftermath of the Israel-Hamas conflict is likely to be a topic of discussion. Vice Finance Minister for International Affairs, Masato Kanda, acknowledged the conflict’s market impact and increasing uncertainty, which has led to a risk-off response.
Kanda noted, “We will vigilantly monitor the situation and respond as necessary.” The Japanese yen, often considered a safe haven for investors during times of instability, appreciated against other currencies in response to the conflict.
DEBT RESTRUCTURING
Georgieva disclosed that a growing consensus is emerging in discussions on sovereign debt restructuring, specifically regarding the equitable treatment of private and public creditors. She mentioned the slow progress of the Group of 20 (G20) Common Framework for debt restructuring but also noted a shorter timeframe for addressing individual country cases, which is encouraging.
She emphasized that abandoning the Common Framework would result in a “far less predictable environment” and advocated for innovative approaches, including aligning debt restructuring with the climate crisis.
ZERO INTEREST RATE LOANS
Japan was lauded by Georgieva for its substantial commitment to an IMF fund that subsidizes zero-interest rate loans for the world’s poorest countries. The contribution from Japan made it the largest single donor, accounting for 20% of the fund dedicated to covering interest payments on loans under the IMF’s Poverty Reduction and Growth Trust (PRGT).
