Israel-Hamas conflict is 'new cloud' darkening economic outlook: IMF chief
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Georgieva says debt restructuring process is making progress
MARRAKECH (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva on Thursday said the Israel-Hamas conflict was "heart breaking" and threatened to darken the already tepid global economic outlook.
"We are closely monitoring how the situation evolves, how it is affecting, especially oil markets," Georgieva said. She said there had been some fluctuations in oil prices and reactions in markets but it was too early to predict the economic impact.
"Very clearly, this is a new cloud on not the safest horizon for the world economy, a new cloud darkening this horizon - and of course, not needed," she told a news conference at the annual meetings of the IMF and World Bank.
Earlier on Wednesday, a senior government official of this year's group chair Japan had said finance leaders of the Group of Seven (G7) advanced nations may discuss the impact escalating tensions in the Middle East could have on the global economy.
While not included in the official agenda of Thursday's G7 gathering, there is a good chance the fallout from the conflict between Israel and Palestinian Islamist group Hamas will be discussed, Vice Finance Minister for International Affairs Masato Kanda told reporters.
"The conflict is already affecting markets in the form of a risk-off reaction due to heightening uncertainty," Kanda said.
"We'll closely monitor the situation and respond as needed," he added.
The Japanese yen, which tends to be an investor safe haven in times of uncertainty, rose against other currencies this week as investors keep a close eye on the conflict.
DEBT RESTRUCTURING
Georgieva said consensus was growing in sovereign debt restructuring discussions on issues such as the comparability of treatment of private and public creditors.
She added that the Group of 20 Common Framework for debt restructuring had been slow to deliver results, but it was encouraging that the time for dealing with individual country cases was now growing shorter.
Throwing out the Common Framework would put the world in a "much less predictable environment," she said, adding creative approaches were also needed, including moves to better align debt restructuring with the climate crisis.
ZERO INTEREST RATE LOANS
Japan made a "very impressive pledge" to an IMF account that provides subsidies to enable zero-interest rate loans to the poorest countries, Georgieva.
The pledge made Japan the single largest donor – accounting for 20 per cent – of the account that covers the interest payments on loans under the fund's Poverty Reduction and Growth Trust (PRGT), she said.
