Nearly 30 countries have restricted trade in food, energy and other commodities since the start of the war between Russia and Ukraine, according to a monitoring by the International Monetary Fund (IMF). The present moment is described as the biggest test for the global economy since the Second World War, and the conflict in Eastern Europe is another component of the crisis created by the covid-19 pandemic.
The IMF emphasizes that only international cooperation can alleviate global problems such as “food shortages, removing barriers to growth and saving the climate”. The text was signed by Kristalina Georgieva, Managing Director of the Fund; Gipa Gopinath, Executive Vice President; and Ceyla Pazarbaşıoğlu, director of strategy, policy and review.
“The cost of further economic fragmentation would be enormous across countries,” according to the fund. For advanced economies, fragmentation would bring more inflation and productivity would suffer as partnerships with other countries deteriorated. The IMF estimates that technological fragmentation alone could result in losses of as much as 5% of GDP for many countries.
For developing countries, exports will be hampered by the restructuring of supply chains and barriers to new investment. The text also points to new transaction costs that will arise should countries develop independent payment systems. IMF executives state that the alternative to not succumbing to geoeconomic fragmentation is to reformulate the form of cooperation between economies.
No obstacle
As a first step towards this renewal, there will be a need to strengthen trade to increase the resilience of the global system. Noting that lowering trade barriers will reduce food shortages and lower food prices, the fund warns that not only countries but also companies should diversify their exports.
Also, intensifying joint efforts to deal with countries’ debts will be another priority. “As about 60% of low-income countries have significant vulnerabilities, some will need debt restructuring.”
Third, the modernization of international payments is in place as a way to guarantee growth. The IMF points out that one possible solution will be an effort to develop a publicly available digital payments infrastructure platform, including interconnecting systems with central bank-issued digital currencies (CBDCs).
The article concludes by recommending the fight against climate change, which is classified as “above all an existential challenge”. Noting the need to narrow the gap between commitments and policy adoption, the authors argue for ways to price carbon emissions through investments in renewable energies and compensate those most affected by climate change.
source: Noticias
