IMF: Russia has not been suspended, economic impact of conflict and post-Covid recovery must be addressed

“Russia has not been suspended from the International Monetary Fund because dialogue is needed,” Georgieva said. “For this conflict to end, there has to be dialogue”.

“In the IMF’s articles of agreement, countries only have economic and financial obligations to the fund. Those are currently being followed. We want to stick to rules-based governance,” she explained.

Referring to the repercussions of the Russia-Ukraine conflict, Georgieva said that “it goes far and fast.”

She added that the conflict is devastating and warned that the situation could possibly spill over into the rest of the world.

The IMF has a lending capacity of $750 billion. Capacity increased after the fund issued special drawing rights (SDRs) worth $650 billion last year, she explained.

SDRs are international reserve assets created by the IMF to supplement the official reserves of its member countries. Georgieva described them as a de facto grant, according to state-run news agency, Wam.

IMF support to low-income countries

The managing director of the IMF, Kristalina Georgieva explained that the number of low-income countries that are in a ‘distressing’ financial situation has doubled since 2015, principally as a result of the pandemic and its economic consequences.

“60 percent of low-income countries are in deep distress and currently need funds, as opposed to 30 percent in 2015,” she said.

Georgieva also addressed global inflationary concerns. While initial IMF advice was to raise interest rates to avoid the spectre of inflation, the institution changed its advice in October 2021, asking governments to exercise monetary tightening with caution.

“We did not [initially] expect supply chains to be so fragile. Once we found out supply chain interruptions are going to be longer – in October last year – we change our advice,” she said, adding that supply chain interruptions had translated to a 1.5 percent rise in inflation.

“I worry for the countries that have high level of debt and do not have recovery success,” Georgieva added.

With many countries reeling under a large debt burden, the IMF has recognised the need for debt restructuring – including write-offs – for some nations, while for others, Georgieva advised debt reprofiling, so they can pay back their loans over longer time.

The fund’s priority over the next 12 months is to identify the highest risks ahead and be ready for them.

“Acting is important, but acting swiftly makes a difference. The fund acted swiftly when the pandemic hit, and I promise you that the fund is there for our members now,” Georgieva concluded.