IMF chief says Fed’s interest rate hikes could affect weaker economies

• Kristalina Georgieva asked countries with higher dollar-dominated debt to act sooner

• She said that navigating global economy through 2022 would be complicated owing to different conditions in every country

Managing director of the International Monetary Fund (IMF), Kristalina Georgieva, addressed the Davos Agenda virtual event on Friday and said that an increase in U.S. rates could affect countries with higher levels of dollar-dominated debt.

The IMF official said that interest rate hikes by the Federal Reserve could “throw cold water” on already weak economic recoveries in certain countries.

Georgieva asked the countries with high levels of dollar-denominated debt to “act now”. “If you can extend maturities, please do it. If you have currency mismatches, now is the moment to address them,” she said.

Global recovery

Global debt rose to $226 trillion in 2020, the largest 12-month debt surge since the Second World War, after the COVID-19 pandemic plunged the world economy into its deepest recession since the 1930s.

Also Read: IMF warns of potential financial risks as global debt hits $226 trillion

Georgieva said that the global economic recovery was “losing some momentum” in 2022 due to the rise in COVID-19 infections, in addition to “much more persistent than anticipated inflation”, and record-high debt levels.

“2022 is like navigating an obstacle course,” she said, terming the recovery in 2022 as “complicated”.

“In 2020, we had similar policies everywhere because we were fighting the same problem — an economy at standstill. In 2022, conditions in countries are very different, so we cannot anymore have the same policy everywhere, it has to be country-specific and that makes our job in 2022 so much more complicated,” she explained.

Also Read: IMF chief warns of global economic unrest as central banks raise rates to combat inflation

Picture Credits: DW

Inputs from CNBC