MOROCCO-IMF pleased with LAC’s response to global threats

Marrakech, MOROCCO, CMC – The managing director of the International Monetary Fund (IMF) says countries in Latin America and the Caribbean (LAC) “have been very prudent over the last years in building sound, macroeconomic and financial policies” even as the conflict between Israel and Gaza threatens to drive up commodity prices.

Georgieva said the IMF had seen many of these LAC countries acting early against inflation, “which is paying off because they could earlier move towards normalization of interest rates.”

“When we look at the current situation, there are three things countries can do in the future. They are doing quite a lot of it. The first one is, in good times, build buffers when commodity prices are up,”,” she told a press conference here in response to a question about how governments in Latin America can safeguard their economies from shocks resulting from the conflict.

“Don’t squander the windfall. Save some of it,” Georgieva said, adding that well-functioning financial arrangements can be a strong protector. And also they can provide a pathway for longer-term investments in growth in these countries,” Georgieva said during the media brief of the annual IMF and World Bank Group meetings, taking place here through Saturday..”

The IMF managing director said that governments should adjust fiscal policy quickly when faced with a drop in commodity prices.

“Target the most vulnerable, not everybody. Make sure that your money stretches the farthest it could,” she said, noting that a third common-sense measure is to diversify the economy and decrease the dependency on commodity prices.

“Right now, countries are in a position to watch the anemic growth in the world economy that can translate into lower commodity prices,” Georgieva said.

“We are in a more shock‑prone world, so there may be shocks that cause the opposite, swing up of prices. We follow these price dynamics, and again, if you have more, save some of it because I do not know when the next shock will be. I know it will come.

Georgieva said it is “heartbreaking to see innocent civilians dying” in the fresh fighting that broke out on Saturday after Hamas militants fired rockets into Israel, killing scores of people and taking others hostage.

Israel, in retaliation, has been bombing Gaza relentlessly, and economists have been monitoring the economic fallout amidst the emerging humanitarian situation.

“An attack from one place on another also causes reciprocity in response. Who pays the price? It is the innocent who pay the price. Regarding economic impact, we are very closely monitoring how the situation evolves. How it is affecting especially oil markets,” Georgieva said.

“It is too early to say we have seen some ups and downs in oil prices. We have seen some reaction on markets. And as they said, we will be closely monitoring this. This is a new cloud on not the sunniest horizon for the world economy. New clouds darkening this horizon, which, of course are not needed. Pray for peace.”

Georgieva said she “cannot predict today” how the situation would evolve.

In a world where geopolitical tensions can flare quickly, we must concentrate on two things: what must we cooperate on? Because otherwise, the world will be in trouble, like climate change.

“And two, where can we pragmatically define a path for cooperation that bridges different views? And I can tell you …”

The IMF managing director said she is “an unwavering optimist.

“We define our destiny. As difficult as it might be, engage in discussions, identify areas of consensus, and build on this consensus to make decisions that would improve the fate of people everywhere. Relentless, this is what we must be.”