International Monetary Fund Managing Director Kristalina Georgieva warned G20 leaders on Tuesday against allowing trade protectionism to “take root” and said fragmentation of the world economy into geopolitical blocs would significantly hurt growth.
In prepared remarks delivered at the Group of 20 leaders summit, Georgieva said that 345 million people in the world were now suffering from a food crisis as a result of Russia’s war in Ukraine, high inflation and climate disasters. She said G20 countries should "allow trade to do its job.”
“Removing barriers, especially for food and fertilizers, can go a long way to counter the suffering of hundreds of millions of people,” Georgieva said.
“We must not allow protectionism to take root and the world to drift into separate blocs.”
Georgieva has long warned against fragmentation of the world economy into blocs led by the United States and Western allies on one side, and China and other state-driven economies on the other, saying this would lead to differing technology and regulatory standards and increasing trade protectionism.
The IMF has calculated that such a divided world would lose at least 1.5 percent of GDP output annually.
“And the cost would be much higher - two times higher or more - for open economies, those that depend on international cooperation,” she said.
There was still time to avoid this situation and “prevent sleepwalking into a world that is poorer and less secure,” she added.
Georgieva also reiterated her call for G20 countries to accelerate efforts to provide debt relief to poorer countries slammed by COVID-19, Ukraine war spillovers and inflation.
For 25 percent of emerging market economies and 60 percent of low-income countries, it is crushing their ability to deal with food and energy insecurity, she said.
She lauded Chad’s deal with creditors to restructure $3 billion in external debt, saying it was evidence G20’s long delayed common debt treatment framework was starting to deliver results.
“But we need to do much, much more,” Georgieva said.
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