Nothing concrete for developing countries post IMF/World Bank meeting

Last week’s meetings of the International Monetary Fund (IMF) and World Bank yielded no new answers for the developing world to the questions posed by a spreading Middle East war, continuing war in Ukraine, rising debt payments and a potential AI bubble.

Not for the first time, lower-income countries are being rocked by the spillover from the actions of wealthier nations: rising debt service costs, higher inflation and the risk of falling ever further behind economically thanks to the AI boom.

What they got was the stock advice the global lenders always dish out: to shrink fiscal deficits and accelerate economic reforms to attract more private sector investment.

Kristalina Georgieva, the first IMF chief from a developing nation, Bulgaria, said advanced economies were in fact the worst offenders on budget imbalances.

She noted that developing countries’ debt levels had actually fallen in recent years, only for surging bond yields elsewhere to drive up their borrowing costs.

Average debt service payments there had more than doubled from a decade ago to 14% of government revenue, crowding out education, healthcare and other critical areas, she said.

ADVANCED ECONOMIES FOCUSED ON THEIR OWN PROBLEMS At a panel on Saturday, Georgieva said many issues remained unresolved, especially around AI.

“We are in a place where we have many more questions than we have answers.

And my alert to everybody is: Do not fall for the guys that pretend they have the answers.

They are tricking you.” Josh Lipsky, vice president of international economics at the Atlantic Council think tank, said the meetings had flunked their opportunity to come up with guidance or ways to help.

“It’s hard to talk about the developing world when the advanced economies don’t have their act together and are at risk of a fiscal crisis,” he said.

“And that’s on top of political situations in many of these countries that makes development aid not a priority at the moment.” Mauricio Cardenas, Colombia’s former finance minister and now a research scholar at Columbia University’s School of International and Public Affairs in New York, said many policymakers were left with a deep sense that “something really bad could happen “but no real roadmap to navigate the future.” “The IMF and World Bank are not particularly well prepared for this new phase.

They understand that something is going on, they bring in experts on AI,” he said.