IMF Warns Global Imbalances Are Increasing

The International Monetary Fund (IMF) has warned that global imbalances are rising and must be addressed carefully to avoid economic risks. The IMF’s Managing Director, Kristalina Georgieva, said reducing these imbalances in an orderly way is essential. She stressed the need to understand their causes, assess the risks, and adopt cooperative global solutions. According to the IMF, domestic economic policies play a major role in shaping a country’s current account balance by influencing how much it saves and invests. While traditional macroeconomic policies remain the main drivers of imbalances, industrial policies can also have an impact. The report explains that policies targeting specific sectors or firms tend to have limited and uncertain effects. However, broader economy-wide policies can significantly influence balances, though they may reduce overall consumption. The IMF added that trade restrictions are generally not effective unless used temporarily or alongside measures that increase public savings.