DOHA: International Monetary Fund chief Kristalina Georgieva said Wednesday that protracted domestic wrangling over the US debt ceiling was “unnecessary” for the world economy but should be settled. Georgieva also told the Qatar Economic Forum that central banks must keep interest rates high to tame inflation but there should be improvement in 2024.
International markets have been unnerved by the battle between US President Joe Biden and opposition Republicans on US borrowing limits with an early June deadline looming. Some Republicans have questioned whether a quick agreement with the US administration is necessary to avert a painful default. “History tells us that the US wrestles with this notional default,” Georgieva said referring to past US showdowns over spending limits.
“At the 11th hour, it gets resolved and I have confidence we will see this play.” But she added that the Washington drama was “unnecessary for a world economy that is in such high uncertainty”. “We always have to be mindful that the risk is there.”
Georgieva said headline inflation in many countries was “peaking” because of central banks raising interest rates but “core inflation, primarily because of very stubborn food prices. is still not trimming down the way it should”. “Central banks have to stay the course, because, if they move back on interest rates prematurely, then tension may become a problem for growth for a longer period of time,” she said. “Interest rates are high, they will stay high for longer, but we are expecting 2024, early 2025, the picture to change.”
Meanwhile, Georgia’s prime minister told the forum Wednesday that his government cannot afford to impose sanctions on Russia over the Ukraine war as they would “devastate” the economy. Facing international criticism, Irakli Garbashvili strongly defended his country’s reluctance to take action against its giant neighbor that occupied about 20 percent of Georgian territory in a 2008 war.
Garbashvili’s government has refused to impose economic sanctions and direct flights from Russia to Georgia resumed last week sparking opposition protests at Tblisi airport. “Not only would we harm Georgia, but we would also devastate our economy and jeopardize the interests of our country and our people if we were to impose any form of economic sanctions on Russia,” Garbashvili told the Qatar Economic Forum. He estimated bilateral trade with Russia is worth about $1 billion a year.
Garbashvili criticized the international community for not taking action, including sanctions, during the 2008 conflict between his country and Russia. “Where’s the logic? Our war was not a war and the Ukrainian war is a war. Well, I have to say that we were quite disappointed that business as usual continued with Russia after the 2008 war.
“The result of that war, a devastating war, is that 20 percent of our territory was taken over by Russia. Russia built two military bases on our historic lands.” Russia’s invasion of Ukraine has been a key issue at the Qatar forum. Hungary’s right-wing Prime Minister Viktor Orban, who has refused to condemn Russian President Vladimir Putin, said on Monday that Ukraine could not beat Russia. — AFP