IMF pleased with LAC response to global threats

Marrakech, (CMC):

The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, 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 has seen quite a number of these LAC countries acting early against inflation “and this is paying off because they could earlier move towards normalisation of interest rates”.

“When we look at the current situation, in the future, there are three things countries can do. 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 that is part of the annual meetings of the IMF and the World Bank Group, taking place here through Saturday.

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

“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 anaemic 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. Obviously we follow these price dynamics, and again if you have more, save some of it because I do not know when the next shock is going to be. I just 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 amid the emerging humanitarian situation.

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