Written by The Banking Post
International Monetary Fund chief Kristalina Georgieva has cautioned that the global economy could face difficult times if tensions in the Middle East persist and oil prices remain elevated.
“We must brace for tough times ahead” if the conflict continues, she said during a briefing at the IMF–World Bank spring meetings in Washington, where global policymakers are assessing the economic fallout.
The warning comes after escalating hostilities—triggered by US-Israeli strikes on Iran in late February—disrupted key energy supply routes, including the Strait of Hormuz. The disruption has pushed up energy prices, putting pressure on economies, particularly those dependent on imported fuel.
Georgieva said the rise in energy costs could spill over into food prices, especially if fertilizer supplies remain constrained. “We are concerned about risks for inflation moving into food prices,” she said.
Despite the inflation risks, she urged central banks to take a cautious approach. Countries with well-anchored inflation expectations may adopt a “wait and see” stance before adjusting interest rates, while others with weaker policy credibility may need stronger action.
She noted that the economic impact of the crisis is uneven, with low-income countries most exposed. According to IMF data, such economies spend around 36% of consumption on food, compared with about 20% in emerging markets and just 9% in advanced economies.
The IMF expects demand for financial support to rise, estimating near-term financing needs between $20 billion and $50 billion. The fund is currently running 39 programs, with fresh requests anticipated from at least a dozen countries, many in sub-Saharan Africa.
Georgieva urged countries to act early to cushion the shock but warned against broad, untargeted measures. “Untargeted steps or export controls could prolong the pain of high prices,” she said, stressing the need to protect fiscal stability while supporting vulnerable populations.
She added that a quicker resolution to the conflict could ease pressures, but for now, risks to growth and price stability remain elevated.
