The Managing Director of the International Monetary Fund, Kristalina Georgieva, warned the United States and China during the annual meeting of this institution in Bangkok on Wednesday that they need to undertake fundamental reforms to control public debt and create a balance in trade. She emphasized that the United States cannot escape its rising debts solely through economic growth, and China must shift from an export-led growth model to greater domestic consumption.
Need for Policy Changes in the Two Largest Economies
Georgieva referred to the United States and advanced countries as "the worst offenders" regarding excessive debt and stated that rising interest rates have put pressure on low-income countries, forcing them to reduce borrowing. In this context, she stressed the need for financial reforms and sustainable fiscal policies.
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According to Georgieva, U.S. officials are heavily reliant on economic growth to reduce debts. She said, "We at the Fund believe that growth certainly helps, but it cannot alone provide the necessary changes quickly. Therefore, some financial measures will be essential."
Recommendations to Reduce Economic Imbalances
Georgieva also responded to a question about economic imbalances stemming from China, recommending that the country should increase domestic consumption. She stated, "For countries with trade surpluses, what they need to do is increase domestic consumption. This clearly relates to China's growth model. They must shift from exports to greater domestic consumption."
She also advised countries with deficits to save more and spend less. In her opinion, European countries should invest more in enhancing competitiveness.
These meetings are held amid concerns about rising debts and increasing interest rates. The President of the European Central Bank, Christine Lagarde, also emphasized the necessity of addressing the debt issues of the French through fiscal policies, stating that this must be done within France.
The International Monetary Fund also praised the United Kingdom for its efforts towards financial reforms but stressed that it should not accelerate the pace of these reforms. Instead, the recommendation was to "stay the course."
Finally, Georgieva advised IMF member countries to provide the Fund's facilities for low-income and vulnerable countries. She stated that these countries are also under pressure from rising interest rates and need more support.
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