Accra, April 9, – The International Monetary Fund (IMF) has cautioned central banks worldwide to remain vigilant and prevent inflation from spiralling out of control amid rising global uncertainty triggered by the ongoing Middle East conflict.
IMF Managing Director Kristalina Georgieva issued the warning in a pre-Spring Meetings address ahead of the joint IMF–World Bank gathering scheduled for next week in Washington.
She said disruptions linked to the conflict, particularly in transport routes and refined product supply chains, were already affecting global economic stability.
According to her, the war has created a large-scale, asymmetric supply shock that threatens to derail global growth prospects that were previously showing signs of improvement.
She warned that rising transport costs and supply bottlenecks are worsening food insecurity, pushing an additional 45 million people into hunger and bringing the global total to over 360 million.
Ms Georgieva outlined three major transmission channels through which the crisis is affecting the global economy—price shocks, production impacts, and supply shortages—all of which risk fueling renewed inflationary pressures and tightening financial conditions.
“We have been here before in the ’70s and earlier this decade,” she cautioned.
She advised central banks not to overreact with unnecessary monetary tightening, but to remain firmly committed to price stability and act decisively if inflation expectations become unanchored.
“If inflation expectations threaten to break anchor and ignite a costly inflation spiral, then central banks should step in firmly with rate hikes,” she said.
The IMF chief added that discussions at the upcoming Spring Meetings would focus on strategies to manage the shock and reduce its impact on vulnerable populations and economies.
On fiscal policy, she noted that many countries have so far avoided broad tax cuts and untargeted energy subsidies, urging governments to continue focusing on targeted and temporary support measures.
She warned that rising borrowing costs and debt servicing pressures mean deficit-financed stimulus could further complicate monetary policy responses.
Ms Georgieva also called for rebuilding fiscal buffers and urged countries to avoid protectionist measures such as export restrictions and price controls, which she said could worsen global disruptions.
“Don’t pour gasoline on the fire,” she cautioned, warning against unilateral actions that could deepen instability.
She estimated that demand for balance-of-payments support linked to spillover effects from the crisis could rise between US$20 billion and US$50 billion, depending on whether a ceasefire is achieved.
The IMF Managing Director stressed that while external shocks are unavoidable, strong domestic institutions and policy frameworks remain the most reliable defence against future crises.
She also urged policymakers not to lose focus on long-term structural challenges such as technological change, demographics, trade shifts, geopolitics, and climate risks, even while managing current turbulence.
The upcoming Spring Meetings, she said, will aim to help countries navigate what she described as a “fog of uncertainty,” while reinforcing calls for peace in the Middle East and globally.
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