IMF Urges Policymakers to Defuse Trade Tensions and Prioritise Stability
The International Monetary Fund (IMF) has called on global policymakers to take decisive steps to resolve escalating trade tensions, strengthen financial stability, and pursue ambitious reforms aimed at boosting productivity and long-term growth.
In its latest commentary, titled “Pursuing Durable Growth in an Uncertain World,” the Fund warned that the international economy is entering a pivotal moment. Though the world economy has demonstrated significant resilience in recent years, the IMF said rising policy uncertainty and worsening trade disputes have complicated the global growth outlook.
According to the Fund, “the global economy is at a crossroads. Despite the world economy’s considerable resilience over the past five years, trade tensions have soared since the publication of the previous Annual Report, and policy uncertainty has increased.” As a result, it noted, achieving sustained growth has become increasingly difficult.
The IMF observed that major economies are undergoing substantial policy shifts, with trade and capital flows being redirected, while many countries confront tighter financial conditions and elevated market volatility. It added that several governments have seen their fiscal buffers eroded by successive global shocks.
Three Urgent Priorities
The Fund outlined three areas requiring immediate and coordinated attention. First, it urged countries to settle ongoing trade tensions and tackle the structural imbalances underpinning them. It emphasised the need for “a rules-based and level playing field,” cautioning against protectionist measures that distort markets or hinder global trade.
The second priority, it said, is safeguarding economic and financial stability. The IMF encouraged governments to pursue credible and realistic fiscal adjustment plans, rebuild buffers, and consolidate finances over the medium term. For advanced economies, expenditure reprioritisation may be required, while emerging and developing economies may need to strengthen revenue mobilisation—though a blend of both may be appropriate depending on circumstances.
At the same time, it stressed that vulnerable groups must be protected through “timely, targeted, and temporary support,” particularly during periods of reform or economic transition. Central banks, it noted, must continue to concentrate on price stability and maintain vigilance against inflationary pressures.
The IMF also highlighted the importance of international collaboration to address global macroeconomic imbalances. It pointed out that internal mismatches between savings and investment can deepen external current account gaps, influencing capital flows and increasing systemic risks. Policies that promote balance, the Fund said, would enhance resilience both domestically and globally.
Reforms to Unlock Long-Term Growth
The third priority involves intensifying growth-enhancing reforms. The IMF urged countries to implement structural reforms in labour, product, and financial markets—without compromising regulatory oversight. Greater investment in infrastructure, innovation, and technology, including digitalisation and artificial intelligence, was identified as essential for raising productivity and expanding economic potential.
The Fund further underscored the need to promote entrepreneurship, strengthen competition, and confront corruption, which it said continues to distort markets and undermine confidence.
Although acknowledging the significant challenges ahead, the IMF stressed that “the future is not predetermined.” With carefully designed and well-sequenced policies, it believes countries can seize new opportunities, mitigate risks, and lay the foundation for inclusive and sustainable growth.
The Fund reaffirmed its commitment to supporting member states, saying it will remain “a trusted advisor to policymakers, a reliable lender of last resort during crises… and a convener to confront common economic challenges” as it adapts to an uncertain global landscape.
