The president of the International Monetary Fund (IMF) told the BBC that governments should subsidise the cost of food and electricity for the weakest sections of society.
People all throughout the world are trying to keep up with escalating living costs.
Support should be offered “in a highly targeted manner, preferably by delivering subsidies directly to people,” according to Kristalina Georgieva.
Many nations are assisting, but opponents contend that it is insufficient.
“There are two priorities,” Georgieva said of the cost-of-living situation. “One is the extremely poor people, portions of society who are now battling with high food and energy prices.” The second is to assist enterprises that have been “particularly harmed” by the conflict in Ukraine, she added.
The IMF’s mission is to help governments stabilise the global economy and increase prosperity. However, this is proving difficult due to record-high food prices this year, as well as steep increases in gasoline and gas prices.
At Birmingham Open Market, a stallholder serves his clients as they shop for fruits and vegetables. This is largely due to the simultaneous shocks of the coronavirus outbreak and the conflict in Ukraine. Russia and Ukraine are important agricultural and hydrocarbon exporters.
Because of the importance of these commodities to the global economy, annualised inflation rates in several nations have risen to their highest levels in decades: 9 per cent in the UK, 8.3 per cent in the US, and 7.4 per cent in the Eurozone.
Central banks are raising interest rates to try to limit the rise in prices, prompting some important players like Goldman Sachs’ Lloyd Blankfein to warn of a recession.
Georgieva is concerned about the impact of increasing borrowing costs on governments that must repay massive debts incurred during the pandemic.
She stated that governments must be “very cautious” about how much money they spend and on what.
At this week’s G7 finance ministers conference in Germany, the issue of declining living standards was at the top of the agenda.
The meeting of seven wealthy countries ended with a pledge to “continue to work together to minimise the impact of the war globally as well as on our own economies and population by providing well-targeted support, where necessary”.
Governments have adopted a variety of initiatives in recent months to try to cut the cost of living.
President Biden of the United States has released oil from reserves to try to lower costs, Spain and Portugal have capped gas bills, and it’s a major campaign topic in Australia.
Chancellor Rishi Sunak of the United Kingdom has made some tax reforms and is mulling a windfall tax on energy corporations’ skyrocketing earnings.
Georgieva is concerned that the protests in Sri Lanka could be duplicated in other countries if the appropriate official backing is not provided. Sri Lanka’s economic crisis, compounded by rising costs, has resulted in fatal riots, the appointment of a new prime minister, and the country’s first-ever debt default.
Similar upheaval before the epidemic, from France to Chile, was fueled by “a growing sense of unfairness” and policies made without the consent of the people, according to the IMF boss.
“If we are to learn any lessons from 2019 if is to be much more humble about policy decisions, and engage in multiple ways with people, because policies must be for people, not the paper we write them on,” she said.
(Adapted from BBC.com)