IMF chief warns AI boom is pulling value-chain countries ahead of importers

IMF Managing Director Kristalina Georgieva warned at the close of the IMF-World Bank Annual Meetings in Bangkok on 17 October that the AI boom was helping countries in its value chain pull ahead while energy-importing economies outside it fell further behind, The Nation reported. She described AI as the main source of support for the global economy and said dependence on one driver of growth left it vulnerable.

Georgieva divides the AI value chain

Georgieva said the difference in countries’ positions was apparent in conversations at the meetings: some were benefiting from AI investment, while others faced the effects of war. Energy exporters and participants in the AI value chain were advancing, she said. Countries buying energy from abroad and remaining outside that chain “are falling further behind”, despite already being vulnerable.

She also described a tension for policymakers. They wanted the benefits of AI, Georgieva said, alongside guardrails for people, businesses and countries. She pointed to cooperation among governments, AI companies and other stakeholders at the meetings. Thailand, which hosted them, was an example of how sound policies and strong institutions could broaden opportunities through participation in the global AI supply chain, The Daily Star reported.

Georgieva called for AI safeguards and noted cooperation among governments, AI companies and others at the Bangkok meetings. She also called for education reform in response to AI’s potential effect on jobs. At the closing briefing, her account of the boom placed those domestic questions alongside differences between countries able to take part in AI investment and those outside its value chain.

The IMFC weighs gains against disparities

Mohammed Aljaadan, chair of the International Monetary and Financial Committee and Saudi Arabia’s finance minister, said AI offered significant productivity gains but also risked widening economic disparities, particularly in low-income countries and fragile states, The Nation reported. Georgieva also warned of wider disparities for those countries, The Daily Star reported. The Daily Star rendered the chair’s surname Aljadaan.

The committee’s members called for credible medium-term fiscal plans that would rebuild financial buffers while protecting vulnerable people and investment that supports growth. Aljaadan also cited wars, disruptions to important waterways and trade routes, pressure on energy and food supplies, and high public debt among the challenges confronting the global economy. He said rising sovereign bond yields were adding to financial vulnerabilities and tightening conditions.

Georgieva urged central banks to concentrate on price stability and finance ministries to reduce debt where it was high. She called on regulators and supervisors to watch risks associated with rising leverage, non-bank financial institutions, cyberattacks and fraud. On digital finance, she said Thai authorities had guided members towards the Bangkok Blueprint, a step towards a framework intended to be safe, inclusive and responsible.

Debt payments and the IMF lending trust

The pressure on poorer economies also figured in Georgieva’s account of debt. She said debt payments in low-income countries had risen from 8 percent to 14 percent of government revenue in recent years, with higher inflation and interest rates adding to the burden. She said their debt-to-GDP ratios had fallen slightly, while those of rich countries were rising. Asked about calls for fiscal consolidation, she favoured sound domestic policies, fair revenue collection and spending that protected vulnerable people while supporting growth.

Georgieva said recent decisions concerning the IMF’s Poverty Reduction and Growth Trust, its vehicle for concessional lending, would permit more than three times the lending available before the reforms, The Daily Star reported. She credited many low-income countries for bringing debt down and said the IMF considered sweeping fiscal changes unnecessary for them.

IMF members reaffirmed support for more timely, predictable and coordinated debt restructuring, including through the G20 Common Framework. Ten partners — France, Germany, Ireland, Italy, Japan, Kazakhstan, Luxembourg, the Netherlands, Spain and Switzerland — committed more than $100 million for the IMF’s capacity-development work.