IMF chief says ready to act if countries crippled by Middle East conflict need help — ‘We recognise our responsibility’

As the conflict in the Middle East escalates even after a week of the initial US and Israel strikes on Iran, the IMF has spoken up. The International Monetary Fund has said it is ready to help countries facing balance-of-payments concerns amid the escalating conflict in the region, which has crippled economies over the past week.

Kristalina Georgieva, the Managing Director at the IMF, said she expects greater demand for the agency's future programmes, especially as foreign aid is also on the decline.

Around 50 countries already depend on the IMF to meet their balance-of-payments needs, Georgiva said in an interview with Bloomberg.

“We have some of the members that have significant balance of payment concerns already engaging with us,” Georgieva said on Friday.

“We are ready to act. We recognise our responsibility in this world of uncertainty to be an anchor of stability," she said during the interview.

She expressed concern about some Pacific Island countries that are among the most vulnerable to disruptions in global oil supplies. Low-income countries and those with high levels of debt could also come under pressure, she said.

Inflation to spike, IMF chief offers solutions

According to Georgieva, a 10% increase in energy prices lasting a year would raise inflation by 40 basis points and slow growth by up to 0.2%.

Central banks must brace for the impact of a possible oil shock, both on consumer prices that could spur inflation and on weaker currencies that could make servicing foreign debt more costly, she said.

She also urged countries to build fiscal capacity, strengthen institutions, and diversify energy supplies.

On Thursday, Georgieva warned of a “world of more frequent, more unexpected shocks,” with the war in the Middle East being the latest example. She called on policymakers to prepare their economies for potential challenges that go beyond politics, including disruptive technology and trade conflicts.

US-Israel attack on Iran

The attack by the US and Israel has killed hundreds in Iran, which in turn has unleashed barrages of missiles and drones against its assailants, including US forces in the region. Shipping through the Strait of Hormuz has dwindled, and oil prices have spiked, threatening to ignite inflation and choke off growth.

On the war's sixth day, Iran launched a series of attacks on Israel, the United Arab Emirates and Qatar. Fire crews in Bahrain extinguished a blaze at a refinery following a missile strike.

Two drone attacks targeted an Iranian opposition camp in Iraqi Kurdistan, as well as an oil field operated by an American firm, security sources said.

The Israeli military warned residents to evacuate areas, including eastern Tehran, while Iranian media reported blasts were heard in various parts of the capital. An air attack killed 17 people in a guest house on a road northwest of the capital, Iranian state television said.

In Iran, at least 1,230 people have been killed, according to the Iranian Red Crescent Society, including 175 schoolgirls and staff killed at a primary school in Minab in the country's south on the first day of the war.