IMF chief urges swift trade policy resolution, domestic reforms to stabilize global economy

New Delhi: International Monetary Fund (IMF) chief Kristalina Georgieva on Thursday called on countries to urgently resolve trade tensions, safeguard economic stability and address domestic imbalances, warning that continued uncertainty and policy inaction risked worsening the global growth slowdown.

Addressing the media on the Global Policy Agenda at the 2025 World Bank Group/IMF Spring Meetings in Washington, Georgieva said the world economy is facing a new and significant test, with policy buffers depleted by the shocks of recent years.

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"That puts countries in a difficult position. It also creates urgency for action to strengthen their economies." 

The IMF chief’s remarks come in the wake of renewed trade tensions following the imposition of reciprocal tariffs by US President Donald Trump.

Earlier in April, US President Donald Trump unveiled sweeping reciprocal tariffs—10% on most imports and steeper rates on countries with higher duties on US goods. Though paused for 90 days in a recent announcement, the move has triggered a global backlash, marking the most aggressive US protectionist shift in decades.

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Warning that prolonged uncertainty is “very costly” for global growth, Georgieva urged major global economies to swiftly resolve trade tensions, noting that without clarity, businesses delay investment and households opt to save rather than spend—further straining already fragile economic prospects.

"Preserving openness and removing uncertainty in a trade policy settlement among the main players is essential," she added.

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Georgieva highlighted the need for countries to prioritise economic and financial stability, starting with strong domestic fiscal policies.

She urged nations to rebuild fiscal buffers and ensure sustainability while acknowledging that some may require temporary, targeted fiscal support due to external shocks.

"We urge countries to define credible adjustment paths gradually in most cases protecting key investments, maximizing spending efficiency, and making space for longer-term needs," she said.

"Trade-offs would be tough for all, but they would be toughest for low-income countries, which face both tight financial conditions and global growth slowdown," she added.

Georgieva emphasized that domestic resource mobilization must be a key part of the solution, warning that countries with a tax-to-GDP ratio below 15% would struggle to sustain essential state functions.

"Our advice is to watch the data. Watch inflation expectations. Central banks will need to strike a delicate balance between supporting growth and containing inflation," she added.

The IMF chief's latest speech signals a push for urgent cooperation on trade and a renewed focus on domestic reforms to weather economic headwinds.

"Some countries like China need to act to boost private consumption and embrace a shift to services. Others, like the United States, need to reduce fiscal deficits," she said.

"And in Europe. It is time to complete the single market banking union, capital market, and remove internal barriers to intra-EU trade," she added.