By zainab.joaque@awokonewspapersl.com
Washington. D.C, – The International Monetary Fund (IMF) has sounded the alarm on rising global financial risks, even as it reaffirmed the enduring status of the U.S. dollar as the world’s most trusted safe-haven asset.
At the IMF Spring Meetings in Washington, the release of the Global Financial Stability Report painted a picture of growing uncertainty in global markets. Leading the charge was Tobias Adrian, IMF’s Financial Counselor, who addressed a packed press conference amid concerns about market volatility, debt stress, and geopolitical shocks.
The IMF’s central message was clear: financial stability risks are climbing, fuelled by mounting policy uncertainty and a sluggish economic outlook. The ripple effects are being felt across global markets, with investors flocking to traditional safe-haven assets like gold and U.S. Treasuries — both of which have seen sharp price swings in recent months.
Gold, buoyed by investor anxiety, has rallied. U.S. Treasuries, although experiencing rising yields, remain the most liquid and trusted instruments globally. As for the dollar’s recent dip, IMF officials described it as a natural correction following a long period of strength, urging caution in interpreting it as a sign of permanent decline.
Emerging economies — particularly those with high debt and limited financial buffers — are feeling the pressure of tighter global financial conditions. While some larger economies have weathered the storm well, others are grappling with rising sovereign risk and shrinking investor confidence.
The IMF urged these nations to adopt sound fiscal policies and maintain credible economic frameworks to restore confidence and keep borrowing costs under control.
Asked whether current market volatility resembles the turmoil sparked by the UK’s 2022 “mini-budget” crisis, the IMF drew a distinction. Officials stressed that while markets are skittish, the recent fluctuations have remained orderly, without requiring central bank intervention — a crucial difference from past panic episodes.
Despite the turbulence, the IMF made it clear: the U.S. dollar remains the bedrock of the global financial system. Backed by the unparalleled depth of American capital markets, the dollar continues to dominate global reserves, reinforcing its role as a financial safe harbour in uncertain times.
Still, the IMF encouraged the development of deeper capital markets worldwide — especially in emerging economies — and welcomed the rise of non-bank financial institutions, provided regulators adapt swiftly to evolving risks.
AI, Debt, and Digital Risks
The briefing also touched on structural transformations reshaping finance. Artificial Intelligence (AI), officials said, holds promise for boosting productivity but also brings new threats — from cyberattacks to increased market concentration in AI-driven trading.
In Sub-Saharan Africa and other debt-stressed regions, the Fund acknowledged that countries continue to grapple with the aftershocks of the COVID-19 pandemic, surging inflation, and commodity price swings. The IMF pledged continued support through customized policy programs aimed at rebuilding resilience and restoring economic momentum.
As the session wrapped up, the IMF’s message to governments and markets was one of watchfulness and discipline. Officials urged countries to reinforce financial regulation, practice fiscal restraint, and ensure that financial institutions are well-prepared to withstand future shocks.
“The global financial system is under strain from a convergence of risks,” the Fund concluded, “but with sound policies and strong institutions, it can remain a pillar of stability and a catalyst for sustainable growth.” ZIJ/5/5/2025
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