Global Financial Stability Report

22.04.2024

Global Financial Stability Report

Why in the news?                          

          Recently, the International Monetary Fund (IMF) released the latest global financial stability report.

About Global Financial Stability Report:

• It is a semiannual report by the International Monetary Fund (IMF) that assesses the stability of global financial markets and emerging-market financing. It is released twice per year, in April and October.
• It focuses on current conditions, especially financial and structural imbalances, that could risk an upset in global financial stability and access to financing by emerging-market countries.

Highlights of the report:

• It has warned about the risks to the global financial system from persistent high inflation, rising lending in the unregulated credit market, and increasing cyber-attacks on financial institutions.
• Geopolitical risks such as the ongoing war in West Asia and Ukraine could affect aggregate supply and lead to higher prices. This, it believes, might stop central banks from lowering rates anytime soon.
• In the calendar year 2023, India was the second-largest recipient of foreign capital after the U.S. But things could change quickly if western central banks signal that they could keep interest rates high for a long time.
• The report also noted that the growing unregulated private credit market, in which non-bank financial institutions lend to corporate borrowers, is a growing concern as troubles in the market might affect the broader financial system in the future.
• The borrowers in the private credit market may not be financially sound and noted that many of them do not have current earnings that exceed even their interest costs.

About International Monetary Fund:

• It was founded in response to the collapse of international monetary cooperation during the Great Depression, with the goal of boosting economic growth and eliminating poverty around the world. In 1944, the Bretton Woods Conference established the International Monetary Fund (IMF).
• The Conference brought together 45 government representatives to discuss a framework for postwar international economic cooperation.
• The IMF was established on December 27, 1945, with 29 member countries agreeing to be bound by the treaty. On March 1, 1947, it launched its financial operations.
• The International Monetary Fund (IMF) now has 189 member countries.
• It is a crucial institution in the international economic system that focuses on rebuilding international capital while maximizing national economic sovereignty and human welfare.

Objectives of IMF

      ○Encourage international monetary cooperation.

      ○Assurance of Financial stability.

      ○Make international trade easier.

     ○Encourage high employment and long-term economic prosperity.

     ○Reduce poverty all around the planet.

                          Source: The Hindu