Georgieva: US, France and Italy need fiscal consolidation. IMF working on paper on stablecoins
Director General: 'Cryptoassets, including stablecoins, could accelerate currency substitution and undermine monetary sovereignty in some countries with weak currencies'
"When we look at the G7 we have on the one hand the US, France and Italy where there is a need for fiscal consolidation. And the good news is that they have all recognised this need. In the G7 there are also countries that are in a better position, such as Canada and Germany," said International Monetary Fund Managing Director Kristalina Georgieva.
Georgieva emphasised that countries must act 'with determination' with 'fiscal adjustments' to ensure debt sustainability and replenish fiscal reserves; these adjustments must be geared towards future growth and preserving social cohesion: where discretionary support for those severely affected by hardship is warranted, 'it should be temporary, targeted and offset by savings in other areas. With public debt close to record levels, many countries are facing a situation of fiscal space depletion just as they face pressing expenditure needs, from ageing populations to growing national security requirements,' she noted.
"Low-income countries facing foreign aid cuts need to redouble their efforts to stimulate domestic resource mobilisation, while donors are encouraged to step up their support," the IMF director adds.
Cryptoassets can be risky for countries with poor monetary stability
Georgieva also commented on cryptoassets: 'Cryptoassets, including stablecoins, could accelerate currency substitution and undermine monetary sovereignty in some countries with weak currencies, high inflation and low trust in central banks. While the digitisation of finance promises to make cross-border payments faster and cheaper and to achieve wider financial inclusion, on the other hand,' she explained, 'these innovations increase the volatility of capital flows, give rise to regulatory arbitrage and potentially increase money laundering and terrorist financing along with legal and cyber risks.
"For this reason, international cooperation is essential, and the Monetary Fund is closely monitoring developments in the international monetary system (the configuration of currencies, payment systems and capital flows) and is preparing a paper to provide an overview of stablecoins - with risks, benefits and crossborder use - and outline ongoing efforts to arrive at a policy framework," he reports.
