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    Can Ghana’s Debt Trap of Crisis and Bailouts Be Stopped?

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    Emmanuel Cherry, the chief executive of an association of Ghanaian construction companies, sat in a cafe at the edge of Accra Children’s Park, near the derelict Ferris wheel and kiddie train, as he tallied up how much money government entities owe thousands of contractors.Before interest, he said, the back payments add up to 15 billion cedis, roughly $1.3 billion. “Most of the contractors are home,” Mr. Cherry said. Their workers have been laid off.Like many others in this West African country, the contractors have to wait in line for their money. Teacher trainees complain they are owed two months of back pay. Independent power producers that have warned of major blackouts are owed $1.58 billion.The government is essentially bankrupt. After defaulting on billions of dollars owed to foreign lenders in December, the administration of President Nana Akufo-Addo had no choice but to agree to a $3 billion loan from the lender of last resort, the International Monetary Fund.It was the 17th time Ghana has been compelled to turn to the fund since it gained independence in 1957.This latest crisis was partly prompted by the havoc of the coronavirus pandemic, Russia’s invasion of Ukraine, and higher food and fuel prices. But the tortuous cycle of crisis and bailout has plagued dozens of poor and middle-income countries throughout Africa, Latin America and Asia for decades.Joshua Teye, a teacher in Suhum, Ghana. The government’s fiscal crisis has cut investment in schools dangerously short.Francis Kokoroko for The New York TimesThese pitiless loops will be discussed at the latest United Nations General Assembly, which begins on Tuesday. The debt load for developing countries — now estimated to top $200 billion — threatens to upend economies and unravel painstaking gains in education, health care and incomes. But poor and low-income countries have struggled to gain sustained international attention.In Ghana, the I.M.F. laid out a detailed rescue plan to get the country back on its feet — reining in debt and spending, raising revenue and protecting the poorest — as Accra negotiates with foreign creditors.Still, a nagging question for Ghana and other emerging nations in debt persists: Why will this time be any different?The latest rescue plan outlined for Ghana addresses key problems, said Tsidi M. Tsikata, a senior fellow at the African Center for Economic Transformation in Accra. But so did many of the previous ones, he said, and still crises recurred.The last time Ghana turned to the fund was in 2015. Within three years, the country was on its way to paying back the loan, and was among the world’s fastest-growing economies. Ghana was held up as a model for the rest of Africa.Agricultural production was up, and major exports — cocoa, oil and gold — were rising. The country had invested in infrastructure and education, and had begun a cleanup of the banking industry, which was riddled with distressed lenders.Yet Accra is again desperately in need. The I.M.F. loan agreement, and the delivery of a $600,000 installment in May, have helped stabilize the economy, settle wild fluctuations in currency levels and restore a modicum of confidence. Inflation is still running above 40 percent but is down from its peak of 54 percent in January.Cocoa pods at a cocoa farm. Ghana’s economy is dependent on exports of raw materials like cocoa, oil and gold, which rise and fall wildly in price.Francis Kokoroko for The New York TimesDespite the I.M.F.’s blueprint, though, Mr. Tsikata, previously a division chief at the fund for three decades, said the chance that Ghana wouldn’t be in a similar position a few years down the road “rests on a wing and a prayer.”The effects of devastating climate change loom over the problem. Within the next decade, a United Nations analysis estimates, trillions of dollars in new financing will be needed to mitigate the impact on developing countries.In Ghana, the government owed $63.3 billion at the end of 2022 not just to foreign creditors but also to homegrown lenders — pension funds, insurance companies and local banks that believed the government was a safe investment. The situation was so unusual that the I.M.F. for the first time made settling this domestic debt a prerequisite for a bailout. A partial restructuring, which cut returns and extended the due dates, was completed in February. While the haircut may have been necessary, it undermined confidence in the banks.As for foreign lenders, there are thousands of private, semipublic and governmental creditors, including China, which have different objectives, loan arrangements and regulatory controls.The magnitude and type of debt means “this crisis is much deeper than the type of economic difficulties Ghana has faced in the past,” said Stéphane Roudet, the I.M.F.’s mission chief to Ghana.The dizzying proliferation of lenders now characterizes much of the debt burdening distressed countries around the globe — making it also more complex and difficult to resolve.“You don’t have six people in a room,” said Joseph E. Stiglitz, a Nobel Prize winner and a former chief economist at the World Bank. “You have a thousand people in a room.”Victoria Chrappah, a trader, recounts the unfavorable business climate, as fluctuating exchange rates affect prices of imported goods from China.Francis Kokoroko for The New York Times‘Last Year Was the Worst of All.’Outside Victoria Chrappah’s narrow stall in Makola Market, snaking lines of sellers hawked live chickens, toilet paper packs and electronic chargers from giant baskets balanced on their heads. As restructuring negotiations with foreign lenders continue, households and businesses are doing their best to cope. Ms. Chrappah has been selling imported bathmats, shower curtains and housewares for more than 20 years.“Last year was the worst of all,” she said.Inflation surged, and the cedi lost more than half its value compared with the U.S. dollar — a blow to consumers and businesses when a country imports everything from medicine to cars. The Bank of Ghana jacked up interest rates to cope with inflation, hurting businesses and households that rely on short-term borrowing or want to invest. The benchmark rate is now 30 percent.Because of the rapidly depreciating currency, Ms. Chrappah explained, “you can sell in the morning at one price, and then you have to think of changing the price the following day.”Purchasing power as well as the value of savings has been halved. Doreen Adjetey, product manager for Dalex Swift, a finance company based in Accra, said a bottle of Tylenol to soothe her 19-month-old baby’s teething pain cost 50 cedis last year. Now it’s 110.A month’s worth of groceries cost more than 3,000 cedis compared with 1,000. Before, she and her husband had a comfortable monthly income of 10,000 cedis, worth about $2,000 when the exchange rate was 5 cedis to the dollar. At today’s rate, it’s worth $889.Joe Jackson, the director of business operations at Dalex, said default rates for small and medium-size enterprises “are through the roof,” jumping to 70 percent from 30 percent.The real estate and construction market has also tanked. “There’s been a drastic drop in the number of homes in the first-buyer segment of the market,” said Joseph Aidoo Jr., executive director of Devtraco Limited, a large real estate developer.Construction of an apartment complex in Accra. The real estate and construction market has suffered along with the rise in the cost of borrowing. Francis Kokoroko for The New York TimesWhen the pandemic struck in 2020, paralyzing economies, shrinking revenues and raising health care costs, fear of a global debt crisis mounted. Ghana, like many developing countries, had borrowed heavily, encouraged by years of low commercial rates.As the Federal Reserve and other central banks raised interest rates to combat inflation, developing countries’ external debt payments — priced in dollars or euros — unexpectedly ballooned at the same time that prices of imported food, fuel and fertilizer shot up.As Ghana’s foreign reserves skidded toward zero, the government began paying for refined oil imports directly with gold bought by the central bank.Even so, while the series of unfortunate global events may have supercharged Ghana’s debt crisis, they didn’t create it.The current government, like previous ones, spent much more than it collected in revenues. Taxes as a share of total output are also lower than the average across the rest of Africa.To make up the shortfall, the government kept borrowing, offering higher and higher interest rates to attract foreign lenders. And then it borrowed more to pay back the interest on previous loans. By the end of last year, interest payments on debt were gobbling up more than 70 percent of government revenues.“The government is bloated and inefficient,” said E. Gyimah-Boadi, the board chair of Afrobarometer, a research network. Half-completed schools, hospitals and other projects are abandoned when a new administration comes in. Corruption and mismanagement are also problems, several economists and business leaders in Ghana said.More fundamentally, Ghana’s economy is not set up to generate the kind of jobs and incomes needed for broad development and sustainable growth.“Ghana’s success story is real,” said Aurelien Kruse, the lead country economist in the Accra office of the World Bank. “Where it may have been a bit oversold,” though, is that “the fast growth has not been diversified.” The economy is primarily dependent on exports of raw materials like cocoa, oil and gold, which peak and swoop in price.Manufacturing accounts for a mere 10 percent of the country’s output — a decline from 2013. Without a thriving industrial sector to provide steady employment and produce exportable goods, Ghana has no other streams of revenue from abroad, which can build wealth and pay for needed imports.This model — the import of expensive goods and the export of cheap resources — characterized the colonial system.Senyo Hosi, executive chairman of Kleeve & Tove, an investment company based in Accra, said he had an agribusiness that produced rice in the Volta region and worked with more than 1,000 growers. He can’t do required upgrades to equipment, though, because 30 percent interest rates make borrowing impossible. “I stopped production,” he said.Delivery riders for an online food delivery app. Francis Kokoroko for The New York Times‘For Us It Means Shutdown.’As the global financial system struggles to restructure hundreds of billions of dollars in existing debt, the question of how to avoid the debt trap in the first place remains more urgent than ever. Large chunks of money are required to invest in desperately needed roads, technology, schools, clean energy and more. But dozens of countries lack the domestic savings needed to pay for them, and grants and low-cost loans from international institutions are scarce.Road works continue on sections of the National Route Six, a carriageway connecting Ghana’s capital to its second largest city, Kumasi.Francis Kokoroko for The New York Times“The fundamental issue is the need for financing,” said Brahima S. Coulibaly, a senior fellow at the Brookings Institution.So governments turn to international capital markets, where investors are foraging the world for high returns. Both political leaders and investors often look for short-term wins, whether in the next election or earnings call, said Martin Guzman, a former finance minister of Argentina who handled his country’s debt restructuring in 2020.This free flow of capital around the globe has resulted in a flood of financial crises. “Inequality is embedded in the international financial architecture,” a United Nations Global Crisis Response Group concluded in an analysis.Even worthy investments — and not all of them are — don’t always generate enough revenue to repay the loans. When bad times hit or foreign lenders get spooked, governments are left in the lurch. This process can be accelerated in Africa, where research has found there is an exaggerated perception of risk, which lowers credit ratings and raises financing costs.Without a safety cushion to fall back on, a small government cash crunch can turn into a disaster. Think of a household in a tough stretch that can’t cover next month’s rent and is evicted. Now instead of being a few hundred dollars in debt, the members of the household are homeless.“For us,” said Ken Ofori-Atta, Ghana’s finance minister, a credit downgrade “means shutdown.”Ghana’s finance minister, Ken Ofori-Atta, at his home in Accra: “For us, a credit downgrade means shutdown.”Francis Kokoroko for The New York TimesSeveral organizations have sketched out escape routes from the debt trap, including more low-cost lending from multilateral banks like the World Bank.Debt Justice, which advocates for debt forgiveness, along with many economists, argues that some of the $200 billion in debt must be erased. It has also called for governments and lenders to publicly reveal the amount and terms of loans, and what the money was used for so it can be better tracked and audited.Other research groups have looked at ways to stabilize the evolving African bond market and help governments survive short-term shortfalls as well as boom-and-bust swings in commodity prices.Mr. Ofori-Atta said he had “extreme confidence” that Ghana would have strong growth after it emerged from this debt tunnel.But the problem of finding manageable amounts of low-cost investment capital remains.Where does an African country — or any developing country — get the type of financing it needs to grow? Mr. Ofori-Atta asked.Before the cycle of debt crises is broken, that question will have to be answered. More

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    Why What We Thought About the Global Economy Is No Longer True

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    While the world’s eyes were on the pandemic, the war in Ukraine and China, the paths to prosperity and shared interests have grown murkier.When the world’s business and political leaders gathered in 2018 at the annual economic forum in Davos, the mood was jubilant. Growth in every major country was on an upswing. The global economy, declared Christine Lagarde, then the managing director of the International Monetary Fund, “is in a very sweet spot.”Five years later, the outlook has decidedly soured.“Nearly all the economic forces that powered progress and prosperity over the last three decades are fading,” the World Bank warned in a recent analysis. “The result could be a lost decade in the making — not just for some countries or regions as has occurred in the past — but for the whole world.”A lot has happened between then and now: A global pandemic hit; war erupted in Europe; tensions between the United States and China boiled. And inflation, thought to be safely stored away with disco album collections, returned with a vengeance.But as the dust has settled, it has suddenly seemed as if almost everything we thought we knew about the world economy was wrong.The economic conventions that policymakers had relied on since the Berlin Wall fell more than 30 years ago — the unfailing superiority of open markets, liberalized trade and maximum efficiency — look to be running off the rails.During the Covid-19 pandemic, the ceaseless drive to integrate the global economy and reduce costs left health care workers without face masks and medical gloves, carmakers without semiconductors, sawmills without lumber and sneaker buyers without Nikes.Calverton National Cemetery in New York in early 2021, where daily burials more than doubled at the height of the pandemic.Johnny Milano for The New York TimesCaring for Covid patients in Bergamo, Italy, in 2020. Cost-cutting and economic integration around the globe left health care workers scrambling for masks and other supplies when the coronavirus hit.Fabio Bucciarelli for The New York TimesThe idea that trade and shared economic interests would prevent military conflicts was trampled last year under the boots of Russian soldiers in Ukraine.And increasing bouts of extreme weather that destroyed crops, forced migrations and halted power plants has illustrated that the market’s invisible hand was not protecting the planet.Now, as the second year of war in Ukraine grinds on and countries struggle with limp growth and persistent inflation, questions about the emerging economic playing field have taken center stage.Globalization, seen in recent decades as unstoppable a force as gravity, is clearly evolving in unpredictable ways. The move away from an integrated world economy is accelerating. And the best way to respond is a subject of fierce debate.Of course, challenges to the reigning economic consensus had been growing for a while.“We saw before the pandemic began that the wealthiest countries were getting frustrated by international trade, believing — whether correctly or not — that somehow this was hurting them, their jobs and standards of living,” said Betsey Stevenson, a member of the Council of Economic Advisers during the Obama administration.The financial meltdown in 2008 came close to tanking the global financial system. Britain pulled out of the European Union in 2016. President Donald Trump slapped tariffs on China in 2017, spurring a mini trade war.But starting with Covid-19, the rat-a-tat series of crises exposed with startling clarity vulnerabilities that demanded attention.As the consulting firm EY concluded in its 2023 Geostrategic Outlook, the trends behind the shift away from ever-increasing globalization “were accelerated by the Covid-19 pandemic — and then they have been supercharged by the war in Ukraine.”A view of the destruction in Bakhmut, Ukraine, in May.Tyler Hicks/The New York TimesUkrainians lined up to receive humanitarian aid in Kherson last year. Trade and shared economic interests weren’t enough to prevent wars, as once thought.Lynsey Addario for The New York TimesIt was the ‘end of history.’Today’s sense of unease is a stark contrast with the heady triumphalism that followed the collapse of the Soviet Union in December 1991. It was a period when a theorist could declare that the fall of communism marked “the end of history” — that liberal democratic ideas not only vanquished rivals, but represented “the end point of mankind’s ideological evolution.”Associated economic theories about the ineluctable rise of worldwide free market capitalism took on a similar sheen of invincibility and inevitability. Open markets, hands-off government and the relentless pursuit of efficiency would offer the best route to prosperity.It was believed that a new world where goods, money and information crisscrossed the globe would essentially sweep away the old order of Cold War conflicts and undemocratic regimes.There was reason for optimism. During the 1990s, inflation was low while employment, wages and productivity were up. Global trade nearly doubled. Investments in developing countries surged. The stock market rose.The World Trade Organization was established in 1995 to enforce the rules. China’s entry six years later was seen as transformative. And linking a huge market with 142 countries would irresistibly draw the Asian giant toward democracy.China, along with South Korea, Malaysia and others, turned struggling farmers into productive urban factory workers. The furniture, toys and electronics they sold around the world generated tremendous growth.China joined the World Trade Organization at a signing ceremony in 2001. ReutersThe favored economic road map helped produce fabulous wealth, lift hundreds of millions of people out of poverty and spur wondrous technological advances.But there were stunning failures as well. Globalization hastened climate change and deepened inequalities.In the United States and other advanced economies, many industrial jobs were exported to lower-wage countries, removing a springboard to the middle class.Policymakers always knew there would be winners and losers. Still, the market was left to decide how to deploy labor, technology and capital in the belief that efficiency and growth would automatically follow. Only afterward, the thinking went, should politicians step in to redistribute gains or help those left without jobs or prospects.Companies embarked on a worldwide scavenger hunt for low-wage workers, regardless of worker protections, environmental impact or democratic rights. They found many of them in places like Mexico, Vietnam and China.Television, T-shirts and tacos were cheaper than ever, but many essentials like health care, housing and higher education were increasingly out of reach.The job exodus pushed down wages at home and undercut workers’ bargaining power, spurring anti-immigrant sentiments and strengthening hard-right populist leaders like Donald Trump in the United States, Viktor Orban in Hungary and Marine Le Pen in France.In advanced industrial giants like the United States, Britain and several European countries, political leaders turned out to be unable or unwilling to more broadly reapportion rewards and burdens.Nor were they able to prevent damaging environmental fallout. Transporting goods around the globe increased greenhouse gas emissions. Producing for a world of consumers strained natural resources, encouraging overfishing in Southeast Asia and illegal deforestation in Brazil. And cheap production facilities polluted countries without adequate environmental standards.It turned out that markets on their own weren’t able to automatically distribute gains fairly or spur developing countries to grow or establish democratic institutions.Jake Sullivan, the U.S. national security adviser, said in a recent speech that a central fallacy in American economic policy had been to assume “that markets always allocate capital productively and efficiently — no matter what our competitors did, no matter how big our shared challenges grew, and no matter how many guardrails we took down.”The proliferation of economic exchanges between nations also failed to usher in a promised democratic renaissance.Communist-led China turned out to be the global economic system’s biggest beneficiary — and perhaps master gamesman — without embracing democratic values.“Capitalist tools in socialist hands,” the Chinese leader Deng Xiaoping said in 1992, when his country was developing into the world’s factory floor. China’s astonishing growth transformed it into the world’s second largest economy and a major engine of global growth. All along, though, Beijing maintained a tight grip on its raw materials, land, capital, energy, credit and labor, as well as the movements and speech of its people.Globalization has had enormous effects on the environment — including deforestation in Roraima State, in the Brazilian Amazon.Victor Moriyama for The New York TimesDistributing food in Johannesburg in 2020, where the pandemic caused a significant spike in the need for assistance.Joao Silva/The New York TimesMoney flowed in, and poor countries paid the price.In developing countries, the results could be dire.The economic havoc wreaked by the pandemic combined with soaring food and fuel prices caused by the war in Ukraine have created a spate of debt crises. Rising interest rates have made those crises worse. Debts, like energy and food, are often priced in dollars on the world market, so when U.S. rates go up, debt payments get more expensive.The cycle of loans and bailouts, though, has deeper roots.Poorer nations were pressured to lift all restrictions on capital moving in and out of the country. The argument was that money, like goods, should flow freely among nations. Allowing governments, businesses and individuals to borrow from foreign lenders would finance industrial development and key infrastructure.“Financial globalization was supposed to usher in an era of robust growth and fiscal stability in the developing world,” said Jayati Ghosh, an economist at the University of Massachusetts Amherst. But “it ended up doing the opposite.”Some loans — whether from private lenders or institutions like the World Bank — didn’t produce enough returns to pay off the debt. Others were poured into speculative schemes, half-baked proposals, vanity projects or corrupt officials’ bank accounts. And debtors remained at the mercy of rising interest rates that swelled the size of debt payments in a heartbeat.Over the years, reckless lending, asset bubbles, currency fluctuations and official mismanagement led to boom-and-bust cycles in Asia, Russia, Latin America and elsewhere. In Sri Lanka, extravagant projects undertaken by the government, from ports to cricket stadiums, helped drive the country into bankruptcy last year as citizens scavenged for food and the central bank, in a barter arrangement, paid for Iranian oil with tea leaves.It’s a “Ponzi scheme,” Ms. Ghosh said.Private lenders who got spooked that they would not be repaid abruptly cut off the flow of money, leaving countries in the lurch.And the mandated austerity that accompanied bailouts from the International Monetary Fund, which compelled overextended governments to slash spending, often brought widespread misery by cutting public assistance, pensions, education and health care.Even I.M.F. economists acknowledged in 2016 that instead of delivering growth, such policies “increased inequality, in turn jeopardizing durable expansion.”Disenchantment with the West’s style of lending gave China the opportunity to become an aggressive creditor in countries like Argentina, Mongolia, Egypt and Suriname.A market in Buenos Aires. China has become an aggressive creditor to countries like Argentina. Sarah Pabst for The New York TimesSelf-reliance replaces cheap imports.While the collapse of the Soviet Union cleared the way for the domination of free-market orthodoxy, the invasion of Ukraine by the Russian Federation has now decisively unmoored it.The story of the international economy today, said Henry Farrell, a professor at the Johns Hopkins School of Advanced International Studies, is about “how geopolitics is gobbling up hyperglobalization.”Old-world style great power politics accomplished what the threat of catastrophic climate collapse, seething social unrest and widening inequality could not: It upended assumptions about the global economic order.Josep Borrell, the European Union’s head of foreign affairs and security policy, put it bluntly in a speech 10 months after the invasion of Ukraine: “We have decoupled the sources of our prosperity from the sources of our security.” Europe got cheap energy from Russia and cheap manufactured goods from China. “This is a world that is no longer there,” he said.Supply-chain chokeholds stemming from the pandemic and subsequent recovery had already underscored the fragility of a globally sourced economy. As political tensions over the war grew, policymakers quickly added self-reliance and strength to the goals of growth and efficiency.“Our supply chains are not secure, and they’re not resilient,” Treasury Secretary Janet L. Yellen said last spring. Trade relationships should be built around “trusted partners,” she said, even if it means “a somewhat higher level of cost, a somewhat less efficient system.”“It was naïve to think that markets are just about efficiency and that they’re not also about power,” said Abraham Newman, a co-author with Mr. Farrell of “Underground Empire: How America Weaponized the World Economy.”Economic networks, by their very nature, create power imbalances and pressure points because countries have varying capabilities, resources and vulnerabilities.Russia, which had supplied 40 percent of the European Union’s natural gas, tried to use that dependency to pressure the bloc to withdraw its support of Ukraine.The United States and its allies used their domination of the global financial system to remove major Russian banks from the international payments system.The Port of Chornomorsk near Odesa, last year. In 2021, Ukraine was the largest wheat exporter in the world.Laetitia Vancon for The New York TimesHarvesting grapes at a vineyard in South Australia. China blocked Australian exports of wine and other goods after the country expressed support for Taiwan.Adam Ferguson for The New York TimesChina has retaliated against trading partners by restricting access to its enormous market.The extreme concentrations of critical suppliers and information technology networks has generated additional choke points.China manufactures 80 percent of the world’s solar panels. Taiwan produces 92 percent of tiny advanced semiconductors. Much of the world’s trade and transactions are figured in U.S. dollars.The new reality is reflected in American policy. The United States — the central architect of the liberalized economic order and the World Trade Organization — has turned away from more comprehensive free trade agreements and repeatedly refused to abide by W.T.O. decisions.Security concerns have led the Biden administration to block Chinese investment in American businesses and limit China’s access to private data on citizens and to new technologies.And it has embraced Chinese-style industrial policy, offering gargantuan subsidies for electric vehicles, batteries, wind farms, solar plants and more to secure supply chains and speed the transition to renewable energy.“Ignoring the economic dependencies that had built up over the decades of liberalization had become really perilous,” Mr. Sullivan, the U.S. national security adviser, said. Adherence to “oversimplified market efficiency,” he added, proved to be a mistake.While the previous economic orthodoxy has been partly abandoned, it is not clear what will replace it. Improvisation is the order of the day. Perhaps the only assumption that can be confidently relied on now is that the path to prosperity and policy trade-offs will become murkier.A solar farm in Yanqing district, in China. The country makes 80 percent of the world’s solar panels.Gilles Sabrié for The New York Times More

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    Pressure Mounts on China to Offer Debt Relief to Poor Countries Facing Default

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    There was optimism at the spring meetings of the I.M.F. and World Bank that China will make concessions over restructuring its loans.WASHINGTON — China, under growing pressure from top international policymakers, appeared to indicate this week that it is ready to make concessions that would unlock a global effort to restructure hundreds of billions of dollars of debt owed by poor countries.China has lent more than $500 billion to developing countries through its lending program, making it one of the world’s largest creditors. Many of those countries, including several in Africa, have struggled economically in the wake of the pandemic and face the possibility of defaulting on their debt payments. Their problems have been compounded by rising interest rates and disruptions to supplies of food and energy as a result of Russia’s war in Ukraine.The United States, along with other Western nations, has been pressing China to allow some of those countries to restructure their debt and reduce the amount that they owe. But for more than two years, China has insisted that other creditors and multilateral lenders absorb financial losses as part of any restructuring, bogging down a critical loan relief process and threatening to push millions of people in developing countries deeper into poverty.A breakthrough would offer an economic lifeline to vulnerable nations at a time of sluggish growth and uncertain financial stability, and it would signal a renewed interest from China in economic diplomacy.Economists and development experts are watching carefully to determine if China is serious about easing the loan forgiveness logjam and if its talk will be followed by action. By some calculations, the world’s poor countries owe around $200 billion to wealthy nations, multilateral development banks and private creditors. Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Zambia, Sri Lanka and Ghana.Africa’s private and public external debt has increased more than fivefold over the last two decades to about $700 billion and Chinese lenders account for 12 percent of that total, according to Chatham House, the London policy institute. Researchers for the Debt Relief for Green and Inclusive Recovery Project estimated in a recent report that 61 emerging market and developing economies were facing debt distress, and that more than $800 billion in debt must be restructured.Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Sri Lanka.Dinuka Liyanawatte/Reuters“China is facing increasing pressure from every quarter, including from other emerging market economies, to play a more constructive role in the negotiations over debt restructuring,” said Eswar Prasad, a former head of the International Monetary Fund’s China division, who said China’s intransigence had left it “increasingly isolated.”There were indications this week that China was prepared to end that isolation as top economic officials from around the world convened at the spring meetings of the I.M.F. and World Bank. Participants expressed optimism that representatives from Beijing appeared to be ready to back off its insistence that multilateral lenders such as the World Bank, which provides low-interest loans and grants to poor countries, accept losses in the debt restructuring.“My sense from the current context is we’re moving on to new steps,” David Malpass, the departing World Bank president, said at a news conference on Thursday, pointing to “progress on equal burden sharing.”Kristalina Georgieva, the I.M.F.’s managing director, said she was “very encouraged” that a “common understanding” had been reached that could accelerate relief for countries such as Zambia, Ghana, Ethiopia and Sri Lanka.“I always say the proof of the pudding is in the eating,” Ms. Georgieva said.To restructure a country’s debt, creditors generally must agree to a combination of lowering the interest rate on the loan, extending the duration of the loan or writing off some of what is owed. China, which has faced an array of domestic economic challenges over the last three years, has been reluctant to take losses on debt and has pushed for other lenders, such as the World Bank, to incur losses.The urgency for a resolution was palpable among countries that are most in need of relief. Zambia defaulted in 2020 and has been trying to restructure $8.4 billion that it owes through a program established by the Group of 20 nations. It owes about $6 billion to Chinese lenders, and its total debt to foreign lenders is approaching $20 billion.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education.Yuri Gripas for The New York Times“Zambia urgently needs debt relief,” Situmbeko Musokotwane, Zambia’s finance minister, told The New York Times. “Delay on debt restructuring puts our currency under pressure, excludes Zambia from capital markets and makes it difficult to attract much-needed foreign direct investment.”Ghana appealed to the Group of 20 nations this year for debt relief through a fledgling program known as the Common Framework after securing preliminary approval for a $3 billion loan from the I.M.F. That money is contingent on Ghana’s receiving assurances that it can restructure the approximately $30 billion that it owes to foreign lenders. Officials from Ghana have been meeting with their Chinese counterparts about restructuring the $2 billion that it owes China.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education and expressed disappointment that advanced economies had been slow to act.“Honestly, it is disheartening to watch Africa struggle in this way, especially considering the potential loss of productivity over the next decade should African economies buckle under the weight of suffocating debts,” Mr. Ofori-Atta said at an Atlantic Council event on Friday.But it remains uncertain how far China is willing to go.Brad Setser, a senior fellow at the Council on Foreign Relations, said that it was not clear what financial terms Beijing would accept when restructuring debt but that it appeared to be taking a “positive step” that would remove “a financially unwarranted roadblock to any progress.”Treasury Secretary Janet Yellen at a farm in Zambia in January. She said this week that she would continue to press her Chinese counterparts to make the restructuring process work better.Fatima Hussein/Associated PressBut given the grinding pace of the talks, big investors in emerging markets are not counting on quick resolutions.“We are starting to see tokens of flexibility from China on their stance in sovereign debt restructuring, but complexities abound,” said Yacov Arnopolin, emerging markets portfolio manager at PIMCO. “Near term, we don’t expect a clear-cut solution on China’s willingness to take losses.”China’s reluctance has been another source of tension with the United States, which has expressed concern that Beijing’s onerous lending terms and refusal to renegotiate have amplified the financial problems that developing countries are facing. Treasury Secretary Janet L. Yellen said this week that she would continue to press her Chinese counterparts to improve the restructuring process but that she was encouraged that China had recently expressed a willingness to help Sri Lanka restructure its debt.People familiar with Chinese economic policymaking said domestic politics had made it hard for China to make difficult decisions last autumn and over the winter about accepting possible losses on its loans.In October, the Communist Party held its once-in-five-years national congress and chose a new team of senior party officials to work with Xi Jinping, the country’s top leader. Maneuvering then began to reshuffle the government’s senior ranks, which had been expected during the annual session of the National People’s Congress in early March, although some changes of financial policymakers were unexpectedly delayed.China is now ready to focus on addressing a wide range of economic issues, including international debt, the people said. However, Beijing still faces other challenges that may limit its willingness to bargain, including a commercial banking system that faces very heavy losses on loans to real estate developers and does not want to accept large losses on loans to developing countries at the same time.Chinese officials offered support for the debt relief initiatives in broad terms this week.Wang Wenbin, a spokesman for the Chinese Foreign Ministry, said on Friday that China had put forward a three-point proposal that included calling for the I.M.F. to more quickly share its debt sustainability assessments for countries that need relief, and for creditors to detail how they will carry out the restructurings on “comparable terms.”After a meeting in Washington between Yi Gang, China’s central bank governor, and Mr. Musokotwane of Zambia, the Chinese central bank released a brief statement.“They exchanged views on issues of common concern including bilateral financial cooperation,” it said.Keith Bradsher More

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    IMF Lowers Growth Outlook Amid Financial System Tremors

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    The International Monetary Fund says a painful slowdown, which could include a recession, has become a bigger risk for the global economy.WASHINGTON — The world economy faces the increasing risk of a painful slowdown amid worries about the global banking system and concerns that rising interest rates could force banks to curtail lending, the International Monetary Fund said on Tuesday.The warning follows weeks of turmoil in the global banking sector, which included two bank failures in the United States and UBS’s takeover of Credit Suisse, brokered by the Swiss government. Fears that bank runs would ripple through the financial system have abated in recent weeks, but concerns that additional bank failures and tightening lending standards could slow economic output around the world remain.In its latest World Economic Outlook report, the I.M.F. made a slight reduction to its growth forecast for 2023, lowering it to 2.8 percent, from 2.9 percent in January. Growth for the year is expected to be much slower than the I.M.F. predicted a year ago, when it projected output of 3.4 percent.Growth projections for Japan, Germany and India were all lowered since the start of the year, when the I.M.F. said a global recession would most likely be avoided.The I.M.F. and the World Bank have both raised alarms in recent weeks that the global economy is facing a period of extended stagnation. The I.M.F. expects growth to hover around 3 percent for the next five years, which is its weakest medium-term growth forecast since 1990.On Tuesday, the I.M.F. expressed optimism that a financial crisis could be averted, but it lamented that inflation was still elevated and that the global economy remained fragile, facing a “rocky” road ahead. It suggested that a so-called hard landing, which could entail economies around the world tipping into recession, was increasingly plausible.“A hard landing — particularly for advanced economies — has become a much larger risk,” the I.M.F. report said, adding, “The fog around the world economic outlook has thickened.”Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said hopes for stronger growth hinged partly on China’s reopening after strict Covid-19 regulations.How Hwee Young/EPA, via ShutterstockThe dimmer forecast comes as top economic officials from around the world are convening in Washington this week for the spring meetings of the I.M.F. and World Bank. The gathering is taking place at a moment of high uncertainty, with Russia’s war in Ukraine grinding on, prices around the world remaining stubbornly high and debt burdens in developing countries raising unease about the possibility of defaults.Treasury Secretary Janet L. Yellen is expected to meet with other international regulators this week to assess the state of the global financial system. On Tuesday, she expressed confidence in the U.S. banking system and the health of the economy, explaining that she continues to believe that the outlook is brighter than what many economists predicted last fall.“Here at home, the U.S. banking system remains sound, with strong capital and liquidity positions,” Ms. Yellen said during a news conference. “The global financial system also remains resilient due to the significant reforms that nations took after the financial crisis.”Ms. Yellen said she remained “vigilant” to the risks facing the economy, pointing to recent pressures on banking systems in the United States and Europe and the potential for more fallout from Russia’s war in Ukraine. She is not currently seeing evidence that credit is contracting, she added, but acknowledged that it was a possibility.“I’m not anticipating a downturn in the economy, although, of course, that remains a risk,” Ms. Yellen said.Treasury Secretary Janet Yellen expressed confidence on Tuesday in the strength of the U.S. economy but acknowledged that a downturn remained possible.Yuri Gripas for The New York TimesThe I.M.F. made a small upgrade to its projection for U.S. output, which is now expected to be 1.6 percent for 2023.Economists are still working to assess what effects the bank failures might have on the broader U.S. economy. Analysts at Goldman Sachs wrote in a research note this week that bank stress could reduce lending by as much as six percentage points and that small businesses, which rely heavily on small and midsize banks, could bear the brunt of tighter lending.The I.M.F. attributed the strain on the financial sector to banks with business models that relied heavily on a continuation of low interest rates and failed to adjust to the rapid pace of increases in the last year. Although it appears that the turbulence in the banking sector might be contained, the I.M.F. noted that investors and depositors remained highly sensitive to developments in the banking sector.Unrealized losses at banks could lead to a “plausible scenario” of additional shocks that could have a “potentially significant impact on the global economy” if credit conditions tighten further and businesses and households have an even harder time borrowing.“The risks are again heavily weighted to the downside and in large part because of the financial turmoil of the last month and a half,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said at a briefing ahead of the report’s release.In the most severe scenario, in which global credit conditions tighten sharply, the I.M.F. projected that global growth could slow to 1 percent this year.Mr. Gourinchas noted that the financial system was not the only cloud hanging over the global economy. Hopes for stronger growth have been hinging on China’s reopening after strict pandemic regulations, and changes to that policy could slow output and disrupt international commerce, he said. At the same time, Russia’s war in Ukraine continues to threaten the reliability of food and energy supply chains.Last month, the I.M.F. approved a $15.6 billion loan package for Ukraine, the first such financing program for a country involved in a major war.Emile Ducke for The New York TimesThe I.M.F. has been playing a leading role in trying to stabilize the Ukrainian economy, and last month it approved a $15.6 billion loan package for Ukraine, the first such financing program for a country involved in a major war. But despite the efforts by Western nations to buttress Ukraine and weaken Russia, the I.M.F. raised its outlook for the Russian economy, projecting it will grow 0.7 percent this year and 1.3 percent in 2024.The I.M.F. noted that Russia’s energy exports continued to be robust, allowing it to support its economy through government spending. The impact of efforts by the United States and Europe to cap the price of Russian oil at $60 a barrel remains unclear because global oil prices have been falling amid recession fears. I.M.F. officials said that because of lower oil prices, Russian oil was no longer trading at as much of a discount and that Russia had been successful at finding ways to circumvent the price cap.Even as it underscored the risks facing the global economy, the I.M.F. urged central banks to maintain their efforts to contain prices while standing ready to stabilize the financial system, noting that inflation is still too elevated relative to their targets.Despite the I.M.F.’s warnings about a hard landing, Ms. Yellen sought to open this week’s meetings with a note of optimism. She pointed to signs that inflation is diminishing and the resilience of the financial system as reasons for hope.“I wouldn’t overdo the negativism about the global economy,” Ms. Yellen said. “I think we should be more positive.”She added: “I think the outlook is reasonably bright.” More

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    Global Economy May Be in a ‘Lost Decade,’ World Bank Warns

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    Adding to crises like the pandemic, recent stress in the banking system is a new threat to world growth, experts at the organization said.WASHINGTON — The World Bank warned on Monday that the coronavirus pandemic and Russia’s war in Ukraine had contributed to a decline in the global economy’s long-term growth potential, leading to what could be a “lost decade” that would mean more poverty and fewer resources to combat the impact of climate change.The warning comes as the world deals with overlapping crises — a pandemic that crippled economies and strained public health systems and Russia’s invasion of Ukraine, which disrupted global supply chains and hurt international trade ties. The threat of a more protracted slump coincides with new signs of stress in the world’s financial system as a series of banking crises threaten to undermine economic growth.The World Bank projected in a new report that average potential global output is poised to fall to a 30-year low of 2.2 percent per year between 2023 and 2030. That would be a sharp decline from 3.5 percent per year during the first decade of this century.The falloff will be even more pronounced for developing economies, which grew at an average annual rate of 6 percent from 2000 to 2010; that rate could decline to 4 percent this decade.“A lost decade could be in the making for the global economy,” said Indermit Gill, the World Bank’s chief economist and senior vice president for development economics. “The ongoing decline in potential growth has serious implications for the world’s ability to tackle the expanding array of challenges unique to our times — stubborn poverty, diverging incomes and climate change.”Officials at the World Bank said the “golden era” of development appeared to be coming to an end. They warned that policymakers would need to get more creative as they tried to address global challenges without being able to rely on the rapid economic expansions of countries such as China, which has long been an engine of worldwide growth.They suggested that international monetary and fiscal policy frameworks should be more closely aligned, and that world leaders needed to find ways to reduce trade costs and increase their labor force participation. A return to faster growth, they said, will not be easy.Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased.”Jing Xu/Reuters“It will take a herculean collective policy effort to restore growth in the next decade to the average of the previous one,” the World Bank said in the report.The increasing frequency of global crises continues to weigh on output even as signs of an economic rebound emerge. Efforts by central banks to tame inflation by raising interest rates have fueled turmoil in the banking sector, leading to the failures of Silicon Valley Bank and Signature Bank in the United States this month and the rescue of Credit Suisse by UBS.Top economic officials have been watching to see if the strain on the banking system will become a significant economic headwind that could tip the United States into a recession.“It definitely brings us closer right now,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said of a recession on the CBS program “Face the Nation” on Sunday. “What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch.”Kristalina Georgieva, the managing director of the International Monetary Fund, said on Sunday that “risks to financial stability have increased” and that given high levels of uncertainty, policymakers must remain vigilant. She noted that the recent turmoil could have implications for the I.M.F.’s global economic outlook and financial stability report, which will be released in the next few weeks.“At a time of higher debt levels, the rapid transition from a prolonged period of low interest rates to much higher rates — necessary to fight inflation — inevitably generates stresses and vulnerabilities, as evidenced by recent developments in the banking sector in some advanced economies,” Ms. Georgieva said at the China Development Forum.The I.M.F. said in January that it believed a global recession could be avoided as growth began to rebound later this year. At the time, it projected that output would be more resilient than previously anticipated, and it upgraded its growth projections for 2023 and 2024, but it did warn that “financial stability risks remain elevated.”World Bank officials said that if the current banking turmoil spiraled into a financial crisis and recession, then global growth projections might be even weaker because of the associated losses of jobs and investment.“However you look at it, if the current situation gets worse and turns into a recession, especially a recession at the global level, that could have negative implications for long-term growth prospects,” said Ayhan Kose, director the World Bank’s Prospects Group and the lead author of the report. More

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    War in Ukraine Deepens Divide Among Major Economies at G20 Gathering

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    Treasury Secretary Janet L. Yellen urged her counterparts at a summit in India to condemn Russia’s actions, and she defended the cost of supplying aid to Kyiv.A year after Russia’s invasion of Ukraine, the war is deepening the division among the world’s major economies, threatening fragile recoveries by disrupting food and energy supply chains and distracting from plans to combat poverty and restructure debt in poor countries.Those fissures were evident this past week as top economic policymakers from the Group of 20 nations gathered for two days at a resort in Bengaluru, a city in southern India, where efforts to demonstrate unity were overshadowed by flaring tensions over Russia. During the summit, Western nations imposed a barrage of new sanctions on Moscow and unveiled more economic support for Ukraine, while developing countries like India, which have been reaping the benefits of cheap Russian oil, resisted expressing criticism.The differing views left officials struggling to cobble together the traditional joint statement, or communiqué, on Saturday, forcing senior representatives from the Group of 7 nations, the world’s most advanced economies, to try to convince reluctant counterparts that defending Ukraine was worth the cost.“Ukraine is fighting not only for their country, but for the preservation of democracy and peaceful conditions in Europe,” Treasury Secretary Janet L. Yellen said on Saturday in an interview, explaining the case that she had made to the more reluctant countries. “It’s an assault on democracy and on territorial integrity that should concern all of us,” she added.The summit took place at a pivotal moment for the global economy. The International Monetary Fund last month upgraded its global output projections but warned that Russia’s war in Ukraine continued to cast a cloud of uncertainty. The fund also noted that increasing “fragmentation” in the world could be a drag on growth in the future.Ms. Yellen was among the most forceful critics of Russia during the two-day meeting. At one point, she directly confronted senior Russian officials in a private session and called them “complicit” in the Kremlin’s atrocities.The grappling over how to characterize Russia’s actions led Bruno Le Maire, the French finance minister, to publicly vent his frustration with some countries that would not assail Russia in writing. He noted that when the leaders of the Group of 20 nations met in November, in Bali, Indonesia, their statement had asserted that most members strongly condemned the war, and he said on Friday that he was opposed to watering down that sentiment.“I want to make it very clear that we will oppose any step back from the statement of the leaders in Bali on this question of the war in Ukraine,” Mr. Le Maire, who declined to name the holdouts, said at a news conference. “We strongly condemn this illegal and brutal attack against Ukraine.”India’s close economic ties with Russia have made its role as the host of the Group of 20 this year especially challenging. Moscow is a major supplier of energy and military equipment to India, while the United States is India’s largest trading partner.To remain neutral, India has tried to avoid describing the conflict as a “war” and instead focused on other issues. In an opening address to the summit, Prime Minister Narendra Modi laid out the threats facing the global economy, but he made no mention of Russia, pointing instead to “rising geopolitical tensions in many parts of the world.”Some of the resistance to condemning Russia is because of concern about the United States’ use of its economic might to isolate a member of the Group of 20.“The fact that the U.S. clearly has so much power to take action against a geopolitical rival is a significant concern,” said Eswar Prasad, a trade policy professor at Cornell University who speaks to both American and Indian officials. “There’s clearly been a splintering of the G20.”Mr. Prasad added that the aggressive use of sanctions by the United States had raised anxiety among other nations — even if they disagreed with Russia’s actions — that they could someday be exposed to Washington’s wrath.That use of economic warfare was on display on Friday, when the United States imposed sanctions on more than 200 individuals and entities in Russia and other countries that are helping to financially support Moscow’s invasion of Ukraine. Sanctions were also placed on Russia’s metals and mining sector and on energy companies.The war in Ukraine was not the only matter this past week that consumed finance ministers in India.The United States and Europe continued to hash out differences over American subsidies for electric vehicles that European countries believe will harm their economies. A global tax agreement that was struck in 2021 continues to flounder, raising the prospect that it could unravel. And talks over restructuring debt burdens facing poor countries to avoid a cascade of defaults failed to bear fruit, largely because of resistance from China.“There hasn’t been a significant change that I see,” said Ms. Yellen, who expressed frustration at China’s role as a roadblock this past week.But it is the war in Ukraine that has left the world’s economic leaders most divided. In many cases, resistance to supporting Ukraine and confronting Russia is the result of complicated domestic politics in many countries, and the United States is no exception.A growing number of Republicans, including former President Donald J. Trump, have been arguing in recent weeks that the United States cannot afford to endlessly support Kyiv. They contend that at a time when the United States is burdened by record levels of debt and a weakening economy, that money would be better spent on domestic problems.In the past year, the United States has directed more than $100 billion dollars of humanitarian, financial and military aid to Ukraine. The Congressional Budget Office projected last week that the United States was on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast.For the Biden administration, scaling back aid to Ukraine does not appear to be an option.In the interview, Ms. Yellen argued that the United States can afford to bear the costs and that supporting Ukraine was a priority for national security and economic reasons.“The war is having an adverse effect on the entire global economy,” Ms. Yellen said, “and providing the support that’s necessary for Ukraine to win this and bring it to an end is certainly something that we really can’t afford not to do.” More

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    IMF Upgrades Global Economic Outlook as Inflation Eases

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    The International Monetary Fund said the world economy was poised for a rebound as inflation eases.WASHINGTON — The International Monetary Fund said on Monday that it expected the global economy to slow this year as central banks continued to raise interest rates to tame inflation, but it also suggested that output would be more resilient than previously anticipated and that a global recession would probably be avoided.The I.M.F. upgraded its economic growth projections for 2023 and 2024 in its closely watched World Economic Outlook report, pointing to resilient consumers and the reopening of China’s economy as among the reasons for a more optimistic outlook.The fund warned, however, that the fight against inflation was not over and urged central banks to avoid the temptation to change course.“The fight against inflation is starting to pay off, but central banks must continue their efforts,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said in an essay that accompanied the report.Global output is projected to slow to 2.9 percent in 2023, from 3.4 percent last year, before rebounding to 3.1 percent in 2024. Inflation is expected to decline to 6.6 percent this year from 8.8 percent in 2022 and then to fall to 4.3 percent next year.After a succession of downgrades in recent years as the pandemic worsened and Russia’s war in Ukraine intensified, the I.M.F.’s latest forecasts were rosier than those the fund released in October.Since then, China abruptly reversed its “zero Covid” policy of lockdowns to contain the pandemic and embarked on a rapid reopening. The I.M.F. also said that the energy crisis in Europe had been less severe than initially feared and that the weakening of the U.S. dollar was providing relief to emerging markets.The I.M.F. predicted previously that a third of the world economy could be in recession this year. However, Mr. Gourinchas said in a news briefing ahead of the release of the report that far fewer countries were now facing recessions in 2023 and that the I.M.F. was not forecasting a global recession.Lukoil oil field in the Baltic Sea. A coordinated plan by the United States and Europe to cap the price of Russian oil exports at $60 a barrel is not expected to substantially curtail its energy revenues.Vitaly Nevar/Reuters“We are seeing a much lower risk of recession, either globally, or even if we think about the number of countries that might be in recession,” Mr. Gourinchas said.Despite the more hopeful outlook, global growth remains weak by historical standards and the war in Ukraine continues to weigh on activity and sow uncertainty. The report also cautions that the global economy still faces considerable risks, warning that “severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate and tighter global financing costs could worsen debt distress.”Growth in rich countries is expected to be particularly sluggish this year, with nine out of 10 advanced economies likely to have slower growth than they had in 2022.The I.M.F. projects growth in the United States to slow to 1.4 percent this year from 2 percent in 2022. It expects the jobless rate to rise from 3.5 percent to 5.2 percent next year, but that it is still possible that a recession can be avoided in the world’s largest economy.“There is a narrow path that allows the U.S. economy to escape a recession altogether, or if it has a recession, the recession would be relatively shallow,” Mr. Gourinchas said.The slowdown in Europe will be more pronounced, the I.M.F. said, as the boost from the reopening of its economies fades this year and consumer confidence frays in the face of double-digit inflation. In the euro area, growth is projected to slow to 0.7 percent from 3.5 percent.China is projected to pick up the slack with output accelerating to 5.2 percent in 2023 from 3 percent in 2022.Combined, China and India are expected to account for about half of global growth this year. I.M.F. officials said at a press briefing on Monday night that China’s economic trajectory would be a major driver for the world economy, noting that after a period of flux, China appears to have stabilized and is able to fully produce.However, Mr. Gourinchas noted that there were still signs of weakness in China’s property market and that its growth could moderate in 2024. The report described the sector as a “major source of vulnerability” that could lead to widespread defaults by developers and instability in the Chinese financial sector.A surprising contributor to global growth is Russia, suggesting that efforts by Western nations to cripple its economy appear to be faltering. The I.M.F. predicts Russian output to expand 0.3 percent this year and 2.1 percent next year, defying earlier forecasts of a steep contraction in 2023 amid a raft of Western sanctions.A coordinated plan by the United States and Europe to cap the price of Russian oil exports at $60 a barrel is not expected to substantially curtail the country’s energy revenues.“At the current oil price cap level of the Group of 7, Russian crude oil export volumes are not expected to be significantly affected, with Russian trade continuing to be redirected from sanctioning to non-sanctioning countries,” the I.M.F. said in the report.Among the I.M.F.’s most pressing concerns is the growing trend toward “fragmentation.” The war in Ukraine and the global response have divided nations into blocs and reinforced pockets of geopolitical tension, threatening to hamper economic progress.“Fragmentation could intensify — with more restrictions on cross-border movements of capital, workers and international payments — and could hamper multilateral cooperation on providing global public goods,” the I.M.F. said. “The costs of such fragmentation are especially high in the short term, as replacing disrupted cross-border flows takes time.” More

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    David Lipton, Economic Diplomat, Will Step Down From Treasury

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    Mr. Lipton, who served in senior roles in the Clinton and Obama administrations and at the I.M.F., is retiring.WASHINGTON — David A. Lipton, a longtime figure in the field of international economics, is stepping down on Wednesday from his job as international affairs counselor to Treasury Secretary Janet L. Yellen, according to two Treasury Department officials familiar with his plans.Mr. Lipton, one of Ms. Yellen’s closest aides, is departing at a critical moment for the global economy. He has become a key negotiator in some of Ms. Yellen’s biggest policy issues. He was deeply involved in international discussions about a global minimum tax last year and has been at the center of the talks among the Group of 7 nations to impose a cap on the price of Russian oil.An economist by training with a doctoral degree from Harvard, Mr. Lipton, 69, has held senior economic policymaking positions in the Clinton, Obama and Biden administrations. He was also a top official at the International Monetary Fund, where he served as the deputy managing director.Last year, Ms. Yellen recruited Mr. Lipton to return to the federal government to help steer the Treasury Department’s international portfolio while President Biden’s nominees to lead the international affairs division were awaiting Senate confirmation.In a statement, Ms. Yellen described Mr. Lipton as one of her closest advisers and lauded his career.The Biden PresidencyHere’s where the president stands after the midterm elections.Beating the Odds: President Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.The ‘Trump Project’: With Donald J. Trump’s announcement that he is officially running for president again, Mr. Biden and his advisers are planning to go on the offensive.Legislative Agenda: The Times analyzed every detail of Mr. Biden’s major legislative victories and his foiled ambitions. Here’s what we found.“He will be irreplaceable for the department, but I feel incredibly fortunate to have had his counsel in my first two years,” Ms. Yellen said. “During that time, David has helped shape our international agenda across a wide set of challenges — from the recovery from the pandemic to our response to Russia’s war against Ukraine.”Mr. Lipton first met Ms. Yellen while a graduate student at Harvard, where he took her introductory course in macroeconomics. Lawrence H. Summers, who would serve as Treasury secretary during the Clinton administration, was also in the class, and he and Mr. Lipton became friends.After graduating from Harvard with a Ph.D. in economics in 1982, Mr. Lipton joined the I.M.F., where he worked for eight years on assignments that involved stabilizing the economies of poor countries.In 1993, after a stint working with the economist Jeffrey D. Sachs advising Russia, Poland and Slovenia on their transitions to capitalism, Mr. Lipton joined the Clinton administration’s Treasury Department. He was recruited by Mr. Summers, who was then the deputy Treasury secretary under Robert E. Rubin. He initially focused on Eastern Europe and the former Soviet Union before turning his attention to easing turmoil stemming from the Asian financial crisis in 1997.While President George W. Bush was in office, Mr. Lipton worked at Citigroup and at the hedge fund Moore Capital Management. He joined the Obama administration as an economic adviser. In 2011, Christine Lagarde named him her top deputy at the I.M.F. when the fund was spending billions of dollars to prop up Greece’s economy and as the economic tension between the United States and China was intensifying.Mr. Lipton’s second term at the monetary fund was cut short in 2020 when Kristalina Georgieva reshuffled its senior leadership. His position at the fund, which is usually decided by the United States, was filled by Geoffrey Okamoto, a former Trump administration official.A longtime proponent of the benefits of a global economy and multilateralism, Ms. Yellen persuaded Mr. Lipton to join her team as the Biden administration sought to mend international relationships that had been frayed during the Trump era.“David Lipton has been an insufficiently sung hero of the international financial system for the last 30 years,” Mr. Summers said in a text message. “His quiet strength and wisdom both prevented and resolved numerous crises.”Mr. Lipton, who grew up in Wayland, Mass., was a star wrestler in high school, serving as a co-captain for two years. At Harvard, he and Mr. Summers bonded over squash and economics.During remarks introducing Mr. Lipton at the Peterson Institute for International Economics in 2016, Mr. Summers described his former classmate as an economic “fireman in chief” who maintained a “keep hope alive” attitude when economic diplomacy got tough.Known for a dry wit that belies his earnest demeanor, Mr. Lipton expressed appreciation for the high praise but recalled that when he met Mr. Summers on the first day of school he initially had his doubts.“After talking to Larry for about 15 minutes, my reaction was, ‘If they’re all like that, I’m really in trouble,’” Mr. Lipton joked. More