A Changing World
Thank you. It is a pleasure to be here at the Atlantic Council.
The global economy is changing in profound ways. Over the past several years, we have lived through a rapid succession of major shocks—the pandemic, a cost-of-living crisis, escalating trade frictions, and wars in Ukraine and the Middle East. Global inflation peaked at close to 9.5 percent in 2022, and roughly four-fifths of the world’s central banks were tightening monetary policy concurrently.
At the same time, the world is undergoing major transformations. Demographically, advanced economies and many emerging markets are aging rapidly, while Africa and South Asia are experiencing a youth bulge. On current projections, the average age of the world’s population will rise by eleven years between 2020 and the end of this century.
Environmentally, climate change continues to intensify, and extreme weather events are becoming more frequent.
Technologically, artificial intelligence and digital finance are advancing at a speed few of us anticipated.
And geopolitically, the post-war global order is giving way to a more fragmented, multipolar world.
The global economy has proved remarkably resilient in the face of these forces. But the sheer scale of what is underway creates an exceptionally high degree of uncertainty—and we should expect the unexpected.
We have, of course, navigated big changes before: the move to floating exchange rates in the 1970s; the acceleration of globalization in the 1980s and 1990s, including the integration of China and Eastern Europe; the Global Financial Crisis of 2008; and the Euro Area crisis that followed. But the scale and complexity of what we face today may exceed anything we have experienced since the creation of the post-war system.
What’s different today is that these major transformations are all happening at the same time, and they are interacting.
The problem is: just when massive structural challenges and a new technological revolution would call for greater international cooperation, the global governance system is fragmenting.
What Is to Be Done: Four Principles
So the central question I want to address today is this: how can countries, and how can the Fund, promote stability and growth—and remain agile—in a world that is fragmenting and changing this fast?
I would offer four broad principles.
First, preserve macroeconomic stability. We cannot say with certainty what the world will look like in the future. But it is safe to assume that the basic rules of economics will continue to hold: stability is a precondition for prosperity. When an economy is unbalanced or unstable, private investment and growth suffer.
That is why governments—and the Fund—must continue to pay close attention to sound public finances and debt, to inflation, to growth and jobs, to external balances, and to financial stability.
This is particularly important in a world where policy buffers have been eroded. Fiscal deficits remain about 1.5 percentage points of GDP above pre-COVID levels; global public debt is projected to reach 100 percent of GDP by 2029, and debt service has climbed alongside higher interest rates. For the median low-income country, interest payments on public debt doubled over the last decade.
Recent shocks have shown that price stability cannot be taken for granted amid more frequent supply disruptions, and policymakers must pay greater attention to external sustainability. Large and rising imbalances both in surplus and deficit countries will need to be addressed to avoid disorderly adjustment.
Responding to future shocks means being prudent and targeted—there are limits to what fiscal and monetary policy alone can do to offset shocks or to accommodate deep structural shifts.
Second, enhance resilience. Recent supply shocks and geopolitical tensions have brought economic security to the forefront.
Trade relationships are shifting: between 2023 and 2025, we counted more than 10,000 trade-distorting industrial policy interventions worldwide. Wars have disrupted energy supplies.
Countries are responding by securing supply chains, diversifying economic relationships, and strengthening energy security.
Another critical question is how to ensure a robust international monetary system in an era of financial innovation. The growth of non-bank financial institutions and the rise of digital finance create opportunities for greater efficiency, but they also introduce new channels of shock transmission and new sources of risk. Adequate regulation, supervision, and risk monitoring will remain essential.
The good news is that countries tend to learn from crises, which helps them navigate the next shock better.
Third, manage uncertainty. In an uncertain world, projecting growth, employment, inflation, fiscal balances, and interest rates becomes ever harder.
During the recent Spring Meetings, I chaired a panel on whether we need to rethink fiscal and monetary policy frameworks in a more shock-prone world.
There are no easy answers, but three things are clear: first, agility and adaptability are key to managing shocks and structural change. Second, policy credibility matters more than ever: when shocks throw an economy off course, it is critical to preserve a credible medium-term fiscal framework and a firm commitment to price stability. And third, we need to think in terms of scenarios, plan for contingencies, and respond with agility when the unexpected arrives.
Fourth, enable the private sector. Government has an indispensable role: providing public goods, adequate social protection, as well as creating a stable enabling environment for private activity. Today, the key is to embrace innovation.
Technology, if well managed, can raise productivity growth, possibly offsetting the negative impact from other shocks and structural shifts.
Digital finance is clearly here to stay. And AI could prove as consequential as the Industrial Revolution—with profound implications for growth, employment, income and wealth distributions, and geopolitics.
But countries also need to pay close attention to the macro-financial impacts of these transformations, and to ensure that the benefits translate into inclusive growth.
How the IMF Is Preparing
So how is the IMF preparing for this changing world?
We have embarked on a comprehensive update and upgrade of our toolkit and policies, so we can better help our members navigate a shock-prone and transforming global economy. We are taking a broad view, focusing on five priorities: managing shocks and uncertainty and building resilient policy frameworks; reducing external imbalances; identifying and addressing debt risks; guarding financial stability amid rapid financial innovation; and tailoring financial support to countries facing balance of payments challenges.
Let me share a few examples from the five major reviews we are undertaking this year—and I am happy to elaborate during the Q&A.
The Comprehensive Surveillance Review is focusing on the IMF’s core strength: safeguarding macroeconomic stability. In today’s uncertain environment, that means making greater use of scenarios and contingent policy advice. We have already begun doing this in the World Economic Outlook, and we will roll it out further at the bilateral level. And as many of the recent shocks have asymmetric impacts across countries, there is a real premium on tailoring our advice to country circumstances.
We have been in an exceptional period since COVID, with shock after shock. The Review of Program Design and Conditionality found that the Fund responded well and with agility—adapting programs mid-course and rebuilding buffers where possible. Going forward, in a world of more shocks and limited buffers, there will be a premium on contingency planning, and on fewer, more targeted, and deeper reforms.
The financing landscape for low-income countries has changed dramatically, with a decline in official development assistance and a rise in sovereign borrowing from local banks. The updated Debt Sustainability Framework for Low-Income Countries will better integrate domestic debt—now a growing share of the total—and provide a stronger tool for assessing longer-term trends and trade-offs, given the demographic, climate, and development challenges these countries face.
The Review of the Financial Sector Assessment Program (FSAP) is sharpening our early-warning capacity, with stronger coverage of emerging risks such as those related to bank-non-bank financial institution linkages, technology, and cyber, and better integration of findings into the Fund’s country-level policy dialogue.
Finally, we are upgrading our toolkit for External Sector Assessments. This has become even more important given rising global imbalances between current account surplus and deficit countries. This has been a priority for both the G20 and the G7 presidencies of the United States and France given the risks of imbalanced growth and potential disorderly adjustment. This upgrade will strengthen our assessment by evaluating how macro-economic trends, trade, and industrial policies interact to shape external balances and, more broadly, patterns of growth.
Closing
The Fund is prepared to play its part. But we certainly do not have all the answers. Our institution has to navigate uncertainty like everyone else, including an evolving geoeconomic landscape.
Our greatest institutional strength is that virtually every country in the world—191 in total—has a seat at the table. That gives us a common platform for identifying problems and sharing solutions. At the end of the day, it is countries themselves that need to anticipate, formulate, and implement the right macroeconomic policies, and build the domestic consensus to see them through. The Fund is here to help, to convene, and to guide.
I look forward to our conversation. Thank you.
read more: https://www.imf.org/en/news/articles/2026/07/15/sp071526-adapting-the-imf-to-a-changing-world
