New IMF Head Warns Of World’s Ability To Handle A Global Slump

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New IMF head warns of world’s ability to handle a global slump – Financial Times
The incoming International Monetary Fund (IMF) boss, Kristalina Georgeiva has recently warned the world that the world’s ability to handle an economic slump might be tested soon. The article describes that although the world and the IMF are better positioned to deal with new forms of economic slow-downs, there are many other risks especially when it comes to the limited accessibility of monetary tools (Politi, 2019). She, therefore, asserts that there is a need to mitigate any risk that might arise by getting ready through the use of monetary policy tools. Kristalina is due to take office as the new head of IMF.
This article relates to international monetary systems in several ways, one being that many financial risks threaten trade between countries. When a global economic slump is experienced, there does not exist a favorable trade environment between countries. Monetary policies and tools are essential for the economic soundness. The article describes the world’s preparedness to economic slumps that might occur. It is the policy of the IMF to be always ready for any difficulty that may affect the world economy. As the new head of the IMF, Kristalina is responsible for ensuring that the world can handle any economic crisis that could come up and develop ways to deal with it. This can be achieved by controlling the monetary policy tools. The tools are; discount rate, open markets operation, reserve requirements and interest on reserves (Politi, 2019). By using these tools, the IMF can ensure that in case of any crisis that may occur, the world economy is strong enough to handle it.
Economic slump refers to a sharp decline in market values, business activity, and trade. When the world experiences an economic slump, trade levels are greatly affected and this affects the international monetary systems as most countries would not be willing to follow the set rules during such a difficult time. Economic slumps or recessions are caused by several factors such as the crashing of the stock market, credit crunches, trade stalemates and wage control among others (Wild & Wild, 2016). There is a reason for Kristalina to warn about the difficult times to come especially considering the Brexit issue that has been putting a lot of pressure between the UK and her trading...