Washington, April 16 As a fresh energy shock from the Persian Gulf conflict risks deepening vulnerabilities across major economies, the global imbalances are widening again, top officials from the IMF and policymakers warned.
Speaking at a high-level panel on Wednesday (local time), IMF Managing Director Kristalina Georgieva said “imbalances have been coming and going in waves” and are now “on the rise again,” with major surplus economies including China, Germany and Japan facing off against a “large persistent deficit” in the United States.
She cautioned that the current phase may reflect “structural increase” rather than temporary cycles, making the risks more enduring. “It is very important to think of how we can work on bringing them down in an orderly manner,” she said.
The latest shock -- a sharp rise in global energy prices triggered by the Gulf conflict -- is already reshaping this landscape. Georgieva described it as “very large” and “highly asymmetric,” hitting oil-importing countries hardest, especially those with limited fiscal space.
Higher oil prices are likely to boost incomes for some exporters while worsening deficits elsewhere. “If we are moving in a place in which we might see deficits going even further up… the cost of servicing that would go up,” she said, pointing to the risk of rising interest rates.
Bank of England Governor Andrew Bailey said today’s imbalances differ from those seen during the global financial crisis, when large cross-border capital flows amplified risks. While such “gross flows” are less dominant now, he flagged new vulnerabilities, including rising public debt and structural shifts in government debt markets.
“We’ve seen a very big increase in many countries in public debt,” Bailey said, warning that volatility in sovereign debt markets has intensified in recent weeks.
He also highlighted the risk of sudden reversals in private credit flows that could trigger “quite a severe, potentially sharp adjustment.”
Economists on the panel underscored that imbalances are not uniform. Adam Posen of the Peterson Institute said the issue is “fundamentally about the irresponsible policies of China and the US governments,” rather than a broad-based global phenomenon.
Hélène Rey of London Business School pointed to “unbalanced growth models,” particularly in China, where high investment and suppressed consumption continue to drive external surpluses. She said structural reforms -- such as expanding health coverage to reduce precautionary savings -- could help rebalance the economy.
Kristin Forbes of MIT stressed that policymakers must look beyond annual trade flows to the growing stock of global imbalances. “They’ve almost doubled over the last 15 years,” she said, warning that rising external positions heighten exposure to shifts in exchange rates and interest rates.
The panel also cast doubt on simple policy fixes. Tariffs alone cannot correct trade deficits without affecting savings, investment and capital flows, participants said, while exchange rate adjustments must be paired with broader macroeconomic policies to be effective.
Georgieva said the IMF’s role remains centred on surveillance and policy guidance. “We are still regarded as the point of reference when it comes down to how we see the world economy,” she said, adding that the Fund aims to make its assessments more actionable.
The discussion comes as global policymakers grapple with rising geopolitical tensions and fragmented economic cooperation. The IMF has warned that prolonged imbalances, if left unaddressed, can lead to disorderly adjustments and financial instability.
Global imbalances -- typically reflected in current account deficits and surpluses -- have historically preceded major economic disruptions, including the Latin American debt crisis of the 1980s and the 2008 global financial crisis.
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