Latest news with #Gopinath
Qatar Tribune
4 hours ago
- Business
- Qatar Tribune
Trade war tougher test for EMs than Covid crisis: IMF
Agencies The trade war fed by US President Donald Trump presents an even tougher challenge for emerging market policymakers than the COVID-19 crisis five years ago, a top official at the International Monetary Fund (IMF) has warned. The shock from the trade war brings 'differential effects' for central banks in emerging markets, in contrast with the COVID-19 pandemic, when they could quickly ease monetary policy, the IMF's Gita Gopinath said, according to an interview published on Thursday. In an interview with the Financial Times (FT) newspaper, the fund's first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder. 'This time the challenge is going to be greater for them, compared to the pandemic,' she said. Federal Reserve (Fed) policymakers have been signalling they are not ready to lower interest rates until they are sure tariffs will not further stoke inflation. Some estimates predict the inflation in the U.S. could go up in the short term due to the impact of Trump's tariffs, which are expected to make goods, from shoes to phones, more expensive for ordinary Americans. Elsewhere, the Bank of England (BoE) and the European Central Bank (ECB) have pivoted to easing monetary policy as inflation slowed down from the peaks observed in 2022 and due to widely stagnating or low growth. However, in emerging markets, which are also facing higher US trade barriers, the situation looks 'more like a demand shock,' said Gopinath, which means slower inflation and growth. The situation contrasts with the onset of the pandemic, when most central banks around the world slashed interest rates. 'When we have this kind of a divergence, you could end up with tightening global financial conditions, and emerging markets are particularly sensitive to such changes in global markets,' Gopinath told the FT. Emerging market currencies and stocks have largely rebounded in the two months since Trump announced his sweeping 'reciprocal' tariffs, as investors bet that central banks will be largely free to stimulate their economies despite the risk that higher rates in developed countries will draw capital away. However, a report from the Organisation for Economic Co-operation and Development (OECD) warned that 'the risk of disruptive capital flows has risen in emerging market economies.' Still, Gopinath noted that 'emerging market central banks have built up credibility over time, and several have moved to inflation-targeting frameworks,' which she said was very positive. She said, 'Global factors are still bigger drivers for them compared to advanced economies, and so when we're entering this environment where we are seeing major shifts in global economic policy, along with the uncertainty, this will present a challenge to them.'
Indian Express
8 hours ago
- Business
- Indian Express
Rapid uptake of crypto in developing economies raises concerns, says IMF's Gita Gopinath: Here's why
The International Monetary Fund's (IMF) first deputy managing director Gita Gopinath on Thursday flagged concerns about the rise of crypto uptake in developing economies saying that though nascent, it poses a risk in terms of currency substitution. In an interview with the Financial Times, Gopinath said 'we are seeing some pretty rapid growth of uptake of crypto in some emerging markets.' Emerging markets faced risks from crypto uptake, especially stablecoins, in terms of 'disintermediation of their financial institutions,' she said. 'In terms of currency substitution, those risks are rising,' Gopinath added. Gopinath's comments came against the backdrop of US President Donald Trump's push for a strategic crypto reserve and backing to the issuance of stablecoins to make America the 'crypto capital of the world'. In the Indian subcontinent, Pakistan has recently struck a deal with US-based World Liberty Financial Inc (WLFI) a firm backed by the Trump family, for that country to emerge as a crypto hub while promoting the use of blockchain technology and the use of stablecoins for payments and remittances. Amid a spate of activity in the crypto space, experts echo Gopinath's warning that cryptocurrencies may pose a risk to the currencies and financial institutions of developing and emerging economies. Stablecoins are cryptocurrencies whose value is pegged to an asset such as a currency or commodity such as gold. Cryptocurrencies such as Bitcoin have rallied since Donald Trump took over as US President owing to the reversal of his earlier skeptical stance on digital coins. He appointed David Sacks as the White House crypto czar while also naming crypto backer Paul S Atkins as the Securities and Exchange Commission (SEC) chair. Flagship cryptocurrency Bitcoin's price stood at $104,512.82 apiece, down 0.07 per cent, at 7:30 pm on Thursday. Last month, Bitcoin breached the $110,00 mark for the first time after the passage of the GENIUS Act Bill in the US Senate owing to bipartisan support. If passed the GENIUS Act is also expected to allow crypto companies to produce more stablecoins. Issuers must be in compliance with anti-money laundering provisions and anti-terrorism regulations, according to the Bill's fine print. Further, stablecoins issuers must back the digital currency with fiat currency or highly liquid assets in a 1:1 ratio. They must also maintain separate reserves to backstop the stablecoins, according to the GENIUS Act Bill. Democratic Senator Mark R Wright, who backed the bill, stated that while there were concerns about the Trump family's involvement in cryptocurrencies to 'evade oversight, hide shady financial dealings, and personally profit at the expense of everyday Americans… blockchain technology is here to stay.' He said it was in America's interest to take the lead on shaping crypto policies. Democratic Senator Elizabeth Warren warned that the GENIUS Act Bill did not meet the minimum standards such as guaranteeing consumer protection and preventing the illicit use of stablecoins. Passage of the GENIUS Act may pose a risk since the illicit use of stablecoins already make up 60 per cent of unlawful crypto transactions. If passed, the GENIUS Act is expected to boost the stablecoin market's growth by 10X to $2 trillion, Warren said citing industry estimates. Developing countries and their dalliance with cryptocurrencies Pakistan recently announced a collaboration between the Pakistan Crypto Council and the WLFI, which envisages the use of blockchain technology to promote financial inclusion. It also aims to monetise national assets such as rare earths besides using stablecoins in trade and remittance. Pakistan eyes the status of a regional crypto hub as a result of this agreement. Experts warn of the inherent instability of the crypto asset system. To elaborate on Gopinath's warning, a paper titled 'Crypto assets as a threat to financial market stability' states that currencies of emerging and developing economies may lose their importance as store of value owing to higher inflation rates, leading to a rising degree of substitution of the domestic currency by a foreign currency. According to an UNCTAD study, this may result in the 'cryptoisation' of emerging and developing economy currencies relative to their GDP and backed by factors such as a younger population as well as macroeconomic stability. In Central America, El Salvador, which approved Bitcoin as official tender in 2021, the cryptocurrency has seldom found use as a means for buying goods and services. Stablecoins may also pose a risk similar to that seen during a bank run — when depositors and investors rush to cash their assets after a bank is unable to honour its financial commitments owing to a shortage of assets. According to the paper cited above, the linkage of stablecoins to a currency creates arbitrage opportunities leading to speculation. Former US Treasury Secretary Janet Yellen during a US Congressional hearing said fears of inadequate asset backing for stablecoins may also lead to a sell off triggering a situation similar to a bank run. In March this year, Trump announced the creation of a strategic crypto reserve — a basket comprising Bitcoin, Ethereum, XRP, Solana and Cardano. While flagging 'corrupt attacks (on cryptocurrencies) by the Biden administration' Trump in a Truth Social post said the US Crypto Reserve, part of his executive order on digital assets will 'elevate this critical industry'. 'I will make sure the US is the Crypto Capital of the World,' Trump said. Under Trump, the US has dropped probes and legal lawsuits related to alleged securities violations against cryptocurrency firms and exchanges. The US government holds an estimated 200,000 Bitcoin pending an audit, according to a fact sheet shared by the White House. To be sure, the US crypto reserve will only store digital tokens obtained through forfeiture proceedings — it will not purchase additional reserves at the cost of the American taxpayer's money, according to the White House fact sheet.
News18
15 hours ago
- Business
- News18
Trade War Poses 'Greater Challenge' For Emerging Markets Than COVID: IMF's Gita Gopinath
Last Updated: 'Unlike during pandemic, when central banks in developing nations had room to swiftly cut interest rates, a trade war would present a more complex challenge,' IMF first MD says. Gita Gopinath, which is first deputy managing director of the International Monetary Fund (IMF), has warned that the shock from the trade war could hit emerging markets harder than the COVID pandemic. In an interview with The Financial Times, Gopinath said that unlike during the pandemic, when central banks in developing nations had room to swiftly cut interest rates and support their economies, a trade war scenario would present a more complex challenge. 'This time the challenge is going to be greater for them, compared to the pandemic," she said. She pointed out that the imposition of tariffs and other trade barriers has a varied and often opaque impact on different economies, making it more difficult for policymakers to respond effectively. A prolonged escalation in global trade tensions, particularly between the US and China, could disrupt global supply chains and dampen investor confidence. Gopinath also cautioned that capital outflows from emerging markets could accelerate if global risk sentiment worsens or if these countries are perceived as having weaker economic prospects. The slowdown in global trade volumes further adds to the uncertainty. As the global economy grapples with rising geopolitical tensions and protectionist policies, Gopinath highlighted the growing pressure on emerging economies to remain resilient amid external shocks that are harder to predict and mitigate than a global health crisis. 'India Weighing Legal Uncertainties' PTI report citing an official. The official said these developments could influence India's approach to the proposed bilateral trade pact with the US. A team of US officials is visiting here from June 5 to hold talks with their Indian counterparts on the proposed pact. Though India is looking for a balanced and a mutually beneficial trade agreement with the US, 'what we get as compared to other countries, will determine what we ultimately finalise in the deal", the official said. The US is negotiating trade pacts with over 75 countries, including China. It has already finalised a pact with the UK. Asked if some kind of interim trade deal can be agreed upon before July 9, the official, as per PTI, said a lot of uncertainties are there at present because of developments like the Trump administration's plan to further increase tariffs on steel and a stay on a court order against the US authorities' decisions on tariffs. A US court of international trade on May 28 had ruled that present Trump tariffs were illegal under the international emergency economic powers act. The administration later filed an appeal and got a stay on this order. On April 2, US President Donald Trump announced reciprocal tariffs against several countries, including India. It imposed an additional duty of 26 per cent on India, but later suspended it till July 9. However, the 10 per cent baseline duty on all the countries remains. India has already reserved its right to impose retaliatory tariffs against US duties on steel and aluminium. It has also sought consultations under the WTO norms on US tariffs on auto components. If India is considering taking similar measures in more products, the official said India will protect its interests. First Published: June 05, 2025, 15:32 IST
Mint
16 hours ago
- Business
- Mint
Trade war bigger threat for emerging markets than COVID crisis: IMF's Gita Gopinath
The shock from trade war brings differential effects for central banks in emerging markets, in contrast with the COVID pandemic, when they could quickly ease monetary policy, the International Monetary Fund's (IMF) Gita Gopinath said. IMF's first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder. "This time the challenge is going to be greater for them, compared to the pandemic," she said. In an interview to the Financial Times, IMF First Deputy Managing Director Gita Gopinath said that in comparison to the coronavirus pandemic, trade war is bigger concern for the emerging markets. Talking about the bleak future outlook, Gopinath said that several emerging markets are potentially at risk of registering significant capital outflows in case the 'relative economic prospects and global risk sentiment deteriorate.' She also highlighted the slowdown in the global trade volumes. On the trade war between the US and China, Gopinath added that the financial hostilities could impact the global supply chain.
Business Recorder
18 hours ago
- Business
- Business Recorder
Trade war is tougher threat than COVID for emerging market cenbanks, IMF says
The shock from trade war brings differential effects for central banks in emerging markets, in contrast with the COVID pandemic, when they could quickly ease monetary policy, the International Monetary Fund's (IMF) Gita Gopinath said. In an interview with the Financial Times newspaper, the fund's first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder. IMF's Gopinath urges US to curb fiscal deficit, FT reports 'This time the challenge is going to be greater for them, compared to the pandemic,' she said.
