'Don't kiss your US dollars goodbye as yet,' IMF chief says

The strength of US economy and depth of its capital markets are why the dollar is dominant reserve currency, says Kristalina Georgieva

From left, Kristalina Georgieva, managing director of the IMF, Ali bin Ahmed Al Kuwari, Qatar’s Finance Minister, and Mohammed Al Jadaan, Saudi Arabia's Finance Minister, at the Qatar Economic Forum in Doha. Bloomberg
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The International Monetary Fund chief has discarded the idea that there is going to be a rapid decline in the US dollar as the world’s dominant reserve currency, amid increasing talk about de-dollarisation, with some market participants even predicting its death.

“The story of de-dollarisation has been with us for some time,” Kristalina Georgieva, managing director of the IMF, said at the Qatar Economic Forum on Wednesday.

“The US dollar’s share of global foreign exchange reserve has been going slightly down, it was 70 per cent of reserves earlier but now, it is slightly below 60 per cent of reserves,”

“Nevertheless, we don't expect a rapid shift in reserves. This is because the reason why the dollar is the reserve currency is due to the strength of the US economy and the depth of its capital markets.

“So, don't kiss your dollars goodbye as yet,” added Ms Georgieva.

The IMF chief said she is hopeful the US would end the deadlock over negotiations to avert a debt default.

“History tells us that the US would wrestle with this notion of default. But come the 11th hour, it gets resolved. And I have confidence we will see that playing again,” she said.

Speaking at a panel discussion, Ms Georgieva said the GCC region is a remarkable example of determination to pursue reforms.

“There are some who think that the fortunes of the Gulf are oil and gas. In fact, the fortune of the Gulf is decisiveness in putting economy on long-term, sustainable path,” she said.

Ms Georgieva said she expects overall growth in the GCC region to slow down at par with the global economic slowdown – to 2.9 per cent this year.

Gulf economies are performing well due to the “relentless” pursuit of reforms and not just because of high oil and gas prices, Ms Georgieva had said in February at the World Government Summit in Dubai.

The oil-rich economies of the region have benefited from the surge in oil prices, which shot up last year to as much as a notch under $140 a barrel after Russia's invasion of Ukraine.

IMF's 2023 outlook for Gulf and Middle East - Business Extra

IMF's 2023 outlook for Gulf and Middle East - Business Extra
IMF's 2023 outlook for Gulf and Middle East - Business Extra

In the Middle East and North Africa, meanwhile, real gross domestic product grew by 5.3 per cent in 2022, reflecting strong domestic demand and a rebound in oil production.

However, growth is projected to decelerate this year to 3.1 per cent, before picking up slightly to 3.4 per cent in 2024.

“I also want to express the admiration for what has been for many years a recommendation from the IMF, that is being taken to heart, and it is [to] diversify,” said Ms Georgieva.

“So, here is an interesting fact, the world economy is slowing down, the Gulf is slowing down after a very impressive 2022.”

Saudi Arabia's Finance Minister Mohammed Al Jadaan added that the GCC region is a “very bright spot” in today's difficult world.

“This did not come by chance but rather it came through rigorous execution of long-term co-ordinated plans to diversify,” the minister said.

What distinguishes this region from others is that it’s in the middle of trade routes connecting Asia with Africa and Europe, which gives it a competitive advantage, Mr Al Jadaan added.

Updated: May 24, 2023, 12:50 PM

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