IMF chief warns of debt, inequality risks from AI boom and global shocks

IMF chief Kristalina Georgieva has warned that rapid debt reduction and efforts to reduce inequality are necessary as countries grapple with the AI boom, heavy borrowing, and the fallout from conflicts in the Middle East and Ukraine. Speaking at a speech in Singapore ahead of IMF-World Bank meetings in Bangkok, Georgieva warned that policymakers must take action now to avoid delaying necessary policy measures.

She emphasized that the world cannot afford to delay in implementing policies, stating that tools are available but wisdom is required to use them. Georgieva highlighted the growing burden of debt on both wealthy nations like the US, Japan, and Germany, as well as low-income countries that are forced to choose between public welfare spending and repaying loans with high interest rates.

She also pointed to risks associated with the rapid growth of data centers powering AI technology, which has driven stock prices to record highs but could lead to a shock if AI-related earnings fall short. Georgieva noted that AI is already a key driver of countries' relative prosperity and that investments in AI are set to surpass spending on infrastructure projects.

She stressed that while AI is benefiting some countries, particularly in Asia-Pacific, it is leaving many others behind, exacerbating economic inequality. Georgieva urged policymakers to curb public spending and raise borrowing costs to manage inflation while protecting vulnerable populations. She also called for well-regulated AI policies, worker training, flexibility in labor markets, and enhanced energy security to foster sustainable growth.