Regulating AI and curbing debt need urgent action around the globe, says IMF chief

IMF chief Kristalina Georgieva warns that both wealthy and developing nations must expedite debt reduction and address growing inequality as economies grapple with the AI boom, high borrowing, and conflicts in the Middle East and Ukraine. Speaking in Singapore ahead of IMF-World Bank meetings in Bangkok, Georgieva emphasized the need for immediate policy action, stating that delaying necessary measures is no longer an option.

Finance ministers and central bank governors from 191 member countries will discuss strategies to support financial stability and sustained growth. Georgieva highlighted the impacts of conflicts in the Middle East, Ukraine, and elsewhere, as well as excessive debt burdens on countries like the U.S., Japan, and Germany, and low-income nations facing choices between public welfare and loan repayment.

She pointed to the risks posed by the rapid expansion of data centers for AI, which may soon outpace investments in traditional infrastructure. While AI is generating robust corporate earnings and contributing to higher inflation, there may be a lag in realizing its benefits, potentially leading to further economic shocks if earnings do not meet expectations.

Seven of the top 10 countries for AI-related trade are in the Asia-Pacific region, where the share of global economic activity has increased from 25% in 1991 to 43% in recent years. However, Georgieva noted that this AI boom is leaving most other countries behind, exacerbating economic inequality. She urged countries to rein in public spending, raise borrowing costs, and implement policies to ensure AI is well regulated and to train workers, improve labor markets, and enhance energy security.