IMF prepares up to $50bn support for vulnerable economies as Gulf tensions keep oil prices high and risks elevated.
The International Monetary Fund (IMF) disclosed Wednesday that it was preparing a potential $50 billion support package aimed at cushioning Nigeria and other vulnerable economies from the economic shockwaves of rising geopolitical tensions in the Middle East, where fears of supply disruption have kept global oil markets on edge.
The proposed intervention comes as crude prices held steady around $95 per barrel on Wednesday, reflecting a fragile balance between easing expectations of US-Iran diplomatic engagement and persistent concerns over possible escalation in the region.
However, oil traders are closely watching developments after comments from US President Donald Trump suggesting that the Iran conflict may be “very close to over,” a statement that has helped temper short-term panic in energy markets.
But amid the uncertainty, the Managing Director of the IMF, Kristalina Georgieva, Wednesday disclosed that the multilateral institution was considering a range of support measures for Nigeria and other vulnerable African economies that are presently burdened by the fallout from the escalating Middle East crisis, which has deeply strained macroeconomic conditions in a lot of energy-importing countries.
Speaking at the unveiling of the ‘Global Policy Agenda’ during the ongoing IMF/World Bank Spring Meetings in Washington DC, she indicated that the Fund was preparing to scale up its crisis response, with potential financing support projected at between $20 billion and $50 billion for countries facing heightened external shocks and limited fiscal space.
Georgieva said: “Let me first say that we have been very loud on the asymmetric impact of this war, and I have in my office a map of countries and where they fall in terms of their dependency on imports and their fiscal space.
“And it pains me that the majority of sub-Saharan African countries are in this quadrant of vulnerability, and therefore we are very determined to use this week to identify which are the countries that most urgently need support and then come out of the week with discussions around the way we would support them.
“But let me emphasise that the most important thing we do for our members is to help them help themselves, to have strong policies during good times, to build buffers so that during bad times, they can protect their people. And I am impressed by how much countries have done, including countries in Sub-Saharan Africa.
“We have been closely watching the events in the Middle East. The war has already caused immense hardship and pain for people in the region and around the world. This is an asymmetric shock, with the biggest burden falling on countries that import energy and have limited policy space. In many cases, these are low-income or fragile economies. These economies need attention and an important focus of our discussions this week is how we can best support them.
“As our Global Policy Agenda makes clear, the IMF serves as the firefighter for our member countries, and we are committed to helping them navigate this complex landscape.
“We anticipate near-term demand for IMF financial support to range from $20-$50 billion. This represents prospective demand for new programmesfrom at least a dozen countries, most of them in Sub-Saharan Africa.”
She reiterated that the fund was coordinating closely with the International Energy Agency (IEA), the World Bank, and other partners, including at the regional level, to maximise a combined response in mitigating this crisis.
The IMF boss further noted that in the short term, maintaining macroeconomic and financial stability was key. According to her, while countries were naturally inclined to act boldly in response to a supply shock, they are advised to look before leaping.
Georgieva said: “On monetary policy, for countries where monetary policy was well calibrated before the shock and expectations remain anchored, ‘wait and see’ is the right approach. In other countries, early policy action may be required.
“On fiscal policy, we have been warning for some time that public debt is constraining fiscal space. Global public debt is on track to breach 100 percent of GDP in 2029, a level not seen since the aftermath of World War II.
“So, to maintain their fiscal policy credibility, policymakers need to strike a careful balance between safeguarding fiscal sustainability and protecting the most vulnerable. The good news is that many countries have so far avoided untargeted tax cuts, energy subsidies, and price controls.”
Georgieva revealed that she had a meeting with African Consultative Group on Tuesday, with ministers and central bank governors seeking policy advice.
Georgieva urged nations that need help financially not to hesitate to ask, so as to protect their economies and their people.
At a separate briefing on the Fiscal Monitor, Division Chief, Fiscal Affairs Department, IMF, Davide Furceri, pointed out that fiscal pressures were expected to persist, although unevenly distributed, with a clear divergence between oil-importing and oil-producing countries.
For oil exporters such as Nigeria, higher crude prices could generate temporary windfalls, he stressed, highlighting the importance of deploying such gains prudently to rebuild fiscal buffers and ease debt pressures.
Furceri said: “In Africa, we have seen not only energy prices going back, but we have also seen fertiliser prices going down, see increase in shipping costs. And these are the increasingly different types of prices. So, they are going to reduce output production, but also consumption. And in some countries that are more vulnerable, is a risk that is going to affect poverty and food security.
“So, the fiscal pressures stemming from all these costs are not likely to be federal. However, again, there is a differentiation between oil desperate countries, such as, for example, Nigeria, or other countries for which the oil price is going to generate some windfall.
“In those cases, it’s important these countries use this with windfall in revenue to clear as earlier and be the fiscal buffer and reduce interest rate. In the case of Nigeria, as well as other countries that have implemented the subsidy reform, (this) implies that the fiscal cost from increased energy prices is going to be lower.”
Oil Prices Stable at $95 as US-Iran Talks Raise Hope
Oil prices were broadly stable Wednesday after steep falls in the previous session as shipping through the Strait of Hormuz remained constrained, countering expectations of the U.S.-Iran talks aimed at ending the war in the Middle East.
Forty-five days after Iran’s Revolutionary Guards declared the strait closed, effectively shutting in about 20 per cent of global oil and liquefied natural gas shipments, transit through the waterway remains at only a fraction of the 130-plus daily crossings seen before the war, sources said.
The U.S. has enacted a blockade of shipping leaving Iranian ports that its military said on Wednesday has completely halted trade going in and out of the country by sea.
Brent crude futures were up 49 cents, or 0.5 per cent, at $95.28 a barrel, after falling around 5 per cent in the previous session. U.S. West Texas Intermediate crude was up 9 cents, or 0.1 per cent, at $91.37. The contract had dropped 8 per cent the session before.
Refiners are desperately seeking alternative crude supply, pushing up the premiums they are willing to pay for oil from areas such as the U.S. Gulf Coast and North Sea. A cargo of WTI Midland for delivery to Rotterdam traded at a record premium of $22.80 a barrel above benchmark European prices, Reuters reported.
War Very Close to Over, Says Trump
President Donald Trump Wednesday insisted the war was “very close to over.” The comments come amid growing market optimism that a diplomatic solution to the U.S.-Iran war can be found, despite the failure of peace talks last weekend.
A senior U.S. official, responding to a report that the countries reached an in-principle agreement to extend their ceasefire, told CNBC that the U.S. “has not formally agreed” to an extension.
The Iran war is “very close to over” with authorities in Tehran eager to agree to a peace deal, Trump said in an interview broadcast Wednesday.
“We’ve beaten them militarily, totally,” Trump told Fox Business Network’s “Mornings with Maria” in a prerecorded interview. “I think it’s close to over, I view it as very close to over. … If I pulled up stakes right now it would take them 20 years to rebuild that country, and we’re not finished.”
“We’ll see what happens, I think they want to make a deal very badly,” he added.
The president’s latest comments come amid growing market optimism that a diplomatic solution to the U.S.-Iran war can be found, despite the failure of peace talks last weekend.
The Associated Press, citing regional officials, reported Wednesday morning that the U.S. and Iran have an “in principle agreement” to extend their fragile two-week ceasefire in order to allow for more diplomacy.
But a senior U.S. official told CNBC that the U.S. “has not formally agreed to an extension of the ceasefire.” “There is continued engagement between the U.S. and Iran to reach a deal,” added the official, who spoke on condition of anonymity to discuss the administration’s internal plans.
Multiple news outlets have reported that negotiations could restart before the ceasefire is set to expire next week. A White House official said that a second round of negotiations between Washington and Tehran was under discussion, though nothing had been officially scheduled as of that time.
Trump Trump downplayed global market turbulence sparked by the war and said oil prices, which have soared due to supply disruptions, would soon fall. He again defended U.S. military operations against Iran, saying, “We have to stop them from ever having a nuclear weapon.”
Trump predicted that when the war is over, the “stock market is going to boom, it’s already booming.”
Iran’s Military Threatens Red Sea Shipping If US Blockade Continues
Meanwhile, Iran’s military has threatened to shut down shipping operations in the Red Sea as well as the Persian Gulf and Sea of Oman if the US continues its blockade of Iranian ports.
Maj. Gen. Ali Abdollahi, the commander of the Khatam al-Anbiya Central Headquarters, the unified command of Iran’s armed forces, described the blockade as “illegal” and said that if it continued it would be considered a violation of the ceasefire agreement.
Abdollahi said Iran “would not allow any exports or imports to continue in the Persian Gulf, the Sea of Oman, and the Red Sea under such conditions,” state-run Tasnim reported.
Iran does not border the Red Sea but holds influence in the area through regional allies, namely the Houthis in Yemen who have previously targeted vessels there.
The US Central Command said Wednesday that the United States’ blockade of Iranian ports has been “fully implemented” and put a halt to most of Tehran’s economic activity in just a day and a half.
But some commercial traffic is still getting through the vital Strait of Hormuz as the blockade does not apply to the strait itself.
