Washington, April 7 (QNA) – Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said that the war in the Middle East will lead to higher inflation and slower global growth.

In remarks Tuesday, Georgieva indicated that the war has reduced global oil supplies by 13 percent, impacting oil and gas shipments and related supply chains such as helium and fertilizers.

She said, "Even if the fighting ends quickly and a relatively rapid recovery occurs, this will result in a relatively small downward revision to growth forecasts and an upward revision to inflation forecasts."

Georgieva pointed out that poor and vulnerable countries lacking energy reserves will be the most affected, noting that many countries do not have sufficient financial resources to help their populations cope with the price increases resulting from the war.

She explained that the International Monetary Fund (IMF) had received requests for financial assistance from some countries, noting that the Fund could enhance some existing lending programs to meet these countries' needs.

Meanwhile, the IMF warned that the ongoing conflict in the Middle East poses a "severe test" for the stability of emerging markets, pointing out that it has caused a reversal in foreign capital flows due to the heightened sensitivity of non-bank investors to crises.

In an analytical chapter of its 2026 Global Financial Stability Report, released ahead of the IMF and World Bank Spring Meetings next week, the Fund explained that emerging markets' increasing reliance on "non-bank lenders" has amplified the impact of these shocks, making capital flight faster and more severe than during periods of traditional bank financing.

The report revealed that portfolio investment flows to emerging markets have surged eight fold since the global financial crisis, reaching a cumulative value of approximately $4 trillion by 2025.

It explained that debt has become the primary driver, with portfolio debt obligations now representing 15 percent of emerging market GDP, up from just 9 percent in 2006.

The IMF urged emerging market governments to adopt defensive strategies, including: strengthening fiscal buffers, as countries with ample foreign exchange reserves and robust institutions experience less capital outflows; allowing currencies to fluctuate to absorb shocks, with limited interventions in the foreign exchange market only when absolutely necessary; and simulating severe economic shock scenarios to ensure the resilience of financial institutions to sudden interruptions in external financing. (QNA)