IMF chief warns inflation hurts poor countries, AI optimism risks market correction

The International Monetary Fund Managing Director Kristalina Georgieva made an urgent appeal for global policymakers to increase financial and policy support for low-income nations. She characterised inflation as a "tax on the poor," noting that low-income households are disproportionately hit by rising costs for basic necessities. She also predicted that disappointing near-term AI returns could trigger a disorderly market correction

“I can tell you that people everywhere, but especially in poorer countries, don’t like inflation. Inflation is like a tax on the poor,” Georgieva said.

Georgieva said that the raw financial cost of servicing that debt has more than doubled, skyrocketing from an average of 6% of revenue a decade ago to up to 8-14% today due to increased interest rates in developed economies.

Even though many poor nations have successfully lowered their overall debt-to-GDP ratios through hard structural reforms, high interest rates in the West draw global capital toward the US dollar and Euro, putting pressure on domestic currencies.

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Higher benchmark yields were increasing borrowing costs for emerging markets even where their risk premiums remained stable, she said, warning that elevated financing costs were likely to persist. Global growth is projected at about 3.1% in 2026, unchanged from April’s forecast but below last year’s 3.4%, she said.

“Optimism from the resilience of the global economy, the promise of AI, the dynamism of Asia,” Georgieva told reporters. “But AI is also recognised to be a source of worry, and so are inflation, high levels of debt, wars, and climate risks.”

She explicitly warned that the global economy is currently "standing on one leg, the AI leg". She invoked Amara’s Law, that society persistently overestimates the short-term impact of new technologies while underestimating their long-term transformation. The IMF MD pointed out the valuation gap, circular financing, and macroeconomic pullback, which could drag down global GDP by 1.1% by 2028.