IMF urges countries to adapt to global economic fragmentation

IMF chief Georgieva encourages stronger regional ties amid trade tensions and tariffs.

Kristalina Georgieva, managing director of the International Monetary Fund, delivers a curtain raiser speech ahead of the IMF and World Bank Spring Meetings at IMF headquarters in Washington, DC, on April 17, 2025. Photo by Kent Nishimura/Bloomberg

By Anna Fadiah and Hayu Andini

As global trade becomes increasingly splintered, the International Monetary Fund (IMF) is urging countries to embrace this reality and build stronger regional and like-minded partnerships. In an exclusive interview on Thursday, IMF Managing Director Kristalina Georgieva acknowledged the global economic fragmentation that has emerged in recent years and emphasized the need for nations to adapt rather than resist.

In her words, the world must now "make the best" of the fractured global economy by boosting ties with regional partners. "Yes, (it's) much better for the world to get one system of rules, much better, and hopefully we will retain the basic principles of this common system for the future," Georgieva said, speaking ahead of the IMF and World Bank Spring Meetings in Washington next week.

However, she added, "we are in a multipolar world. And my call is, rather than wishing this away, wishing that the world turns back to where it was, we work hard to make the best out of economic relations."

A fractured global economy is the new norm

The concept of global economic fragmentation refers to the growing trend of countries moving away from multilateral trade frameworks in favor of regional, bilateral, or ideologically aligned agreements. This shift has accelerated in recent years, driven by geopolitical tensions, national security concerns, and protectionist policies—most notably those of the United States.

The IMF's position on the matter is clear: the fractured world economy cannot be wished away, and it is in every country’s interest to make the most of the new configuration. Georgieva pointed out that instead of longing for a return to a unified global trade system, countries should proactively pursue partnerships where cooperation is still possible.

Tariffs reshape the global trade landscape

The context for Georgieva’s comments is the increasingly aggressive trade policy adopted by U.S. President Donald Trump. Since returning to office in January, Trump has introduced sweeping new tariffs, particularly targeting China. The world's second-largest economy now faces a combined 145 percent in new import tariffs, while most other trading partners are subject to a 10 percent baseline rate.

These policies have rattled financial markets, with economists downgrading growth forecasts and raising inflation expectations. The IMF has responded by trimming its global growth outlook, although Georgieva stressed that a recession is still not expected at this stage.

"The concentration on unfair trade practices, on the necessity to level the playing field, on security concerns is not really new," she said. "What is new is that determination to act in a very significant manner, and that created a surprise domestically and internationally."

Regional and plurilateral trade deals fill the vacuum

With the rise of global economic fragmentation, nations are increasingly turning to regional and plurilateral agreements. Georgieva cited growing cooperation in Southeast and Central Asia, as well as among the Gulf Cooperation Council (GCC) countries, as examples of how countries are adapting to the new trade environment.

"What we have observed over the last years is that more and more countries seek ways to improve their trade relations with selected partners," she explained. "And in this environment, it is likely to continue, maybe even accelerate, so we will see more bilateral and plurilateral agreements."

This pivot to regionalism reflects both necessity and pragmatism. As large-scale multilateral agreements face political obstacles, smaller and more focused trade deals offer a path forward.

Aid cuts compound pressure on low-income countries

The challenges brought by the fractured world economy extend beyond trade. Foreign aid, long a pillar of support for low-income nations, is now being scaled back by several key donors, including the United States, France, and Britain. The Trump administration in particular has slashed development assistance in favor of a more domestically focused agenda.

Georgieva acknowledged that many low-income countries lack the capacity to generate sufficient domestic resources. “They are many low-income countries where, for a variety of reasons, generating domestic resources is very limited," she said, pointing to weak tax systems and large informal sectors.

“This is the moment to please get your own house in order,” she added, emphasizing the need for structural reform in recipient nations. At the same time, she noted that wealthier emerging markets—such as those in the GCC—have the opportunity to fill the aid gap by increasing their contributions.

A new model of global cooperation

Despite the many headwinds, Georgieva remains cautiously optimistic about the potential for adaptive cooperation. The IMF, she said, is working “very hard” to encourage countries with stronger fiscal positions to contribute more to global financial stability.

“Every penny matters,” Georgieva emphasized. “And when it is in the context of an international response, then the use of money is more efficient. It's better for the country, better for the donors.”

In her view, coordinated action—albeit on a smaller or regional scale—can still deliver impactful results. While the golden age of expansive multilateralism may be behind us, a pragmatic approach to cooperation remains viable and essential.

Global leaders face hard choices at Spring Meetings

As financial leaders gather in Washington for the upcoming IMF and World Bank Spring Meetings, the theme of global economic fragmentation is expected to dominate discussions. The challenge for policymakers will be to reconcile national interests with the need for global coordination.

Georgieva’s message is likely to resonate with many attendees: adapt or fall behind. In a world where unified trade rules are no longer a given, countries must chart their own course—while still striving for cooperation where possible.

“This is not about surrendering national interests,” she said. “It’s about pursuing them in a way that recognizes the new reality of the world we live in.”

Her remarks make it clear that while the global trade order has changed, the IMF believes there is still a path forward—through adaptation, regionalism, and a renewed focus on practical, inclusive economic ties.

A realistic roadmap for a fragmented future

In summary, the IMF is urging countries to confront global economic fragmentation head-on. Rather than hoping for a return to a cohesive, rules-based system, nations must build stronger regional partnerships and explore alternative frameworks for cooperation.

The fractured world economy may be here to stay, but with strategic alignment, smarter aid flows, and forward-looking trade policy, countries can still thrive. As Kristalina Georgieva aptly put it, “We work hard to make the best out of economic relations.”

That call to action may define the global economic agenda for the foreseeable future.