MNI BRIEF: Use Digital Platforms To Fight Fragmentation - IMF

Public digital payment platforms could help prevent economic fragmentation brought about by Russia’s invasion of Ukraine, IMF chief Kristalina Georgieva said in a speech Tuesday, and channel a greater proportion of funds into the hands of their intended beneficiaries.

“Russia’s invasion of Ukraine has caused not only tremendous human suffering, but also a global economic shock and a sharp increase in the risk of a ‘new Cold War,’” Georgieva said. “Some countries may consider developing parallel, disjointed payment systems to mitigate the risk of potential economic sanctions. These ‘payment blocs’ would only worsen the impact of broader ‘economic blocs’— creating new inefficiencies and imposing new costs.”

There has been some talk the ECB has been looking at a tool to help with issues of fragmentation as monetary policy normalises, although executive board members have played down the idea to some extent.