US Treasury Secretary Janet Yellen warned it is crucial to prevent the war sparked by the Israel-Hamas conflict from becoming a wider, regional conflict.
(Bloomberg) — US Treasury Secretary Janet Yellen warned it is crucial to prevent the war sparked by the Israel-Hamas conflict from becoming a wider, regional conflict.
“It’s critically important that the conflict not spread, and that’s what the United States is focused on,” Yellen said Friday in an interview with Bloomberg News in Marrakech, Morocco, where she’s attending annual meetings of the International Monetary Fund and World Bank.
The potential economic fallout from the attacks by Hamas on Israel have been an over-arching concern at the gathering of global finance chiefs, which had been aimed at priorities including debt relief for poorer nations and bolstering financing for climate change.
Yellen said “I’m not seeing any major economic ripple effects” at this point from the crisis. The conflict began when Hamas – which rules Gaza and is designated a terrorist group by the US and European Union — launched an invasion of southern Israel Oct. 7.
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Fears of a broadening war have been sparked by Lebanon’s Hezbollah militant group saying it was prepared to act against Israel, and Iran warning the continued blockade of Gaza could open up a new front in the conflict. Turkey has criticized some US moves in recent days, while China has taken flack for its initial response.
The global economy remains in a fragile state, still recovering from the pandemic and the impact of Russia’s war in Ukraine on food and energy prices. The IMF, in its latest World Economic Outlook this week, said it expects slightly higher inflation and lower growth than previously forecast for 2024.
Still, Yellen said the global economy, particularly with respect to developed countries, was doing better than she had feared.
“The countries that I worry about are the low-income countries,” she said. Economies with high debt loads “now live in a world of higher interest rates for longer,” she said.
Earlier on Friday, Yellen met with the newly installed head of China’s central bank, Pan Gongsheng, the latest in a series of high-level meetings between US and Chinese officials that could pave the way for a second face-to-face sit-down between Presidents Joe Biden and Xi Jinping.
Asked if she felt Friday’s meeting kept the recent progress on track, Yellen responded: “I definitely do.”
“The meetings we’re having are becoming more substantive, more candid,” she said.
Two points of frank discussion, she said, revolved around debt relief for poor countries and whether to reapportion IMF quotas — which represent a country’s share of the institution’s resources and align closely with voting rights.
China and other emerging countries have pushed for a reshuffle that reflects their larger role in the world economy.
“If we were going to do that, I think we would have to feel as if they were good, solid members of the IMF — living up to the obligations all of us have,” she said.
China is the largest official creditor to the developing world and, in the view of many observers, has dragged its feet on multilateral debt restructuring efforts — slowing relief for countries like Zambia and Sri Lanka that have defaulted on their debt.
Yellen said she welcomed recent progress that has put Zambia on the verge of a debt restructuring deal, and hoped the momentum would carry over to other debt-stricken nations.
“Now, will that necessarily continue?” she said. “I’m not positive.”
–With assistance from Viktoria Dendrinou.
(Updates with context on Hamas in fourth paragraph.)
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