Recently, the International Monetary Fund (IMF) released the latest Global Financial Stability Report 2024 and the central theme of this report is ‘The Last Mile: Financial Vulnerabilities and Risks’. This Report draws out the financial ramifications of economic imbalances highlighted by the IMF's World Economic Outlook.

Major Highlights of the report

• The risks on global financial system from persistent high inflation, rising lending in the unregulated credit market, and increasing cyber-attacks on financial institutions will major challenge on global economy.
• Geopolitical risks such as the ongoing war in West Asia and Ukraine could affect aggregate supply and lead to higher prices which could prevent central banks from lowering rates anytime soon.
• The fall in inflation has probably stalled in some major advanced and emerging economies where core inflation in the most recent 3 months has been higher than in the previous 3 months.
• In its report also noted that the growing unregulated private credit market, in which non-bank financial institutions lend to corporate borrowers, is a growing concern as troubles in the market might affect the broader financial system in the future. 
• The borrowers in the private credit market may not be financially sound and noted that many of them do not have current earnings that exceed even their interest costs.

India’s Perspective

• In calendar year 2023, India was the second-largest recipient of foreign capital after the U.S. But things could change quickly if western central banks signal that they could keep interest rates high for a long time.
• The Indian rupee has already been depreciating and traded at a new low of 83.57 against the U.S. dollar last week despite likely intervention by the Reserve Bank of India (RBI).
• India is witnessing the growth of a small private credit market with the rise of Alternative Investment Funds (AIFs).

About the Report

• Global Financial Stability Report (GFSR) is a semi-annual report by the International Monetary Fund (IMF) released twice per year, in April and October.

International Monetary Fund (IMF)

• Founded: July 1944
• Founders: John Maynard Keynes, Harry Dexter White
• Managing Director: Kristalina Georgieva
• First Deputy Managing Director: Gita Gopinath
• Headquarters: Washington, D.C., USA
• Total memebers: 190  (189 UN countries and Kosovo)
• Unit of account  in IMF is Special Drawing Rights (SDRs)