Investors withdraw over $14bn from emerging markets on global trade conflicts

*IMF gives conflict navigation tips to emerging economies

The International Monetary Fund (IMF) has said over $14 billion dollars have been withdrawn by investors from emerging markets in May and June of this year further complicating situations in these markets.

Christine Lagarde in an article released Wednesday via the IMF blog also indicated that rising interest rates in the US have put pressure on many developing economies, including Brazil and Turkey.

“In response, policymakers in several emerging markets have raised interest rates and some have directly intervened to support their domestic currency,” she however noted.

According to her, most of the pressure has been limited to a few countries till date and is nowhere near as widespread as the Taper Tantrum of 2013. However, as US interest rates continue to rise there is a risk that more countries could face increased pressure.

Explaining that emerging markets can use all the tools at their disposal in combating the trade conflicts, Largarde advised that, “exchange rates should remain flexible and act as a shock absorber to help countries weather the departure of investors’ money.”

She said regulators should coordinate to prevent excessive credit growth from turning into another crisis, including by ensuring liquidity in financial markets, adding that with high debt levels in many countries, fiscal policy should be used to preserve and rebuild buffers where needed.

“The IMF will continue to provide guidance in this area, and we are committed to doing everything we can to help our members strengthen their economies and increase resilience in the face of headwinds,” she further noted