Why is it in the News?

The International Monetary Fund (IMF) released the latest global financial stability.

About Global Financial Stability Report (GFSR):

• The Global Financial Stability Report (GFSR) is a semiannual report by the International Monetary Fund (IMF).
  • It is released twice per year, in April and October.
• The GFSR provides an assessment of the global financial system and markets and addresses emerging market financing in a global context.
• It focuses on current market conditions, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging market borrowers.

Key Points from the Report:

• The report highlights significant risks facing the global financial system, including persistent high inflation, increased lending in unregulated credit markets, and a rise in cyber-attacks targeting financial institutions.
• It underscores geopolitical tensions, such as conflicts in West Asia and Ukraine, as potential factors disrupting aggregate supply and driving up prices, possibly constraining central banks from lowering interest rates.
• India emerged as the second-largest recipient of foreign capital in 2023, following the United States, though this trend could shift rapidly if Western central banks signal prolonged high-interest rates.
• Of concern is the expansion of the unregulated private credit market, where non-bank financial institutions extend credit to corporate borrowers, posing potential threats to the broader financial system.
• Many borrowers in this market lack financial stability, with numerous entities unable to cover interest costs with current earnings, highlighting underlying risks.