IMF: Recapitalisation of banks buffer against global shocks

The IMF director said: “Of course, it’s in times of stress where the value of bank capital really comes to the fore, right? So, what we are aiming at for global financial stability is a banking sector that is capitalized against adverse shocks. So yes, bank recapitalizations are very welcome and are paying off, particularly under times of stress.”

According to Adrian, the raised funds will support and provide buffers for the banks during the period of stress.

Economic Counsellor/Director in charge of the Research Department of the IMF, Pierre-Olivier Gourinchas, projected a two-year growth prospects for Nigeria, pegging growth for 2026 and 2027 at 4.1 per cent and 4.3 per cent respectively.

He said the global economy disrupted with the outbreak of war in the Middle East, rising commodity prices, firmer inflation expectations, and tighter financial conditions, will grow at 3.1 per cent in 2026 and 3.2 per cent in 2027.

Gourinchas said a prolonged Middle East conflict, deeper geo-political fragmentation, disappointment over AI-driven productivity, or renewed trade tensions could weaken growth and unsettle markets.

For Nigeria, he highlighted the impact of soaring oil prices, on cost of living and the sensitivity of the inflation expectations.

Gourinchas said that Nigeria’s policies need to be agile, carefully manage the trade-offs involved in ramping up defense spending, and lay the foundation for a sustained recovery.

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He explained that after withstanding higher trade barriers and elevated uncertainty last year, global activity now faces a major test from the outbreak of war in the Middle East.

“Assuming that the conflict remains limited in duration and scope, global growth is projected to slow to 3.1 percent in 2026 and 3.2 percent in 2027. Global headline inflation is projected to rise modestly in 2026 before resuming its decline in 2027,” he said.

Gourinchas said that although no central bank can influence global energy prices on its own, the markets are already pricing in higher policy rates.

“However, provided inflation expectations remain well entered, central banks can afford to wait and watch for now, but they must be attentive to risks and communicate clearly their readiness to act decisively to maintain price stability. In most cases, exchange rates should be allowed to adjust, allowing central banks to focus on their mandates,” he said.

Gourinchas advised that monetary and fiscal policy should be ready to pivot to support the economy and safeguard the financial system alongside appropriate financial and liquidity policies.

Stating that slowdown in growth and increase in inflation are expected to be particularly pronounced in emerging markets and developing economies, he warned that a longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial intelligence driven productivity, or renewed trade tensions could significantly weaken growth and destabilise financial markets.

He said: “At the same time, activity could be lifted if productivity gains from AI materialize more rapidly or trade tensions ease on a sustained basis.

“Fostering adaptability, maintaining credible policy frameworks, and reinforcing international cooperation are essential to navigating the current shock while preparing for future disruptions in an increasingly uncertain global environment”.