The paper, reviewed by the Board on April 1 2026, introduces a structured framework showing how domestic policy choices influence current account positions through their impact on national saving and investment decisions. While global imbalances have narrowed in recent years, the IMF noted that they have begun to widen again and remain concentrated in a small number of surplus and deficit economies.

IMF staff analysis finds that traditional macroeconomic policies remain the dominant drivers of global imbalances. Certain industrial policies may also play a role, although their effects vary. Sector‑specific industrial policies generally have limited and ambiguous impacts on current accounts, depending on productivity outcomes.

By contrast, economy‑wide industrial policies combined with measures that curb domestic consumption, such as capital flow restrictions or reserve accumulation, can significantly affect external balances but often at a cost to growth and welfare. Trade restrictions, the paper notes, are unlikely to materially reduce imbalances unless applied temporarily or alongside measures that raise public savings.

Using scenario analysis, the paper demonstrates that simultaneous domestic rebalancing across both surplus and deficit economies can reduce global imbalances while also lifting global output. The IMF stressed that durable rebalancing cannot be achieved by unilateral action and requires coordinated policy responses.

Executive Directors welcomed the analysis, agreeing that the saving‑investment framework remains the correct anchor for evaluating external imbalances. They emphasised that large and persistent current account surpluses or deficits, beyond what fundamentals justify, warrant close scrutiny due to their potential spillovers.

Directors also highlighted the importance of considering capital flows, balance‑sheet positions and stock‑flow dynamics when assessing risks. They agreed that industrial and trade policies cannot substitute for reforms that support productivity growth, resilient domestic demand and sound macroeconomic management.

Looking ahead, the IMF said it will step up efforts to improve data quality, refine its External Balance Assessment methodology and strengthen dialogue with member countries. Directors stressed that continued evidence‑based surveillance and international cooperation are critical to reducing global imbalances and safeguarding global economic and financial stability.