Risk Exists International Monetary System Could Collapse - Imf Director For Russia

WASHINGTON, May 3 (Bernama-Sputnik) -- A possibility exists that the international monetary system could collapse, International Monetary Fund (IMF) Executive Director for Russia Aleksei Mozhin told Sputnik.

"I think there is such a possibility," Mozhin said regarding the potential risk for the international monetary system to collapse.

Mozhin noted that the existing system relies on the trust that dollar assets are safe.

However, central banks and households are already buying gold - and other precious metals - with the growing mistrust about the safety of dollar assets, Mozhin said.

"Once trust is lost, chaos will ensue in the global economy," Mozhin added.

Mozhin suggested that BRICS countries could offer an alternative to the US dollar if the international monetary system collapses.

"A lot is being written about the shortcomings of the current system. Moreover, many publications mention BRICS in the context that this association can offer an alternative," Mozhin said.

BRICS countries could create a unit of account that would be built on a basket of currencies of the five member countries of the group, including the Brazilian real, the Russian ruble, the Indian rupee, the Chinese yuan, and the South African rand, according to Mozhin.

"This proposal is being discussed. In case the US dollar and international monetary system collapse, there will be a need to turn this unit of account into a real currency backed by commodities," the Russian representative said.

On another aspect, he said the US and other high-income countries are in a deadlock due to their huge public debt.

"The main question is what rich countries, for example, the US, are going to do with this public debt. In my understanding, they are in a deadlock," Mozhin said.

The Russian envoy advocated for low-income countries to have their debt written off or restructured.

As for rich nations, they have several options to resolve their debt crises, according to Mozhin.

He mentioned that advanced economies can achieve a primary budget surplus, sustain it over several years, and gradually reduce public debt, even when confronted with an unavoidable recession.

Mozhin pointed out that it is also possible to address the issue either through economic growth or by depreciating public debt through inflation. However, the IMF in its assessments has ruled out either of those possibilities for the US, he noted.

As a result, the US is left to "do nothing and watch this debt grow endlessly" or choose "the worst option," which is a unilateral debt restructuring, Mozhin said.

--BERNAMA-SPUTNIK