Christine Lagarde said walking away with no agreement would cause too much disorder for both the UK and EU.
Speaking at a press conference in Washington, Ms Lagarde said she “just cannot imagine” the UK would leave with no deal and default to World Trade Organisation (WTO) rules as it would cause so much disruption.
She added the WTO rules do not cover Europeans living in the UK, or British citizens living in Europe.
Another area that would be left unclear in the case of no Brexit deal would be airline landing rights.
Philip Hammond yesterday revealed flights could be suspended between Britain and EU on the first day of Brexit.
The Chancellor said: “It is theoretically conceivable that in a no deal scenario there will be no air traffic moving between the UK and the European Union on the 29th March 2019. But I don’t think anybody seriously believes that that is where we will get to.
“There is a range of outcomes and what we will need to do at a point in time is determine what is a realistic worst case scenario that we need to plan for and invest for.”
These are just two of the reasons why the UK must reach an agreement, she said.
Ms Lagarde added: “There is so much that has been brought together between the continent and the United Kingdom that it requires a very specific approach to reduce the uncertainty that is damaging [economic] potential.”
The IMF boss also said she thinks the Brexit transition will help cut uncertainty.
She hopes Brexit “will be conducted promptly” but does not know if the two-year period will be agreed.
Ms Lagarde said we need to put “people first and business second” and provide more clarify on Britain’s exit bill, how citizens rights will be protected and how the Irish border will be managed after Brexit.
Source : EXPRESS