International Monetary Fund:Resilience and Sustainability | Metals and Green Energy | A Pathway to Net-Zero

 

The latest IMF analysis of global economics, finance, development and policy issues shaping the world //

Dear maria, Welcome to the Weekend Read! In today's edition we get new details on a Resilience and Sustainability Trust, we wrap up the second and final week of COP26 with a focus on how rising metals prices could effect a green transition, a playbook for climate negotiators, how Maldives is wrestling with climate change, economic outlooks for Mexico and India, and much more. Special Drawing Rights Financing Resilience and Sustainability The IMF will seek to launch a new Resilience and Sustainability Trust (RST) in time for the Annual Meetings in October 2022. To start, the trust would make $30 billion available to low-income and vulnerable middle-income economies, as well as fragile island economies, IMF Managing Director Kristalina Georgieva announced this week at the Paris Peace Forum. The new trust enhances the IMF's ability to provide long-term and low interest funding to countries in need. It will also be a way for wealthier countries to "rechannel" new additional Special Drawing Rights (SDRs) to countries that need them the most. Earlier this year, the IMF Board of Governors agreed to a historic allocation of the international reserve asset, injecting the equivalent of $650 billion in new liquidity into the global economy. Rechanneling goals: The G20 has put forward a goal of rechanneling $100 billion of the SDR allocation from richer to poorer countries. Georgieva said the goal would be to build the RST up to $50 billion or more. The new trust would provide another vehicle for nations to rechannel SDRs beyond the existing Poverty Reduction and Growth Trust. "Via this new RST instrument, the IMF can do significantly more to support policies for the once-in-a-lifetime transformation to the new climate economy—one that is low-carbon and, most importantly, climate resilient," Georgieva said in her statement. Climate (Photo: Petmal/iStock by Getty Images) Metal Prices and the Green Transition Transitioning to greener and cleaner forms of energy could spur unprecedented demand for copper, cobalt, lithium and nickel--metals used to generate and store renewable forms of energy. A surge in prices could create a boom for some economies but soaring costs could delay or derail the energy transition, Lukas Boer, Andrea Pescatori , Martin Stuermer and Nico Valckx write in a new IMF Blog. Under a net-zero emissions scenario, booming demand for the four energy transition metals alone would boost their production value sixfold to $12.9 trillion over two decades, the authors found in new staff research.  High uncertainty: Uncertainty over demand, technological change and policy direction could hinder mining investment, raising prices and derail or delay an energy transition. A credible, globally coordinated climate policy; high environmental, social, labor, and governance standards; and reduced trade barriers and export restrictions would allow markets to operate efficiently and direct investment. An international body with a mandate covering metals—analogous to the IEA for energy or the UN Food and Agriculture Organization—could also play a key role. Read the Blog COP26 A Playbook of Pathways to 1.5-2 Degrees The United Nations Climate Change Conference (COP26) concluded this week in Glasgow with the key takeaway that everyone needs to do more to take steps to limit global warming. To keep warming to 1.5-2 degrees, we need to cut global emissions by 30-55 percent below business-as-usual levels by 2030. Under revised plans, advanced economies have committed to reduce emissions rapidly—with collective pledges of 43 percent below projected 2030 levels (up from 21 percent in 2015 pledges). Higher-income emerging market economies have together pledged a 12 percent cut (up from 3 percent in 2015), and lower-income emerging market economies, 6 percent (up from 4 percent). The IMF has identified multiple pathways to keep warming contained. These are feasible, affordable and—arguably—fair, since they place a bigger burden of cuts on richer countries. Want to know more? Download the new IMF Staff Climate Note: “Not Yet on Track to Net Zero: The Urgent Need for Greater Ambition and Policy Action to Achieve Paris Temperature Goals” Read our entire IMF Staff Climate Note series.  Watch a short video explaining how prosperity is possible in a net-zero future. F&D Magazine (PHOTO: IMF PHOTO/RAPHAEL ALVES) F&D: No Higher Ground Maldives Environment Minister Aminath Shauna is fighting an existential battle against climate change for her low-lying island nation. The country lives and dies by the ocean that surrounds its 1,200 islands. It has built an economy on drawing tourists to its crystal blue waters. Those same waters continually threaten its population. In an "In the Trenches" interview, Shauna describe how the government is approaching adaptation measures and setting a good example of how even the smallest countries can make efforts to cut greenhouse gases. Read the full article on the web or download a PDF. Read the Full September Finance & Development Issue Want to get a print copy delivered to your home or office? Click here. (Photo: Luis Cortes/Reuters/Newscom)   Mexico on the Rebound Mexico’s economy is rebounding from its steepest recession in decades. Raising productivity and tackling poverty remain key challenges. Per capita incomes in Mexico have continued their long-term divergence from the US and poverty has increased even further. In a new Country Focus, the IMF's Swarnali Hannan and Kevin Wiseman describe the challenges ahead.   (Photo: unsplash)   India's Path Forward India’s broad range of fiscal, monetary and health responses to the crisis supported its recovery and, along with economic reforms, are helping to mitigate a longer-lasting adverse impact of the crisis. The pandemic, however, is still likely to result in greater poverty and inequality. A new Country Focus provides a snapshot of India's outlook and features an in-depth podcast with Luis Breuer, the IMF’s senior resident representative to India. Quote of the Week “Technological advances in finance should be broadly welcome, together with preparations to capture their benefits and mitigate potential risks to the financial system’s integrity and safety. ”   —IMF Deputy Managing Director Bo Li in an event on managing technology in finance WEEKLY ROUND-UP 01. Managing Technology in Finance IMF Deputy Managing Director Bo Li led a discussion on global approaches for managing technology in finance. From the perspective of financial regulators, the key question is how to reap the benefits of technology in terms of financial inclusion, efficiency, risk management, and oversight, while managing the financial stability and integrity risks. On the panel were Catherine Batchelor, Director, Digital Markets Unit, Competition and Markets Authority, United Kingdom; Ho Hern Shin, Deputy Managing Director, Monetary Authority of Singapore; Robert B. Koopman, Chief Economist and Director, Economic Research and Statistics Division, World Trade Organization; Anton Korinek, David M. Rubenstein Fellow, Brookings Institution; and Latha Reddy, Co-Chair, Global Commission on the Stability of Cyberspace. 02. Monetary Policy and Inequality The role of central banks in reducing inequality through monetary policy can go both ways. On one hand lower interest rates increase asset prices, which can benefit the wealthy. On the other, low interest rates can also create more employment and lower borrowing costs, benefitting lower income households. At Tuesday's Federal Reserve Conference on Diversity and Inclusion in Economics, Finance, and Central Banking IMF Chief Economist Gita Gopinath moderated a panel on the subject with Andrew Bailey, Governor, Bank of England; Roger Ferguson, Former Vice Chair, Federal Reserve Board; J. Nellie Liang, Undersecretary for Domestic Finance, U.S. Treasury; and Isabel Schnabel Board Member, European Central Bank.  Also, be sure to read a recent F&D article explaining the distributional effects of monetary policy. 03. Firms and Workers in the MENA Region The IMF's Jihad Azour, director of the Middle East and Central Asia Department, participated in a panel discussion with the United Arab Emirates Ministry of Economy on the legacy of the pandemic on firms and workers in the Middle East and North Africa region. He noted that countries in the Gulf Cooperation Council are performing better than others in the region with growth and recovery being driven by the non-oil sector.  In a separate event, Azour discussed the role of youth in the region's development during an event at New York University Abu Dhabi. 04. A Global Network of Support The International Monetary Fund leverages a network of seventeen regional capacity development centers (RCDC) spread across five continents to help meet its members’ needs for technical assistance and training. From setting up fiscal transparency portals on COVID-19 spending and debt management to boosting revenue mobilization and better tracking economic activity, RCDCs have been at the forefront of the IMF’s capacity development efforts during the crisis. Find out more in this wrap-up of this week’s Retreat of RCDC directors, which featured the IMF's First Deputy Managing Director Geoffrey Okamoto, Deputy Managing Director Antoinette M. Sayeh, Director of Communications Gerry Rice, and more. 05. A New Deputy Managing Director IMF Managing Director Kristalina Georgieva announced this week to the Executive Board her proposal to appoint Kenji Okamura as Deputy Managing Director, effective Dec. 3. He will take the place of Mitsuhiro Furusawa, who announced his departure last month. Okamura currently serves as special advisor to Japan's prime minister on international economic policies. Mark Your Calendar 01. IMF Statistical Forum The International Monetary Fund will hold its 9th Statistical Forum virtually on November 17-18, 2021. The conference will focus on the role of economic and financial statistics in informing decision makers and the public on climate change related trends. Some highlights include a conversation between the IMF Managing Director Kristalina Georgieva and Johan Rockström of the Potsdam Institute for Climate Impact Research on climate risks and planetary boundaries, a presentation of The IMF Climate Change Indicators Dashboard, and a high-level panel moderated by Gillan Tett of the Financial Times on the role for data for a greener future in the aftermath of COP26. In our latest chart of the week, by the IMF's Cian Allen and Cyril Rebillard, an analysis of US data as part of our recent External Sector Report found the bulk of the increase in saving and wealth during the pandemic occurred at the top of the wealth distribution. Indeed, while recent research has documented that household saving has historically been very unevenly distributed in the United States, very little is known of how the increase in saving or wealth since the beginning of the pandemic was distributed. Our chart, based on data published by the Federal Reserve, tries to answer this by plotting the changes in household net wealth by percentile (expressed as a ratio of total nationwide personal disposable income) during the pandemic and during a period of time before the pandemic we refer to as “normal times.” What we found is the net wealth of the top 1 percent richest households rose by nearly 35 percentage points of the economy’s disposable income compared to a modest 5-percentage-point increase for households in the bottom 50 percent. Adam Behsudi Editor IMF Weekend Read abehsudi@IMF.org   P.S. What global economic issues are you watching? Let me know what's attracted your attention or keeps you up at night.