IMF update

Dear maria, In today's edition we focus on the challenges of restructuring the debts of poorer nations, how to manage the long-term risks from COVID-19, a special series of three F&D articles on the future of inflation, global financial resilience, war's impact on emerging markets, climate change indicators, India, Japan and Lebanon, and much more.

Debt Restructuring Debt of Poorer Nations (PHOTO: IMF PHOTO/ESTHER RUTH MBABAZI) Improvements to the Group of Twenty's Common Framework for Debt Treatments could clear a path through increasing creditor complexity and make debt restructuring more efficient, the IMF’s Guillaume Chabert, Martin Cerisola and Dalia Hakura write in a new blog. Low-income countries face fewer debt challenges today than they did in the mid-1990s, but debt has been creeping up for the past decade. Changes to the composition of creditors will make restructurings more complex, the authors say. --Changing Creditors: In past decades, the mostly sub-Saharan African countries that were eligible for the Debt Service Suspension Initiative borrowed mainly from multilateral organizations such as the IMF and World Bank and the Paris Club official creditors. Today, China and private bondholders play a much larger lending role. --Common Framework: As the economic shocks from COVID-19 and the war in Ukraine add to the debt challenges faced by low-income countries, it has become urgent to put in place mechanisms that ensure coordination and confidence among creditors and debtors, the authors say. “Improvements to the G20 Common Framework could play an important role by ensuring broad participation of creditors with fairer burden sharing.” 📺 Watch a discussion on debt sustainability featuring the IMF's Ceyla Pazarbasioglu, John Lipsky of the Bretton Woods Committee, Kenneth Rogoff of Harvard University, and Jason Rosario Braganza of AFRODAD.   Health Covid's Long-Term Risks (PHOTO: GETTY IMAGES) Countries need a more comprehensive COVID-19 toolkit for fighting the pandemic that includes vaccines, tests, treatments, and bolstering the resilience of health systems, Gita Gopinath, the IMF’s First Deputy Managing Director, said on April 5. In a statement to launch a new staff paper on how to manage the long-term risks from the pandemic, Gopinath said it is clear that COVID-19 is likely to last for the long term. Given the many possible scenarios for the evolution of the virus, and given the limited resources countries have, a new strategy is necessary, she said. --Additional Funding: The paper, published jointly with the Coalition for Epidemic Preparedness Innovations (CEPI), the Global Fund, and Wellcome Trust, calls on the international community to allocate additional funding to fight pandemics and strengthen health systems across the world. This will require about $15 billion in grants this year and $10 billion annually after, the paper says. “Infectious diseases with pandemic potential are a threat to global economic and health security. The international community should recognize that its pandemic financing addresses a systemic risk to the global economy.” 📺 Watch a press briefing on the strategy with the IMF's Gita Gopinath and Ruchir Agarwal, the Wellcome Trust's Jeremy Farrar, CEPI's Richard Hatchett, and Peter Sands of the Global Fund.   Read more about the IMF and COVID-19 including news, blogs, factsheets and our vaccine tracker here.   F&D Special Feature: Future of Inflation CREDIT: ISTOCK / VECTORMINE With inflation in the headlines, F&D online has just published a special feature on the future of inflation. Authored by the IMF’s Ruchir Agarwal and Miles Kimball of the University of Colorado, the three-article series looks at: --Whether inflation will remain high and how central banks will respond. --What the costs and benefits of inflation are, as well as the trade-offs. --The case for an electronic money standard and a zero-inflation target. Check out our March Issue of Finance & Development, which focuses on "Rethinking Fiscal: Public Finance and Fairness in a Changed World".   Want to get a print copy delivered to your home or office? Click here to subscribe.

(PHOTO: ETIENNE MARTIN/UNSPLASH)   Financial Resilience The world’s banking systems remain able to absorb shocks from adverse developments in global growth and risk premia, but uncertainties remain, the IMF’s Tobias Adrian, Vikram Haksar and Ivo Krznar write in a new blog, based on a first-of-its-kind global stress test of financial institutions.

(PHOTO: SWISSHIPPO/ISTOCK BY GETTY IMAGES)   Africa's Monetary Challenge Monetary policy tools such as foreign exchange intervention can ease the effects of shocks but need to be carefully weighed against potential longer-term costs, the IMF's Tobias Adrian, Gaston Gelos, and David Hofman explain in a new blog on policy challenges in Sub-Saharan African countries.

(PHOTO: IMF)   War and Emerging Markets Emerging markets face added risks from the war in Ukraine and its spillovers that could slow economic growth and make borrowing costlier, as Benjamin Kett of the IMF's Strategy, Policy and Review Department explains in our latest Analyze This! video.

(PHOTO: METAMORWORKS/ISTOCK BY GETTY IMAGES)   Essential Reading: Capital Flows Check out our eLibrary section on capital flows, where you can find all the latest IMF research on how rising international interest rates could affect countries' external accounts and currencies.

The Spring Meetings of the International Monetary Fund and the Boards of Governors of the World Bank Group bring together central bankers, ministers of finance and development, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world's financial system. This year's Spring Meetings events will be held on April 18-24. All public and invitation-only events will be virtual.

WEEKLY ROUND-UP 01. Lebanon Agreement Lebanon and the IMF have reached a staff-level agreement on comprehensive economic policies that could be supported by a four-year Extended Fund Facility equivalent to about US$3 billion. The agreement, reached on April 7, is subject to approval by IMF management and the Executive Board after the timely implementation of all prior actions and confirmation of international partners’ financial support. “Lebanon is facing an unprecedented crisis, which has led to a dramatic economic contraction and a large increase in poverty, unemployment, and emigration,” Ernesto Ramirez Rigo, who led the IMF’s mission, said in a statement. 02. Climate Change Indicators The IMF has updated its Climate Change Indicators Dashboard—an international statistical initiative to address the growing need for data in macroeconomic and financial policy analysis related to climate change—with a raft of new indicators and updates to existing ones. The dashboard, which was launched a year ago by IMF Managing Director Kristalina Georgieva and John Kerry, the United States’ Special Presidential Envoy for Climate, is intended to support the climate-related recommendations in the G20’s new Data Gaps Initiative. Read more in the first edition of a climate dashboard newsletter. 03. Japan's Economy Japan’s economy is recovering from the pandemic amid strong policy support and high vaccination levels, the IMF said in an annual economic assessment on April 6. Gross domestic product is expected to grow by 2.4 percent in real terms this year, up from an estimated expansion of 1.6 percent in 2021, led by stronger consumer spending. There are risks, however. “There is significant uncertainty around the outlook, including from the Russia-Ukraine conflict … with the balance of risks tilted to the downside.” Read more about IMF surveillance here. 04. Inequality in India In a new IMF staff paper, Surjit Bhalla, Karan Bhasin and Arvind Virmani present estimates of poverty and inequality in India across almost two decades until 2021. These estimates include, for the first time, the effect of in-kind food subsides on poverty and consumption inequality. Extreme poverty was as low as 0.8 percent in the pre-pandemic year 2019, and food transfers were instrumental in ensuring that it stayed at that low level in pandemic year 2020, the authors say. 05. Mortgage Default Risk A new version of a household mortgage credit risk model—a powerful state-of-the-art structural macro-micro simulation model—has been developed by the IMF's Marco Gross, Thierry Tressel, Xiaodan Ding, and Eugen Tereanu, in a new staff paper, “What Drives Mortgage Default Risk in Europe and the US?” Users of the model can pick any macro-financial baseline and adverse downturn scenarios and gauge their impact on various risk metrics for households and banks, including on bank capital. 06. Crypto and CBDCs "The IMF has made a strong call for a comprehensive, consistent, and coordinated global regulatory framework for crypto assets," IMF Deputy Managing Director Bo Li said at a virtual conference organized with the Bank of Tanzania on the twentieth anniversary of the African Regional Technical Assistance Centre. He also underscored that financial stability and privacy considerations are paramount for the design of central bank digital currencies. MARK YOUR CALENDAR 01. Civil Society Forum Ahead of the Spring Meetings, the IMF and World Bank Civil Society Policy Forum began on April 4 and will run through April 15, with 19 sessions covering inequality, climate change, special drawing rights, fiscal policies, and the Resilience and Sustainability Trust, among other things. All the sessions will be in English and some will be available in French, Arabic or Spanish. If you have registered for the Spring Meetings, you will be able to join on WebEx and ask questions. If not, you can watch the sessions live on the IMF CSO page or WB CSO page. The full program is available here. 02. New Challenges Conference This year’s BIS-BOE-ECB-IMF spillover conference, titled New Global Challenges Amid Incomplete and Divergent Recoveries, will be held on April 27-28. The conference aims to close gaps in our understanding of the international transmission of vulnerabilities, shocks and policies, and the trade-offs for policymakers, in the current environment of incomplete and divergent recoveries, high uncertainty, and structural change. For a WebEx invitation, register for the conference here. 03. Statistical Forum The tenth IMF Statistical Forum will take place virtually and in person in Washington on November 16-17 2022. The forum is a platform for policymakers, researchers, the private sector, regulators, and compilers of economic and financial data to discuss cutting-edge issues in macroeconomic and financial statistics and to build support for statistical improvements. The theme of this year’s Statistical Forum is Measuring the Tangible Benefits of Intangible Capital. Authors interested in contributing a paper to the forum should submit an indication of interest and an abstract describing the main ideas of the paper by June 30 to STAForum@imf.org.

Nick Owen Editor IMF Weekend Read nowen@imf.org   Thank you again very much for your interest in the Weekend Read! Be sure to let us know what issues and trends we should have on our radar.

Miles Kimball-Ruchir Agarwal on Inflation; Part 1: Negative Interest Rates
April 8, 2022




Everyone feels the pinch when inflation is on the rise and so the pressure on central banks to manage inflation rates has grown exponentially in recent weeks. In this first podcast of a two-part series on inflation, distinguished economists Miles Kimball and Ruchir Agarwal discuss how a robust negative interest rate policy can help central banks better control inflation and stabilize the economy.
Listen to the podcast.
Read the transcript.
Read the article in Finance and Development.

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Bruce Edwards

Producer, IMF Podcasts