IMF update

 

Dear maria, In today's edition, we spotlight the IMF's response to the global food crisis, Barbados's access to $183 million in climate finance, crypto's trust deficit, gender disparities and economic recovery, Asia's digital innovation, industrial policy, digital jobs during the pandemic, and much more.

Food Crisis Managing Director Calls for Rapid Response Why Countries Must Cooperate on Carbon Prices (TOM FISK/PEXELS; MAGNIFIER AND AABOIKIS/GETTY IMAGES; GRISHA BRUEV/STOCKSNAPPIXABAY) Acute food insecurity threatens the lives and livelihoods of 345 million people. The suffering is worst in 48 countries, many highly dependent on food imports from Ukraine and Russia. The financial costs of the crisis are rising, too. Writing in a blog, IMF Managing Director Kristalina Georgieva calls for a rapid response to the unprecedented humanitarian challenge. “We must all act now to ease the suffering of those experiencing hunger, by supporting countries who take strong policy action with the financing they need.” A new paper by IMF staff estimates that the rising cost of food and fertilizer imports in countries highly exposed to food insecurity will add $9 billion to their balance of payments pressures in 2022-23. This will erode their international reserves and ability to pay for food imports. In many countries, policymakers have introduced fiscal measures to protect people from the food crisis. Highly exposed countries will need as much as $7 billion this year alone to help the poorest households, according to staff estimates. “The international community must…take decisive action to ensure that the needed financing is in place,” Georgieva writes. On Friday the IMF’s Executive Board approved a one-year "Food Shock Window" under two existing emerging financing instruments, the Rapid Credit Facility and the Rapid Financing Instrument, to provide additional assistance to people in vulnerable countries.   Read a separate blog that shows how reliance on imports of food staples is fueling price rises in sub-Saharan Africa.   F&D A Foundation of Trust The remarkable rise of cryptocurrencies captured the popular imagination and gave a glimpse of new technical capabilities, write the Bank for International Settlements’ Agustín Carstens, Jon Frost and Hyun Song Shin in F&D. Yet the recent rout in crypto valuations has underscored the failure to fulfill the requirements of a monetary system that fully serves society. These shortcomings are not just bugs but structural flaws. “The monetary system of the future should harness the new technical capabilities demonstrated by crypto but be grounded in the trust central banks provide,” they write. Read the full article   This article appears in the September 2022 edition of F&D Magazine—The Money Revolution: Crypto, CBDCs, and the future of finance. In this edition, F&D delves into Crypto and CBDCs by drawing on cutting-edge research and analysis from economists and other leading experts including Eswar Prasad, Ravi Menon, Tobias Adrian, and many others.

(IMF PHOTO/KIM HAUGHTON)   Barbados Climate Agreement Barbados is the first country to reach a staff-level agreement to access the IMF’s Resilience and Sustainability Trust, which aims to provide affordable long-term financing to build resilience against climate change. Wednesday’s agreement, which must be approved by the IMF’s Executive Board, will allow Barbados to tap about $183 from the trust. “Fantastic to hear our IMF team has reached a staff-level agreement with Barbados,” Kristalina Georgieva, the IMF’s managing director, wrote on Twitter. The agreement is a crucial step to support a small state with huge climate vulnerabilities, she added.

Women's Opportunities Countries in which women have the same opportunities and potential to participate in the economy as men are better placed to recover from recent shocks, IMF First Deputy Managing Director Gita Gopinath said on Wednesday. The World Economic Forum expects it will take more than 130 years to close gender gaps worldwide, up from about 100 years before the pandemic, when twice as many women lost their jobs as men. “Eliminating gender disparities that hold women back is the right thing to do,” Gopinath said. Listen to a podcast with the IMF’s Ratna Sahay on how multilateral institutions can close the gender gap.

IMF PHOTO/SAUMYA KHANDELWAL)   Asia's Digital Innovation The Asia-Pacific is at the forefront of digital innovation, making financial services and payment systems more inclusive, more efficient and thus cheaper for users. But IMF Deputy Managing Director Antoinette Sayeh told a training series on Wednesday that the region is also the most uneven in the world when it comes to the use of fintech. “While some countries are leaders, others lag in critical areas, such as electronic payments, mobile money and mobile government transfers,” she said at the series organized by the IMF Singapore Training Institute.

What is a Recession? What is a recession? In our new series, Ask an Economist, the IMF’s Sandile Hlatshwayo explains how we know when an economy has fallen into recession, the causes of recession and what recession may mean for people. Watch the video.

Here at the IMF, we’re always searching for new ways we can help streamline your reading experience. Our blog has long remained one of the key platforms to deliver our policy messages on pressing global economic issues. We’re thrilled to announce the launch of our new IMFBlog page, which has undergone multiple rounds of new concept ideas and rebranding designs, coming together through the collective efforts of our team.

WEEKLY ROUND-UP 01. Fintech Notes The volatile growth of crypto assets has generated retail and institutional interest globally. To harness the benefits from the crypto asset ecosystem while managing risks, it is important to have effective conduct as well as prudential regulation and oversight. Two new IMF Fintech Notes share key considerations for effectively regulating the crypto ecosystem, focusing on unbacked crypto assets and stablecoins. 02. Industrial Policy & Growth As countries strive for a strong post-pandemic recovery, developing new industrial capabilities is necessary to tackle global challenges such as raising living standards and addressing climate change, according to a new IMF paper. The paper examines which sectors to target, how to intervene, and who should lead the work. 03. R&D Subsidies A new IMF staff paper finds that the impact of R&D subsidies varies across industries for multinational corporations and domestic firms while it does not differ substantially by firm size. Domestic firms have a larger response in R&D spending in low-tech manufacturing, knowledge-intensive services and technological services. 04. Digital Jobs in the US US regions that were hit harder by the COVID-19 recession experienced a larger increase in the share of digital occupations in both employment and newly-posted vacancies, according to a new IMF staff paper. This result is driven by the smaller decline in demand for digital workers relative to non-digital ones, and not by an absolute increase in the demand for digital workers. MARK YOUR CALENDAR Tune into IMF Live next Thursday to watch Managing Director Kristalina Georgieva discuss the global economic outlook ahead of the IMF and World Bank annual meetings.

Nick Owen Editor IMF Weekend Read nowen@IMF.org

Dear maria, We just published a new blog—please find the full text below.  Global Food Crisis Demands Support For People, Open Trade, Bigger Local Harvests Credit: Tom Fisk/Pexels; Magnifier and aaboikis/Getty images;Grisha Bruev; stocksnap/Pixabay) By Kristalina Georgieva, Sebastián Sosa, and Björn Rother Food insecurity has been rising since 2018. Even before Russia’s invasion of Ukraine, the increasing frequency and severity of climate shocks, regional conflicts and the pandemic were all taking their toll, disrupting food production and distribution, and driving up the cost of feeding people and families. The situation took an even more dramatic turn with the war in Ukraine. This pushed the prices of food and fertilizers higher still—hurting importers and prompting several countries to impose export restrictions. The result is an unprecedented 345 million people whose lives and livelihoods are in immediate danger from acute food insecurity. And around the globe more than 828 million people go to bed hungry every night, according to the World Food Programme. The impact of the food shock is felt everywhere. The suffering is worst in 48 countries, many highly dependent on imports from Ukraine and Russia—mostly low-income countries. Of those, about half are especially vulnerable due to severe economic challenges, weak institutions, and fragility. Alongside the human toll, the financial costs are also escalating. A new paper by IMF staff estimates the impact of higher import costs for food and fertilizer for highly exposed to food insecurity will add $9 billion to their balance of payments pressures—in 2022 and 2023. This will erode countries’ international reserves, and their ability to pay for food and fertilizer imports. In many places, even though food prices have eased somewhere from recent peaks, still high food—and energy—prices have fueled a cost-of-living crisis that is likely to increase poverty and hurt growth, potentially fueling political instability. As a result, policymakers in many countries have introduced fiscal measures to protect people from the current food crisis. For this year alone, we estimate that highly exposed countries need as much as $7 billion to help the poorest households cope. Rapid response Strong and swift policy action is needed across four areas to mitigate the global food crisis and avert human suffering. First, rapidly and adequately support people vulnerable to food insecurity through humanitarian assistance from the World Food Programme and other organizations, alongside effective domestic fiscal measures. Policymakers around the world should prioritize fighting inflation and protecting the most vulnerable to alleviate the burden of the cost-of-living crisis. Near-term social assistance should focus on providing emergency food relief or cash transfers to the poor, such as those recently announced by Djibouti, Honduras, and Sierra Leone. Where this is not possible, second-best subsidies and tax measures can provide temporary relief. Second, maintaining open trade, including within regions, to allow food to flow from surplus areas to those in need. We should build on the progress made under the Black Sea Grain Initiative and at the 12th Ministerial Conference of the World Trade Organization by urgently phasing out export bans imposed by major food producers. Protectionist measures only serve to make the food crisis worse, accounting for as much as 9 percent of the increase in world wheat prices, according to the World Bank. Third, increase food production and improve distribution, including through ensuring adequate access to fertilizers and crop diversification. Increasing trade financing and reinforcing supply chains is vital to addressing the current food price shock. The World Bank and other multilateral development banks play a key role as they increase trade financing for agricultural commodities and other food products and their support to countries for critical logistics and infrastructure upgrades. Fourth, investing in climate-resilient agriculture will be vital to increasing future harvests. More intense and more unpredictable climatic events are increasing food insecurity. Low-income countries, particularly in sub-Saharan Africa, are among the least prepared to face the effects of climate change. Solutions should be tailored to country circumstances, with a focus on low-cost, high-impact measures, such as investing in new crop varieties, improving water management, and information dissemination. For example, Ethiopia, Kenya, and Rwanda are leveraging mobile technology to provide farmers with rainfall forecasts to optimize the planting of crops and the purchase of crop insurance. Decisive action The international community must also take decisive action to ensure that the needed financing is in place to deal with the immediate crisis and to strengthen food security in the medium-to-long term. Institutions specialized in food security, such as the World Food Programme and the Food and Agriculture Organization of the United Nations, need to be adequately funded because they play a vital role with their local presence in many nations and an unwavering focus on the human cost of acute food insecurity. More grants and concessional financing from donors and international organizations, are urgently needed to support cash and in-kind assistance for people suffering most acutely from food insecurity. In some countries, debt relief will also be needed. As an additional line of defense, IMF financing supports countries in meeting external financing needs associated with the global food shock. Since Russia’s invasion of Ukraine, new Fund-supported economic programs in Benin, Cabo Verde, Georgia, Mozambique, Tanzania, and Zambia, included policies to address the impact of the food crisis. Additional financing for existing programs in Jordan, Moldova, Pakistan, and Senegal provided support for additional measures to strengthen social safety nets and address food insecurity. A new food shock window under the IMF’s emergency financing is expected to be approved this week by our Executive Board. The proposed window will provide increased access to emergency financing for a year for countries that are most vulnerable. Where grants and concessional financing from partners are not enough, or a Fund-supported program is not possible, it will offer a new channel of IMF support. This global food crisis has staggering humanitarian impact and large financial costs. It requires a comprehensive and well-coordinated approach to ensure complementarity and maximum efficiency in resource use. Together with the World Bank and our global partners, we recently issued a second joint statement calling for action on global food insecurity. We must all act now to ease the suffering of those experiencing hunger, by supporting countries who take strong policy action with the financing they need. —This blog also reflects contributions by Guillaume Chabert, Daehaeng Kim, Lukas Kohler, Gaëlle Pierre, Naoya Kato, Majdi Debbich and Chiara Castrovillari.   Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!