IMF: Kristalina Georgieva at G20 | $235 Trillion Global Debt | Market Reform | Government Technology | Premature Inflation Celebrations | Gender Gaps | Russian Ructions

 

Dear MARIA, In today's edition, we highlight: Managing director at G20 Global debt totals $235 trillion Market reforms Government technology Premature inflation celebrations

GROUP OF TWENTY Georgieva Pushes For Stronger Global Safety Net (Credit: @KGeorgieva/X) IMF Managing Director Kristalina Georgieva on Sunday called on countries to strengthen global financial safety nets at the end of a meeting of the Group of Twenty in India. The IMF has injected $1 trillion in reserves and liquidity since the start of the pandemic through lending to nearly 100 countries and a historic allocation of special drawing rights, Georgieva said in a statement at the close of the world leaders summit in New Delhi. “To make the global economy stronger and more resilient in a more shock-prone world, it is vital to reach an agreement to increase the IMF’s quota resources before the end of the year and secure the needed resources for the Fund’s interest-free support to the poorest countries through the Poverty Reduction and Growth Trust.” The managing director also called on countries to raise their ambition to reduce carbon emissions ahead of the United Nations’ COP28 meeting in November. “G20 members must lead by example in delivering on the promises of $100 billion per year for climate finance, supported by strengthening the multilateral development banks.” Watch Kristalina Georgieva speak to CNBC about why international institutions must work together and why countries shouldn’t be excluded from economic corridors. Read a joint statement on solidarity with Morocco after the September 9 earthquake.

GLOBAL DEBT Global Debt Totals $235 Trillion Global debt has retreated for the second year in a row but remains above its already-high pre-pandemic level, according to the latest update of the IMF’s Global Debt Database. Total debt stood at 238 percent of global gross domestic product in 2022, 9 percentage points higher than in 2019. In US dollar terms, debt amounted to $235 trillion, or $200 billion above its level in 2021. China played a central role in increasing global debt in recent decades as borrowing outpaced economic growth. “Policymakers will need to be unwavering over the next few years in their commitment to preserving debt sustainability,” Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, writes in a blog. Watch Vitor Gaspar discuss the latest debt data at an event in Washington with JP Morgan’s Joyce Chang, Moody’s Elena Dugga and Bruegel’s Jeromin Zettelmeyer.

F&D MAGAZINE Middle East's Geopolitical Sands Are Shifting (Credit: Kaveh Sardar) The Middle East is often seen as an arena of unending conflict: ambitious regional rivals vie for advantage as restless young people struggle against authoritarian rule and ailing economies. And yet despite the region’s many challenges, a generational shift in geopolitics is creating new possibilities for prosperity, Johns Hopkins University’s Vali Nasr writes in F&D magazine. Just as the US has shifted its gaze away from the Middle East to Asia, China is looking west to the Middle East, constituting the most significant change in the geopolitics of the Middle East for decades, Nasr writes. “As has happened so often throughout history, great power rivalries will shape the future of the Greater Middle East. Yet in this case they are working to bind countries closer together economically rather than wrenching them apart.” F&D magazine’s September issue, Time for Transformation, explores the choices confronting the politically and economically diverse nations of the Arab world. Contributors include the IMF’s Jihad Azour on overhauling the Arab world’s economies, the Peterson Institute's Adnan Mazarei on debt, Jordan’s finance minister Mohamad Al-Ississ on progressive fiscal policies, Lebanon’s former economy minister Nasser Saidi on regional trade, Egypt’s minister of international cooperation Rania Al-Mashat on climate finance, and many more. Want a print copy delivered to your home or office? Click here to subscribe

MARKET REFORMS Market Reforms Can Stabilize Debt and Spur Growth Regulatory changes and market reforms can help developing economies to revive growth while managing rising debt and other policy considerations, IMF economists write in a blog. Market reforms, which include lowering barriers to entry in utilities markets, establishing financial supervision and regulatory frameworks, and relaxing restrictions on foreign exchange transactions and cross-border capital flows, are associated with a 3-percentage-point reduction in the ratio of debt to gross domestic product. That’s according to the authors’ analysis in a new paper. “Reforms are essential to improve how markets work and spur long-term growth,” the authors write.

Credit cards that offer rewards like travel discounts seem a good idea, but rewards cards can be costly for anyone who keeps a running balance. So should there be rules around who gets one? In this podcast, IMF economist Andrea Presbitero says while the high interest rates and penalties associated with these cards can widen wealth inequality, limiting access is not the answer.

TECHNOLOGY Harnessing GovTech to Tax Smarter and Spend Smarter Digitalization is a transformative force as powerful as the advent of the printing press in the 15th century or electricity in the 19th. Yet some governments have been slow to harness the potential of digital technology to improve delivery of public services and strengthen public finance, IMF economists write in a blog. The authors say a two-pronged policy approach is required—connecting unconnected households to the internet and accelerating and strengthening the adoption of digital solutions in the public sector. They outline strategies for pursuing these policies in a new staff paper on government technology, or govtech. “Digitalization, done right, can equip governments to improve revenue collection and spending efficiency.”

CENTRAL ASIA AND CAUCASUS More Effective Monetary Policy Can Tame Inflation (Credit: Industrial Photograph, Julia/Adobe Stock, Andrey Khrobostov) Central banks in Central Asia and the Caucasus must remain free from government interference when it comes to setting interest rates and other monetary policies, IMF economists write in a Country Focus article. It's one of three recommendations to policymakers, along with flexible exchange rates and improved transparency, contained in a staff report on how to strengthen monetary policy in the region. Inflation has remained above central bank targets in most Central Asian and Caucasian countries, partly because of the large share of food and imported products in consumption baskets, coupled with currency depreciation in some countries, the authors say.

BACK TO BASICS Resilient Remittances

Migrant workers sent $647 billion back to their families in 2022. These funds have a big impact on both personal lives and national economies. In this video we explore why remittances are important and their global ripple effects.

Weekly Roundup GLOBAL INFLATION Beware of Premature Celebrations Policymakers often declare victory too soon in the fight against inflation only to see price pressures reemerge and become entrenched. That’s the finding of a staff paper that looks back at over 100 historical inflation shocks, with particular attention to the 1970s oil crises which have parallels with energy price spikes caused by Russia’s war in Ukraine. The authors find that in only about 60 percent of cases did inflation fall back within five years. “While fighting inflation often involves short-term pain, this is likely small in relation to the costs of persistently high inflation,” they say. “It is crucial not to loosen policies prematurely.” LABOR MARKETS Gender Gaps May Never Close The gap between the proportion of men and women who work is falling at an annual rate of about 1 percent, leading some economists to predict that it could take centuries to achieve gender parity in labor markets. But even these predictions may be too optimistic, according to a staff paper. The authors say that gender gaps could “persist perpetually” unless policymakers address setbacks and do more to empower women economically. ECONOMIC SPILLOVERS Russian Ructions The rises and falls in Russia’s economic output are an important driver of economic performance in neighboring economies, particularly oil importers, according to a staff paper. The authors use vector autoregression and dynamic panel models to show that cross-border spillovers are greatest for countries with high bilateral trade concentration, low export diversification and weak external buffers. FOREIGN INVESTMENT Decline in Portfolio Flows Foreign portfolio investment declined by 14.4 percent in 2022 due to economic uncertainties, price changes, geopolitical tensions, and shifts in investor sentiment, according to the latest update of the IMF’s Coordinated Portfolio Investment Survey. The survey is conducted twice a year and collects data on holdings of foreign portfolio investment assets by counterpart economy from about 82 countries. SUMMER SCHOOL Online Courses Throughout the summer, IMF economists presented the key highlights of online courses on green public finance, external sector and public debt statistics, tax administration, and cyber risk supervision. Watch all the sessions in our dedicated playlist.

MARK YOUR CALENDAR

SEPTEMBER 28, 10 AM ET Cracking the Tax Problem Join IMF Fiscal Affairs Department Director Mario Mansour to discuss a new model for improving tax systems at a live-streamed event hosted by the Center for Global Development. Register here

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.

Nick Owen Editor IMF Weekend Read nowen@IMF.org