IMF Weekend Read

 

Dear MARIA, In today's edition, we highlight: Growth and the green transition How to stave off a debt crisis Egypt’s Rania Al-Mashat on climate finance Harvard’s Eliana La Ferrara on social norms and development Women’s economic empowerment

DEVELOPING ECONOMIES Reform Can Aid Growth And Green Transition Credit: Real Moment/Adobe Stock New approaches to governance, regulation and trade can spur growth at a time when many developing economies are grappling with high inflation, rising debt and balance of payments pressures, IMF economists write in a blog. In economies with significant structural impediments, these so-called “first-generation reforms” can boost output by up to 4 percent in two years and up to 8 percent in four years, according to a new staff paper. Historical examples, such as Georgia’s regulation streamlining and fiscal reform in 2005 and Senegal’s improvements to governance, business regulation and external integration in 2014-18, demonstrate the growth returns from such reforms, the authors say. “By frontloading these gains, well-designed reform packages could help overcome resistance to major changes and garner public support, including for the green transition.”

FINANCE & DEVELOPMENT Climate Finance That Puts People First (Credit: Ministry of International Cooperation, Egypt) An unprecedented number of calamitous climate events—floods and heat waves, superstorms, droughts, and uncontrollable forest fires, all connected to human activity—are putting people’s lives in danger, disrupting economies, and causing havoc in the natural world. Writing in the September issue of F&D magazine, Rania Al-Mashat, Egypt’s minister of international cooperation, says the need for climate action has never been more pressing and innovative approaches are critical to address these mounting problems. “It’s time to move from mere promises and pledges to concrete implementation, and resources must be allocated equitably and generously— putting people and the planet first.” 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, Johns Hopkins University’s Vali Nasr on a generational shift in geopolitics, and many more. Want to get a print copy delivered to your home or office? Click for a free copy

SUB-SAHARAN AFRICA How To Stave Off A Debt Crisis (Credit: IMF Photos) Sub-Saharan Africa’s debt has doubled in a decade—from 30 percent of gross domestic product at the end of 2013 to almost 60 percent by end-2022. Repaying this debt has also become much costlier, and the IMF reckons more than half the region’s low-income countries are already in debt distress or at high risk of it. In a Country Focus article, IMF economists identify five policy actions African governments can take to preserve the sustainability of public finances, while also achieving the region’s development goals.

A functioning economy provides people with access to credit, insurance and, among other things, investment opportunities. But what happens in poor communities where they are landless and have no wealth? Eliana La Ferrara, a Professor of Public Policy at Harvard Kennedy School and an award-winning economist, says the social structure within those communities offers people the collateral they need to make the economy work. In this podcast, La Ferrara discusses her work in Africa and how she came to focus on development issues that are often overlooked.

SAUDI ARABIA Diversification Drives Growth (Credit: Adobe Stock) Saudi Arabia’s economy is undergoing a transformation, as the kingdom implements reforms to reduce oil dependence, diversify income sources and enhance competitiveness, according to IMF economists writing in a Country Focus article. As a result of new laws to promote entrepreneurship, protect investor rights and reduce the costs of doing business, new investment deals almost doubled and licenses increased almost fourfold in 2022, as noted in the IMF’s most recent review of the economy. “Sustaining this performance requires pursuing sound macroeconomic policies and maintaining the reform momentum, irrespective of developments in oil markets,” the authors say.

ANNUAL REPORT Committed To Collaboration (Credit: IMF Photos) The IMF’s annual report highlights work on challenges facing the global economy, including Russia’s war on Ukraine, inflation, debt vulnerabilities, inequality, food insecurity, geoeconomic fragmentation, climate change, and digitalization. The report, available in nine languages, includes a letter from the managing director and descriptions of what we do and who we are. The In Focus section drills down on how the Fund and its membership have worked together in addressing the world’s key challenges—global economic uncertainty, the cost-of-living crisis, public debt, resilience to shocks, and international cooperation.

Empowering women economically is one important reform policymakers can make to revive sluggish economies. With global growth predicted to languish at just 3 percent over the next five years, many economies are missing out by not tapping women’s potential. Emerging and developing economies could boost gross domestic product by about 8 percent over the next few years by raising the rate of female labor force participation. As the Chart of the Week shows, that’s more than the economic “scarring,” or output losses, inflicted on countries by the pandemic. Read the blog

Weekly Roundup SRI LANKA Discussions To Continue Discussions will continue towards reaching a staff-level agreement with Sri Lanka that will maintain the reform momentum needed for the country to emerge from its deep economic crisis, IMF staff said in a statement on Wednesday. “Sustaining the reform momentum is critical to put the economy on a path towards lasting recovery and stable and inclusive economic growth,” Peter Breuer and Katsiaryna Svirydzenka said at the end of a visit to Colombo to discuss policies to support the first review of the country's $3-billion arrangement. Read a transcript of the press briefing. MOROCCO Board Approves Climate Arrangement The IMF’s Executive Board on Thursday approved a $1.3-billion arrangement for Morocco under the Resilience and Sustainability Facility. The arrangement will support Morocco’s transition to a greener economy and strengthen preparedness and resilience against natural disasters, including from climate change, a statement said. BANKING STABILITY Interacting Risks Recent bank failures in the United States show how large liability withdrawals can damage lenders’ capital positions. In a staff paper, IMF economists highlight the dangers to banks when liquidity and solvency risks interact. Vulnerability is generally greater for banks in advanced economies due to lower cash buffers, securities holdings and capitalization, the authors conclude.

MARK YOUR CALENDAR

OCTOBER 5, 5 PM GMT (1 PM ET) Annual Meetings Curtain Raiser IMF Managing Director Kristalina Georgieva highlights policy priorities for the global economy in a speech in Abidjan, with introductory remarks by Côte d’Ivoire’s President Alassane Ouattara. OCTOBER 2, 11 AM ET How To Pay For Climate Action Raphael Lam and Christine Richmond of the IMF’s Fiscal Affairs Department present new research on how countries can balance climate goals, fiscal sustainability and political feasibility at the Center for Global Development.

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