IMF Weekend Read

 

Dear MARIA, In today's edition, we highlight: IMF Managing Director calls for a "different kind of growth" African Fiscal Forum Angus Deaton in F&D magazine Foreign currency liberalization IMF Managing Director selection process, and much more

GLOBAL ECONOMY Georgieva Calls for a "Different Kind of Growth" in Cambridge Speech (Credit: IMF) IMF Managing Director Kristalina Georgieva said there is a promise to be made to the next generation and those who follow in a keynote speech at Kings College, Cambridge. Her speech was based on John Maynard Keynes’ 1930 essay, Economic Possibilities for our Grandchildren. The past 100 years have seen more progress for more people than ever before in human history, she noted, but “there have been policy errors—especially a failure to do enough to support those hit hard by dislocations from new technologies and trade.” Georgieva called for a different kind of growth: one that is more sustainable and equitable, and more resilient, so that countries can better navigate what is likely to be a more shock-prone world. She also underscored the need to reduce inequality. Georgieva outlined three priority areas of investment: technology, climate, and people—especially in Africa. Investment in these three key areas will help to build a better, fairer and more resilient global economy which, in turn, will help to rebuild trust within countries and across borders, she said. Georgieva noted that this cannot be achieved without cooperation and called for a ‘21st-century multilateralism’ – one that is more representative; more open and ‘listening;’ and more results-oriented. The speech was followed by a fireside chat, hosted by Gillian Tett, 45th Provost of King's College and Chair of the US Editorial Board and America Editor-at-Large at the Financial Times.

AFRICA Creating Fiscal Policy Space in Sub-Saharan Africa (Credit: IMF) Speaking at the 12th African Fiscal Forum, IMF Fiscal Affairs Department Director Vitor Gaspar emphasized the need to create fiscal policy space and manage public finance risks in Sub-Saharan Africa. Gaspar’s remarks at the Forum, which was co-organized by the IMF and European Commission, were followed by a high-level panel discussion moderated by IMF African Department Director Abebe Aemro Selassie. The panelists were: Vera Daves de Sousa, Angola’s Finance Minister; Koen Doens, Director-General for International Partnerships at the European Commission; Njuguna Ndung’u, Kenya's Finance Minister; and Fati N’Zi-Hassane, Executive Director of Oxfam in Africa. The discussion covered ways to set fiscal targets and determine the pace and composition of potential adjustments depending on countries’ specific circumstances. They also explored the role of institutions in addressing implementation challenges and how those institutions can be strengthened.

FINANCE & DEVELOPMENT Angus Deaton Rethinks His Economics (Credit: Andre Laame/Sepia) The economics profession knows and understands many things, but today we are in some disarray, writes Nobel laureate Angus Deaton in F&D magazine. “We did not collectively predict the financial crisis and, worse still, we may have contributed to it through an overenthusiastic belief in the efficacy of markets, especially financial markets whose structure and implications we understood less well than we thought. Recent macroeconomic events, admittedly unusual, have seen quarrelling experts whose main point of agreement is the incorrectness of others,” Deaton writes. “Like many others, I have recently found myself changing my mind, a discomfiting process for someone who has been a practicing economist for more than half a century.” Read the full article

Economics: How should it change? Read F&D’s March issue. Contributors include Angus Deaton, Atif Mian, Dani Rodrik, Diane Coyle, Jayati Ghosh, Jeffry Frieden, John H. Cochrane, Kate Raworth, Katharina Pistor, Michael Kremer, Michael Olabisi, Niall Kishtainy, Ruchir Agarwal, Signe Krogstrup, Thomas Sangill, Mette von Sicard, Suresh Naidu, Ulrike Malmendier, Clint Hamilton, Wendy Carlin, and many others.

ANALYZE THIS Foreign Currency Liberalization

Some countries restrict access to foreign currency, and only select people can buy them. The result? A parallel market emerges, unfairly benefiting people who are connected and can access the cheaper official exchange rate. The IMF’s Christoph Rosenberg shares insights on this topic.

IMF EXECUTIVE BOARD IMF Executive Board Extends Temporary Increase in Access Limits Under the General Resources Account (Credit: IMF) The Executive Board of the IMF on March 4, 2024 approved an extension until end of 2024 of the temporary increase in normal limits on members’ annual and cumulative access to Fund resources in the General Resources Account (GRA) to 200 and 600 percent of quota respectively. The increase was initially approved in March 2023 for a period of 12 months, ending on March 5, 2024. The extension takes place in the context of the still uncertain global economic environment, and the need for a smooth transition to the comprehensive review of the GRA access limits planned for the second half of 2024.

Weekly Roundup MANAGING DIRECTOR SELECTION PROCESS IMF Executive Board Initiates Selection Process for Next Managing Director The IMF Executive Board has adopted an open, merit-based, and transparent process for the selection of the next Managing Director, similar to the one used in recent rounds. The Executive Board underscores the importance it places on the successful candidate having the requisite global standing to lead the Fund, which stands at the center of the global financial system. Individuals may be nominated by a Fund Governor or Executive Director and as with past practice, we aim to reach a decision by consensus. The Board intends to complete the process by end-April 2024. MONETARY AND CAPITAL MARKETS Tobias Adrian on Global Financial Stability The Hong Kong Academy of Finance, the Hong Kong Institute for Monetary and Financial Research, and the IMF recently hosted a high-level seminar on the “Outlook for Global Financial Stability.” In a wide-ranging discussion, IMF Financial Counselor and Director of the Monetary and Capital Markets Department Tobias Adrian touched on current risks to global financial stability, implications of geopolitical fragmentation, climate transition finance, the Chinese property market, CBDCs and tokenization, and emerging market capital flows. In another panel hosted by the Brookings Institution, Adrian discussed lessons learned from the March 2023 bank failures in the US. STAFF PAPER Monetary Policy and Inflation in Europe Europe has faced a high level of economic and geopolitical uncertainty over the past few years. In particular, monetary policymakers in Europe have faced an unusual degree of Knightian uncertainty—structural uncertainty that is not easily captured with probabilities—about the persistence of inflation. A new paper argues that, when facing uncertain inflation persistence and robust underlying wage pressure, such as many central banks had to face during most of the post-pandemic period, central bankers should set the policy interest rate under the assumption that inflation is more persistent than their routine baseline forecasts suggest. STAFF PAPER Assessing the Outcomes of Mexican Pension Reforms In recent years the Mexican pension system has changed significantly. In 2019 the existing means-tested social pension was made universal – covering everyone over the age of 65 – and the benefit level increased. In 2020, the main regime of the private sector was substantially reformed, increasing contribution rates for the funded defined contribution system, lowering the minimum years of contributions needed to receive an earnings-related pension, and increasing minimum pensions. A new paper aims to assess the likely outcomes of those reforms, discusses design inefficiencies of the reforms and offers policy options to improve pension system design. POLICY ADVICE Industrial Policy in IMF Surveillance A new IMF paper provides a conceptual framework and guiding principles for the coverage of industrial policy in IMF surveillance. It proposes a working definition of industrial policy, discusses its objectives and main instruments, and provides a brief review of academic literature. A new how-to note aims to support IMF country teams with staff guidance, useful questions for engagement with national authorities, and resources on trade related aspects of industrial policies.

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.

Miriam Van Dyck Editor IMF Weekend Read mvandyck@IMF.org

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