International Monetary Fund:Weekend Read: Risks of a High-Debt, Slow-Growth World....

 

Dear MARIA, In today's edition, we highlight: Risks of a high-debt, slow-growth world Kristalina Georgieva on boosting China's growth Germany's economic challenges Digital money in the Pacific Islands Diane Coyle on renewing economics Digital currencies in Sub-Saharan Africa

PUBLIC DEBT Bringing Debt to Sustainable Levels (Credit: Altayb/iStock by Getty Images) Public debt has increased significantly in recent decades, across advanced as well as emerging and middle-income economies. A new blog by Tobias Adrian, Vitor Gaspar, and Pierre-Olivier Gourinchas says that countries should take three steps to bring global debt to more sustainable levels: rebuild fiscal buffers, undertake appropriate stress tests, and implement structural reforms. “It is easier to rebuild fiscal buffers while financial conditions remain relatively accommodative and labor markets robust. It is harder to do so when forced by unfavorable market conditions. Durable fiscal consolidation will also allow policy rates to fall faster, which should reduce any adverse effects on the macroeconomy. While a substantial fiscal consolidation is necessary, this is not a call for austerity,” the authors note.   The authors advise that stress tests should adequately account for the impacts on banks and non-banks of higher sovereign interest rates and potential bouts of market illiquidity. They also warn against postponing structural reforms, which they recommend as the best way to help stabilize debt dynamics. Read the blog

CHINA New Policies Could Boost Growth, Says Kristalina Georgieva (Credit: Digital Vision/Photo Images) China is approaching a fork in the road: rely on the policies that have worked in the past, or update its policies for a new era of high-quality growth, IMF Managing Director Kristalina Georgieva said in remarks at the China Development Forum in Beijing. “According to our analysis, with a comprehensive package of pro-market reforms, China could grow considerably faster than a status quo scenario. This additional growth would amount to a 20 percent expansion of the real economy over the next 15 years – in today’s terms, that is like adding $3.5 trillion to the Chinese Economy,” said Georgieva. To achieve this growth, China will need to commit to sound macroeconomic fundamentals and strong institutions; higher reliance on domestic consumption; strengthening the business environment; and investments in human capital. China also has enormous potential in advancing the green economy, Georgieva noted. Read the speech

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 King's College, Cambridge. In this podcast based on the speech, she calls 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.

GERMANY Reforms Could Overcome Economic Challenges (Credit: Lena Mucha/IMF Photo) Germany’s economy has been struggling, and the country faces several obstacles to improving its medium-term growth prospects, including an impending decline in the working-age population and a lack of investment in public infrastructure. However, it has the means at hand to overcome these issues, note Kevin Fletcher, Harri Kemp, and Galen Sher in a new Country Focus article. "Germany faces important economic challenges, but it also possesses policy levers to overcome them and secure a brighter economic future," the authors note. "It's time to use them." The authors list a number of ways Germany might address these obstacles, including increasing its labor supply by making it easier for women to extend their working hours (through expanding access to reliable childcare, for example); boosting public investment to raise productivity; cutting red tape, which is a barrier to both investment and starting new business; and digitalizing government services to speed up processes. Read the article

PACIFIC ISLANDS Digital Money and Financial Inclusion (Credit: BrianScantlebury/iStock by Getty Images) Pacific Island countries face challenges to financial services and inclusion partly due to their small size and unique landscape. A new blog from the IMF’s Bo Li, Anca Paduraru, and Yong Sarah Zhou says that digital money can improve financial inclusion and cross border connectivity, as well as empowering underserved people and groups in these countries. “In an increasingly interconnected world, digital money and related innovation offer advantages such as efficiency, accessibility, and security,” the authors note. “Pacific island countries could explore a regional approach to introducing new forms of digital money and payments while managing the associated risks. That could entail connecting traditional domestic payment systems, interlinking CBDCs once in place, establishing or joining multilateral digital payment platforms and regional networks." This approach can also include knowledge sharing with peers, development partners, and the IMF and other international organizations, the authors say. Read the blog

FINANCE & DEVELOPMENT Renewing Economics (Credit Andre Laame/Sepia) The absence of solidly grounded welfare economics has been an uncomfortable vacuum in economics, the University of Cambridge's Diane Coyle writes in F&D magazine. Policymakers must choose what they think will be the best course of action for their society, using the best tools economics can provide. But these tools have reached their limits, she writes. “It is time for a reboot of welfare economics. And that means moving away from the simplistic set of assumptions that have shaped the worldview instilled in generations of economics policymakers.”

This article is from F&D’s March issue, in which we ask, Economics: How should it change? For this issue, we invited leading thinkers to share their views on how economics can rise to today’s challenges. Contributors include Angus Deaton, Atif Mian, Diane Coyle, Jayati Ghosh, John H. Cochrane, Michael Kremer, Dani Rodrik, Jeffry Frieden, Kate Raworth, Katharina Pistor, Michael Olabisi, Niall Kishtainy, Signe Krogstrup, Suresh Naidu, Ulrike Malmendier, Wendy Carlin, and many others.

Weekly Roundup FINTECH NOTE Sub-Saharan Africa's Digital Payments What will digital payment systems look like in Sub-Saharan Africa? A new Fintech Note summarizes the views of 30 central banks from the region. The digital landscape across Sub-Saharan Africa has witnessed a dynamic transformation in recent years, with the emergence of private digital money, the usage of crypto-assets, and the development of a Central Bank Digital Currency (CBDC). Over 75 percent of countries are currently engaged in—or are planning to engage in—CBDC research or pilot activities, mainly to improve financial inclusion and domestic payments efficiency, the note says.  AFRICA PERSPECTIVES The Africa Cheetah Run: Transforming Obstacles into Economic Opportunities Carlos Lopes, Professor from the Mandela School of Public Governance at the University of Cape Town, joined Abebe Aemro Selassie, Director of the IMF's African Department for a conversation on the latest episode of Africa Perspectives. Professor Lopes shared his insights on the key obstacles to Africa’s economic performance–what he calls “the static model” based on commodity dependence–and how this model can be transformed to pioneer a new type of development. STAFF PAPER AI's Economic Impact AI will affect most occupations and transform growth, but findings are inconclusive on employment and productivity effects, according to a new staff paper that reviews academic literature and policy actions related to the new technology. Summarizing the regulatory actions undertaken in different regions, the authors also find that regulations differ widely in scope and approach. STAFF PAPER Climate Mitigation Policies and Effects in North America The ramp-up of climate mitigation policies in the US and Canada in recent years has elicited competitiveness concerns; however, a new staff paper finds that cross-border effects of these policies have been limited and have been restricted to energy-intensive and trade-exposed industries. The authors explore the legislated climate policy packages of Canada, Mexico, and the US, and quantify the competitiveness effects of these packages, as well as the Greenhouse Gas emissions carbon leakage effects resulting from these policies. MARK YOUR CALENDAR

APRIL 2 | 3:30 PM ET Fireside Chat with Kristalina Georgieva In this conversation with the Center for Global Development’s Masood Ahmed, IMF Managing Director Kristalina Georgieva will reflect on lessons learned from previous evolutions of the Fund and look forward to new challenges and ways the IMF can respond. The conversation will also cover the IMF’s role in responding to climate change, fragmentation, and supporting low-income and fragile and conflict-affected states. Watch 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.

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