COLOMBIA(Credit: IMF Photo) Highlighting Colombia’s strong economic fundamentals and institutional policy frameworks, along with its track record of implementing and maintaining very strong policies, the IMF approved a $8 billion successor two-year arrangement under the Flexible Credit Line (FCL), the Fund said in a press release. The FCL, designed for crisis prevention, would be treated by the Colombian authorities as precautionary, and the previous arrangement has been canceled, the press release noted. “Appropriately tight macroeconomic policies over the last two years have allowed for an impressive reduction in Colombia’s domestic and external imbalances,” said the Fund’s Deputy Managing Director Antoinette M. Sayeh in a statement, “This has improved the resilience of the Colombian economy, which is further bolstered by the ongoing program to accumulate further international reserves.” “Going forward, careful normalization of monetary and fiscal policies and decisive progress on structural reforms are key to durably eliminate imbalances, reinvigorate investment, diversify the economy away from fossil fuels, and raise potential growth,” Sayeh said. PAKISTAN(Credit: IMF Photo) Strong policy efforts by country authorities have supported the stabilization of Pakistan’s economy and the return of modest growth, said the IMF in a press release marking the completion of the Second and Final Review of the Stand-By Arrangement for Pakistan. The completion allows for the immediate disbursement of US$1.1 billion, bringing total disbursements under the arrangement to about $3 billion. Macroeconomic conditions have improved over the course of the program, and growth of 2 percent is expected in FY24 given the country’s continued recovery in the second half of the fiscal year, the IMF noted. “Given the significant challenges ahead, Pakistan should capitalize on this hard-won stability, persevering – beyond the current arrangement – with sound macroeconomic policies and structural reforms to create stronger, inclusive, and sustainable growth,” said IMF Deputy Managing Director Antoinette M. Sayeh in a statement. “Continued external support will also be critical.” “Achieving strong, long-term inclusive growth and creating jobs requires accelerating structural reforms and continued protection of the most vulnerable through an adequately-financed Benazir Income Support Program [a federal unconditional cash transfer poverty reduction program]. Priorities include advancing the reform of state-owned enterprises (SOEs), including to ensure that all SOEs fall under the new policy framework, strengthening governance and anti-corruption institutions; and continuing to build climate resilience.” Weekly RoundupPOLICY NOTEBy ensuring income security for older persons and other vulnerable groups, pension systems prevent poverty and reduce inequality. Iraq’s current pension system is fragmented, inequitable, and inefficient, and comprehensive pension reform is urgently needed, says a new policy note based on collaboration among the IMF, ILO, and the World Bank. The authors outline a multi-pillar approach to pension reform, which includes establishing general social protection for older persons; creating a social insurance pillar collectively financed through employer and worker contributions; a publicly regulated defined-contribution or defined-benefits pillar aimed at supplementing the pension benefits from the previous two pillars; and a complementary voluntary personal savings pillar. STAFF PAPERThe escalating frequency and intensity of natural disasters have already inflected severe consequences on economic growth, development, and inequality. But climate change can also have a substantial effect on inflation, particularly through its influence on food prices. A new staff paper looking at evidence from the Middle East and Central Asia finds that the persistence of climate shocks could have a substantial impact on food inflation, making it challenging for central banks to maintain price stability. This could lead to higher interest rates and lower outputs and, in some contexts, may require a tighter monetary policy stance, the authors say. STAFF PAPERIndustrial policies pursued in many developing countries in the 1950s-1970s largely failed while the industrial policies of the “Asian Miracles” (i.e., Taiwan Province of China, Korea) succeeded. Key to the success of these Asian Miracles is industrial policy with export orientation in contrast to import substitution, says a new IMF staff paper. Exporting encouraged competition, economies of scale, innovation, and local integration and provided market signals to policymakers, the authors find. They argue that export orientation could be the “secret” ingredient of a successful industrial policy. |
