IMF weekend read

 

Dear MARIA, In today's edition, we highlight: A Fund for the Future F&D June 2024 Issue Ukraine's Strong Performance Tokyo Fiscal Forum Harry Dexter White's messy legacy Chart of the Week F&D MAGAZINE A Fund for the Future (Credit: Original Illustration by Daniel Lievano) Our biggest challenges—from global warming to demographic and technological transformations—cannot be resolved by countries acting alone, says the IMF’s Gita Bhatt in a blog marking both the 80th anniversary of the IMF as well as the 60th anniversary of the Fund’s quarterly magazine, Finance & Development. The new F&D issue illustrates the ways the Fund can continue to adapt to new realities and the changing needs of our members, she notes. Highlights of the new edition include IMF Managing Director Kristalina Georgieva calling for “21st century multilateralism”—a framework for international cooperation that’s more open and representative, with a better balance between advanced economies and the voices of emerging market and developing economies. Top policymakers such as Barbados’ Prime Minister Mia Mottley, Kenyan President William Ruto, and Pablo García-Silva, a former vice-governor of Chile’s central bank, suggest ways in which the IMF can deliver that for its members. Adam Posen and Raghuram Rajan share their views on greater operational independence for the Fund and IMF reform, respectively. Masood Ahmed’s piece considers the IMF’s role in addressing the climate threat. The IMF’s Ceyla Pazarbasioglu shows how much the organization has evolved in its regular reviews of member economies and its regional and global analyses. Atish Rex Ghosh and Andrew Stanley chart how IMF lending, in particular, has evolved rapidly over the past 30 years. And historian Harold James draws lessons from the past for global financial risk management. "Today we are a platform on which thought leaders in many fields and from many countries explain and debate issues central to the global economy...we look forward to another 60 years of fresh thinking and inspiring debate,” Bhatt concludes. Read the Blog F&D JUNE 2024 ISSUE An IMF For Tomorrow UKRAINE Strong Performance Despite the Challenges of War (Credit: Tashka/Getty Images) IMF staff and the Ukrainian authorities have reached agreement on the fourth review of the four-year Extended Fund Facility arrangement, said a statement issued upon the conclusion of discussions between Fund staff and Ukrainian officials. Subject to approval by the IMF Executive Board, Ukraine would have access to about $2.2 billion. “Ukraine’s four-year EFF Arrangement with the IMF, which forms part of a $122 billion international support package, continues to provide a strong anchor for the authorities’ economic program in times of exceptionally high uncertainty,” said the Fund’s Gavin Gray in the statement. “Performance under the program has remained strong despite the challenges of the war, with all quantitative performance criteria met, and one structural benchmark met and another implemented with a short delay.” The Ukrainian economy continued to achieve resilient growth and disinflation through the first quarter of 2024. However, risks are high and rising as the war continues, and the outlook for the remainder of the year remains highly uncertain, the statement noted. Read the Statement Economies across the Middle East and Central Asia are more affected by conflicts. The idea that violent conflict reduces economic output is uncontroversial. However, the repercussions are notably harsher and longer lasting in these regions than in most others, as we show in a chapter of our latest Regional Economic Outlook for the Middle East and Central Asia.  A year after the start of a severe conflict, countries in these regions lose about 2 percent in real GDP per capita compared to before the conflict, with the decline extending to about 10 percent after a decade. Countries elsewhere, by contrast, typically have a similar drop after the first year, of about 2 percent, but then largely recover after the fifth year, as the Chart of the Week shows. TOKYO FISCAL FORUM Collect More, Spend Better to Boost Growth (Credit: IMF Photo/Noriko Hayashi) Policymakers face a challenging fiscal environment, with global public debt remaining high, medium-term growth projections at the weakest level in decades, and the possibility that interest rates could remain higher for longer, even with inflation coming down. These challenges constrain government budgets, even as public spending demands rise, including to address climate change and aging populations, said IMF Deputy Managing Director Kenji Okamura in opening remarks at the Ninth Tokyo Fiscal Forum. “In this context, mobilizing revenue and spending more efficiently are essential to rebuild fiscal buffers, prepare for future shocks, and deliver sustainable development,” he said. Okamura underscored the support provided by the IMF to assist countries in facing these challenges, citing the Domestic Resource Mobilization Initiative (in partnership with the World Bank), which helps members in increasing their resources, spending more effectively, and building domestic capital markets, as well as the new Global Public Finance Partnership, which provides a one-stop-shop for capacity development on both revenue and spending. “Working together to collect more and spend better, we can build the growth, jobs, and prosperity our citizens deserve,” Okamura concluded. It’s no mystery where the IMF was born, but its origin story might surprise you. While the spotlight was on the charismatic British economist John Maynard Keynes during the 1944 Bretton Woods Conference, a little-known American economist was working in the shadows. Harry Dexter White’s plan would lead to the creation of the IMF and forever change the world economy. In this podcast, IMF historian and author James Boughton speaks with Rhoda Metcalfe about how Harry White made history without making a splash. Weekly Roundup GLOBAL ECONOMY Georgieva Sees "Transformational Twenties" Ahead Speaking at the CNBC CEO Council Summit in Washington on Thursday, IMF Managing Director Kristalina Georgieva said that the world economy is headed for a soft landing, inflation is going down, and rate cuts are coming, though medium-term growth prospects globally are disappointing, and divergence remains a major concern. Georgieva shared concerns about the rise of industrial policy but expressed optimism that the world is heading for the “Transformational Twenties.” STAFF PAPER Shedding Light on the Shadow Economy The informal economy is as mysterious as it is important: mysterious, because its size is often unfathomable, and important, as because should it be formalized, it would potentially raise economic growth, boost government revenue, and improve social welfare. In a new IMF staff paper, the authors develop a new approach (which they call the “augmented factor model approach”) to estimating the degree of informality in an economy, marrying direct measures from surveys and insights from a statistical model and combining micro and macro data. STAFF PAPER Inflation and Fossil Fuel-Price Fluctuations After a prolonged period of low inflation across most of the world, inflation surged in 2021 and 2022. While there are various drivers of inflation, the increase in oil and gas prices were a dominant factor. The authors of a new staff paper say it is reasonable to hypothesize that reducing the share of fossil fuels in a country’s energy mix could mitigate the impact of oil and gas price changes on inflation. The paper focuses on how renewable energy affects the sensitivity of inflation to changes in fossil fuel prices; the authors find no evidence that increased renewable energy adoption reduces the impact of fossil fuel price changes on energy inflation rates. 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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