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Dear MARIA, We just published a new blog—please find the full text below.  Emerging Markets Show Resilience Despite Global Monetary Tightening (Credit: AsianDream/iStock by Getty Images) By Cian Allen and Rudolfs Bems Interest rates in the United States are at 20-year highs and the dollar has appreciated sharply against other world currencies. Given the dollar’s outsized role in international finance and trade—and if history is any guide—emerging markets have good reason to be concerned. We know that rapid monetary tightening in the US and a strong dollar can lead to sudden capital flight and financial crises in the emerging world. The good news is that we have not seen an emerging market crisis. Our latest External Sector Report shows that capital flows into emerging markets have recovered from a post-pandemic low. Net capital inflows into emerging markets—excluding China—rose to $110 billion, or 0.6 percent of GDP, last year. That’s the highest level since 2018. As one would expect during a period of global monetary tightening, emerging markets have seen a decline in more volatile net portfolio inflows, but net inflows of foreign direct investment have been more stable. China is an exception. It saw net capital outflows, including negative net FDI inflows over 2022-23. Some of this may reflect multinational firms repatriating earnings. But it may also reflect shifting expectations about Chinese growth and geoeconomic fragmentation. The fact is most emerging markets have shown resilience amid global monetary tightening. This is partly because of stronger fundamentals. Indeed, many countries are now benefiting from more robust fiscal, monetary, and financial policy frameworks, as well as more effective implementation of policies and tools. But this is only part of the story. These patterns in net inflows mask a retrenchment of global gross capital flows—declines in both gross inflows (foreigners buying fewer assets) and gross outflows (residents buying fewer assets abroad). In 2022-23, global gross inflows declined from 5.8 to 4.4 percent of world GDP, or from $4.5 trillion to $4.2 trillion, relative to 2017-19, in line with global gross outflows. The decline masks large differences across countries. The US accounted for 41 percent of global gross inflows—almost double its 23 percent share in 2017-19. Gross outflows from the US have similarly increased, from 14 to 21 percent of global gross outflows. Meanwhile, global gross flows into and from China dropped considerably over that period, and there was an even more drastic decline in gross flows for financial centers. This may be evidence of increased financial fragmentation but could also partly reflect an unwinding of some tax or regulatory strategies by large multinational corporations in financial centers, whose share of global flows has declined drastically. Amid shrinking global flows, emerging markets must double down on recent improvements to macroeconomic frameworks, more effective policies and stronger institutions that have helped them to ride out the prospect of higher-for-longer US interest rates. Countries also have at their disposal a variety of tools to cope with the stresses created by capital flow volatility. The IMF’s Integrated Policy Framework can help calibrate the best possible policy mix—which can also help countries navigate this strong-dollar period. Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!

Dear MARIA, In today's edition, we highlight: Emerging markets' resilience F&D at 60 Lisa Kolovich on gender and demographics Ghana, Bretton Woods at 80, sustainable development, fintech, climate change, and more

ECONOMIC GROWTH Emerging Markets Show Resilience Despite Global Monetary Tightening (Credit: AsianDream/iStock by Getty Images) Unlike past episodes, emerging market capital flows have remained largely resilient in the face of global monetary tightening, even as global capital flows have fallen, the IMF's Cian Allen and Rudolfs Berns write in a blog. Interest rates in the United States are at 20-year highs and the dollar has appreciated sharply against other world currencies. Given the dollar’s outsized role in international finance and trade—and if history is any guide—emerging markets have good reason to be concerned, they write. Rapid monetary tightening in the US and a strong dollar can lead to sudden capital flight and financial crises in the emerging world. The good news is that an emerging market crisis hasn't occurred, the authors write. The IMF's latest External Sector Report shows that capital flows into emerging markets have recovered from a post-pandemic low. "Countries also have at their disposal a variety of tools to cope with the stresses created by capital flow volatility. The IMF’s Integrated Policy Framework can help calibrate the best possible policy mix—which can also help countries navigate this strong-dollar period." Read the blog

F&D MAGAZINE F&D at 60 (Credit: Finance & Development) Since June 1964, F&D has been a window into the IMF and the evolving global economy, writes the IMF's Anna Postelnyak for F&D. Forged in the crucible of war and created to foster multilateralism and international cooperation, the IMF's mission is more vital than ever, Postelnyak continues. F&D is doing its part, delving into a panoply of topics ranging from health, demographics, and inequality to digital currency and artificial intelligence.  "Over the past 60 years, F&D has witnessed—and experienced—numerous transformations while staying true to its purpose of engaging, educating, and entertaining its readership." Read the Article

The world has changed markedly since the IMF was founded 80 years ago. In F&D’s June issue, we explore how the IMF can adapt to remain effective. Authors include Kristalina Georgieva, Ceyla Pazarbasioglu, Raghuram Rajan, Mia Amor Mottley, William Ruto, Pablo García-Silva, Harold James, Martin Wolf, Adam S. Posen, Edwin M. Truman, Masood Ahmed, Axel A. Weber, Anna Postelnyak, Réka Juhász, Nathan Lane, Mark Aguiar, James M. Boughton, Atish Rex Ghosh, Andrew Stanley, Adam Jakubik, Elizabeth Van Heuvelen, Henny Sender, Melinda Weir, Vivek Arora, Douglas A. Irwin, and Lisa Kolovich.

Aging populations in many advanced and emerging market economies mean shrinking workforces, weighing on growth. However, the opposite is true in low-income countries where populations are growing, and the expanding workforce may lack the skills for the job market. How can these two scenarios offset each other? In this podcast, the IMF’s Lisa Kolovich says gender equality can serve as a stabilizing factor to rebalance demographic trends.

Weekly Roundup GHANA Good Progress on Debt Restructuring The IMF board recently completed the second review of Ghana’s 36-month Extended Credit Facility Arrangement. This allows for the immediate disbursement of SDR 269.1 million (about US$360 million). Ghana’s performance under the program has been generally strong. Good progress is being made on the debt restructuring, and key structural reforms are advancing. FUND-BANK Bretton Woods at 80 In recognition of the Bretton Wood Conference’s 80th anniversary, the Fund and World Bank have launched a high-level consultation on the future of the world economy and international cooperation. The initiative is led by a group of external advisors comprising Sri Mulyani Indrawati, Minister of Finance of Indonesia; Patrick Achi, former Prime Minister of Côte d'Ivoire; and Mark Malloch Brown, former Deputy Secretary-General of the UN. CAPACITY DEVELOPMENT Domestic Resources for Sustainable Development The IMF recently hosted the Partnership Week on Domestic Resources for Sustainable Development in coordination with the World Bank and OECD. The objective of this week was to further coordinate support to countries through capacity development to improve public finances and mobilize domestic resources in order to fund key development needs. The week also marked the 10th anniversary of the IMF’s Tax Administration Diagnostic Assessment Tool (TADAT) and the adoption of the work program of the Global Public Finance Partnership. STAFF RESEARCH IMF Lending Catalyzing ODA A new IMF staff paper explores the catalytic impact of IMF lending to low-income countries on Official Development Assistance (ODA) during 1990-2019. A one percentage point (pp) of GDP increase in IMF disbursements catalyzes additional ODA of 2.7 pp of GDP. IMF disbursements catalyze ODA mostly from multilateral donors (1.3 pp of GDP) and to lesser extent from traditional bilateral donors (0.6 pp of GDP).  STAFF RESEARCH Fintech and Financial Inclusion Has the rapid growth of fintech broadened financial services to under-served populations? A new IMF staff paper, which analyzes 84 countries between 2012 and 2020, contains interesting insights. While digital lending has a significant negative effect on financial inclusion, digital capital raising is statistically insignificant. In developing countries, the overall impact of fintech is positive and statistically highly significant.

As economies worldwide strive to reduce emissions and achieve sustainable growth, reliable data is crucial. The third phase of the G20 Data Gaps Initiative seeks to better integrate climate data with macroeconomic statistics. The Chart of the Week by Jim Tebrake, Francien Berry and Darja Milic shows which industries are producing more pollutants per dollar of output—this information can guide efforts to reduce emissions in the most impactful areas. Read our analysis

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.

Peter Walker Acting Editor IMF Weekend Read pwalker@IMF.org

(Credit: IMF Photo) Nigeria’s new administration has set out on an ambitious reform path to stabilize its currency, regain market confidence, and tame inflation. In this podcast, Governor Olayemi Cardoso and IMF Africa Department head, Abebe Aemro Selassie discuss the role of Nigeria’s central bank in restoring macroeconomic stability. The conversation took place as part of the Governor Talks series held during the IMF-World Bank Spring Meetings.   Listen to the podcast on: IMF.org | Apple Podcasts | Spotify | Soundcloud | YouTube   Watch the webcast     Thanks for listening to the podcast. We're always looking to improve your experience so let us know if you have any suggestions! Send your comments to me at bedwards2@IMF.org.   Bruce Edwards Producer, IMF Podcasts