IMF update

 

Dear MARIA, In today's edition, we highlight: IMF Managing Director Begins Second Term Guinea-Bissau Country Focus Growth in GCC expected to rebound, risks remain: Georgieva F&D magazine: Nicholas Bloom on productivity IMF's Kammer on Central Banks, and much more IMF MANAGEMENT IMF Managing Director Georgieva Begins Second Term (Credit: IMF Photo) October 1 marked the beginning of IMF Managing Director Kristalina Georgieva’s second term. In an interview this week with CNBC’s Sara Eisen, Georgieva reflected on her first term and looked to the future.   As the world has faced a confluence of crises, the IMF has served as an “anchor of stability in a sea of trouble,” she noted. Since the pandemic, the IMF has provided about $1 trillion in liquidity and reserves to its member countries, supporting critical efforts to save lives and livelihoods. “The other thing we did was to keep the world together, so we can have economic cooperation and dialogue on the policy choices that countries need to make,” said Georgieva. “When I look ahead to my next term, I pray that it will be more boring than the first one.” “What we are determined to do at the Fund is, first, help our members build more resilience to cope with a more shock-prone world. Fostering strong policies and strong institutions will be critical. Second, help our members take advantage of opportunities. There is a massive technological transformation that, if well-managed, can generate new jobs, new opportunities for businesses. And third, strive to be a voice of reason. Together we are stronger,” she concluded. As well as providing financial support in times of crisis, the IMF is the only institution in the world empowered by its members to carry out regular “health checks” of their economies. Providing impartial analysis and advice is critical, especially in a world of political polarization and geo-economic fragmentation. Watch the Interview COUNTRY FOCUS Guinea-Bissau is Using Blockchain to Boost Fiscal Transparency (Credit: Damian Pankowiec; Tiago_Fernandez; Virginia Yunes/iStock by Getty Images) Guinea-Bissau has made a quantum leap into the future. In May 2024, the country successfully launched a blockchain platform—as part of the country’s program with the IMF, under the Extended Credit Facility (ECF)—designed to revolutionize its public wage bill management. This initiative, one of the first of its type for Africa, marks a significant leap toward better governance and transparency in government finances. It underscores the country’s commitment to tackling governance challenges and enhancing public service delivery. "The platform offers a secure, transparent digital ledger for managing the public service’s wage bill data, enabling almost real-time monitoring of salary and pensions eligibility, budgeting, payment approvals, and salary and pensions disbursements," said the IMF’s Concha Verdugo Yepes.  The program support by the ECF and the blockchain solution are playing a crucial role in improving the fiscal and economic stability of Guinea-Bissau, said the Fund’s Jose Gijon. “The initiative will help increase accountability and reduce any perception of public corruption, and in turn help build trust in fiscal institutions." Read the Article MIDDLE EAST Growth in GCC Expected to Rebound, but Risks Remain, says Georgieva (Credit: Chris Clark/Pexels) Ongoing challenges in MENA, including from protracted conflicts, present risks to economic stability for the region. Nevertheless, GCC economies have demonstrated resilience: the IMF expects overall growth in the GCC to rebound in 2024, and to strengthen to close to 4 percent in 2025 as oil production cuts are gradually unwound, said the Fund’s Managing Director Kristalina Georgieva in Doha this week at the joint annual meeting of the Financial and Economic Cooperation Committee and the Committee of Central Bank Governors of the Cooperation Council for the Arab States of the Gulf (GCC) with the IMF. Despite the good news, there are risks to the outlook; most notably, fluctuations in oil prices and production could reduce financial buffers and have negative spillovers to the non-oil economy, she noted. “Regardless of what happens to oil prices, the strong reform momentum should be maintained, and even accelerated in some cases – while managing risks, with a goal of achieving digital, green, and inclusive growth,” Georgieva said. She highlighted three priorities. First, on fiscal policy, most GCC countries are undertaking consolidation, but more needs to be done to build sufficient savings for future generations, she noted. Second, impressive strides in structural reforms have improved the business climate remarkably in recent years, but the progress on diversification needs to be accelerated. Third, integration into regional and global trade and financial systems will play an important role in economic diversification, she said. Read the Speech F&D MAGAZINE Working from Home is Powering Productivity: Nicholas Bloom (Credit: Gabrielle Lurie/Getty Images) A fivefold increase in working from home since COVID-19 could counter slowing productivity and power economic growth, Stanford’s Nicholas Bloom writes in an article for F&D magazine. Working from home increased about tenfold following the outbreak of the pandemic and has settled in at about five times its prepandemic level. Changes in technology, trade, prices, and regulations usually have mixed effects, but when it comes to working from home, the winners massively outweigh the losers, Bloom says. “In my lifetime as an economist, I have never seen a change that is so broadly beneficial.” Read the Article Sign up for a free print copy of the magazine here. CENTRAL BANKS Stay True to Mandate and Remain Vigilant, Says Kammer (Credit: IMF Photo) Central banks have come a long way; in many countries, they have made significant progress in reducing inflation following the latest surge. This is thanks to improved frameworks, which have enhanced resilience through the recent crises, said the IMF’s Alfred Kammer this week at the High-Level Conference of the National Bank of the Republic of North Macedonia and Reinventing Bretton Woods Committee. However, the "last mile" remains challenging, requiring continued vigilance. Political pressures on central banks have reemerged, threatening to erode the hard-earned credibility that is essential for maintaining economic stability, he said. “Efforts to reduce inflation over the past two years have reasserted a crucial tenet of central banking: Stay true to your mandate. Yet, this should not prevent us from asking if—and how—monetary policy strategies need to adapt in the future,” Kammer noted. The road ahead requires both continuity and adaptation. Existing frameworks need to adapt to navigate new challenges. Yet it is also critical to uphold the core mandates of central banking, balanced by adequate accountability. Central bank independence should always remain the foundation of the framework. It is a vital public good that must be preserved and strengthened, concluded Kammer. Stories can unify or divide but our ability to imagine them is uniquely human. Cooperation and trust, built through shared stories and narratives, are the foundation of human societies and economies. So what happens when humans no longer hold the pen? Yuval Noah Harari is a historian, philosopher, and author of several books on human evolution, including Sapiens, and Nexus: A brief history of Information Networks from the Stone Age to AI. In this podcast, Harari says artificial intelligence is a risk to humankind’s most valuable resource, trust. Weekly Roundup DEPARTMENTAL PAPER Navigating External Shocks in Southeast Asia's Emerging Markets As relatively small open economies, southeast Asian emerging markets are highly susceptible to external shocks that could induce large capital flows and exchange rate volatility which could trigger foreign exchange market dysfunction. With the exception of Bank Negara Malaysia, ASEAN-4 central banks mostly have flexible inflation targeting frameworks for monetary policy implementation. Their main policy objectives include medium-term price stability, sustainable economic growth, and financial stability. Central banks in ASEAN-4 economies (Indonesia, Malaysia, Philippines, Thailand) have been early pilots in the operationalization of the IMF's Integrated Policy Framework (IPF) in 2022–23. A new departmental paper takes stock of the experience from these pilots, both from the perspective of country authorities and of IMF country teams. It aims at distilling key lessons that could be used to inform broader IPF operationalization. STAFF CLIMATE NOTE Embedded in Nature: Nature-Related Economic and Financial Risks and Policy Considerations The economy is embedded in, and dependent on, nature. Yet economic activity is degrading nature at an unprecedented pace. Interacting with climate change, nature loss and transformation generates significant threats to the global economy and financial system. However, work on the implications of nature-related risks for macroeconomic and financial sector policies remains at an early stage. A new IMF Staff Climate note seeks to contribute to this emerging policy area by proposing a conceptual framework for understanding nature-related risks; conducting empirical analysis; and discussing takeaways for macroeconomic and financial sector policies and frameworks. STAFF CLIMATE NOTE Destination Net Zero: The Urgent Need for a Global Carbon Tax on Aviation and Shipping The need to decarbonize international transportation has long been overlooked. Aviation (mostly passenger flights) and shipping account for a rapidly growing share of global carbon dioxide emissions. A global carbon tax on fuels used in the sectors can contribute to climate mitigation in two ways, say the authors of a new Staff Climate Note. First, it would incentivize efficiency and technological development, accelerating decarbonization of the sectors. Second, it could raise up to $200 billion a year in revenues by 2035, potentially tripling current global climate finance. There are major political hurdles, notably reaching consensus on revenue allocation, price levels, and managing impacts, which are substantive for aviation but less so for shipping. An emissions trading system is another possibility but has greater capacity requirements. Other options are “fee and rebates” or tradeable performance standards. This note assesses these policies, using a new model to quantify their impacts on fuel use, emissions, revenues, and costs, and suggests how to steer international aviation and shipping in the right direction. 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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