International Monetary Fund Weekend Read

 

Dear MARIA, In today's edition, we highlight: The IMF at Davos Electricity reform in the Bahamas Integrating the EU energy market Yuval Noah Harari on humankind's competitive advantage IMF staff papers, and more WORLD ECONOMIC FORUM 2025 The IMF at Davos (Credit: Olya Solodenko/iStock Photo) The World Economic Forum Annual Meeting 2025 in Davos, Switzerland is convening global leaders to address key global and regional challenges. These include responding to geopolitical shocks, stimulating growth to improve living standards, and stewarding a just and inclusive energy transition. IMF Managing Director Kristalina Georgieva and First Deputy Managing Director Gita Gopinath have taken part in a number of events at Davos this year. Today, Georgieva took part in a panel on the Global Economic Outlook alongside Faisal Alibrahim,  Laurence D. Fink, Sara Eisen, Christine Lagarde, and Tharman Shanmugaratnam. Earlier in the week, Georgieva discussed strategies to bridge the growing AI divide and ensure more equitable access to AI benefits globally in a panel entitled AI: Lifting All Boats, along with Hatem Dowidar, Brad Smith, Bill Thomas, Paula Ingabire, and Vijay Vythianathan Vaitheeswaran. The Managing Director also participated in a panel on Saudi Arabia’s Economic Shifts, discussing the country’s plans to safeguard stability and drive robust growth alongside Francine Lacqua, Faisal Alibrahim, Mohammed Aljadaan, Laurence D. Fink, and Abdullah AlSwaha. Gita Gopinath took part in a panel on Emerging Economies amid Shocks with Jacob Aarup-Andersen, Bob Sternfels, Odile Françoise Renaud-Basso, Børge Brende, and Mohammed Aljadaan. Gopinath also participated in a panel on Navigating the Fiscal Squeeze along with Stephanie Flanders, Kimberly Clausing, Ali Ahmed Al Kuwari, David Schwimmer, and Mthuli Ncube. COUNTRY FOCUS Electricity Reform Can Help Usher in Sustainable Growth in The Bahamas (Credit: Marina113-LynMc42k/iStock by Getty Images/IMF Photo by Melissa Alcena) Modernizing electricity grids and increasing the shares of solar energy and liquified natural gas (LNG) in electricity production can yield major macroeconomic benefits in The Bahamas, write the IMF’s Zamid Aligishiev, Beatriz Garcia-Nunes, and Shane Lowe in a new Country Focus article. Such transformations, over the medium-term, could reduce fossil fuel imports, decrease the country’s vulnerability to volatile global fuel prices, significantly reduce CO2 emissions, and substantially boost national output (eventually increasing long-run growth potential from 1.5 percent to 2 percent). These are just some of the many interesting findings using the IMF’s new Renewable Energy Balance of Payments tool. The tool estimates the impact of a shift in the mix of energy production on a country’s transactions with the rest of the world, the authors write. For years, Bahamians have suffered from frequent power outages, while the reliance on imported fossil fuels—one of the highest in the Caribbean—for electricity generation leaves consumers and businesses vulnerable to high and volatile energy prices. To address these hardships, the government announced plans in June 2024 to, in partnership with the private sector, invest in a modern electricity transmission and distribution infrastructure and to increase the share of renewable energy in its mix of electricity generation. While a transformation of this magnitude can be expensive, the government’s partnerships with private power producers and investors can help The Bahamas to achieve its mitigation goals, note the authors. Read the Article EUROPEAN UNION Integrating the EU Energy Market to Foster Growth and Resilience (Credit: peterschreiber.media/iStock Photo) Europe faces significant challenges: persistently low growth, driven by a large productivity gap with the global frontier, has plagued the European Union for decades, said the IMF’s Alfred Kammer in a recent speech to the EU's Economic and Financial Affairs Committee. “To this, we now add growing geo- economic fragmentation and a soaring energy price gap to other advanced and emerging market economies. These challenges coincide with an urgent need to accelerate the green transition and to strengthen Europe’s energy security. Achieving higher growth and resilience demands a dual focus: deepening the single market and pursuing structural reforms at the national level,” said Kammer. Europe’s energy market is key to lowering energy prices and their volatility, improving energy security, and decarbonizing the economy—goals that are connected and essential to Europe’s long-term prosperity, Kammer noted. “The EU can simultaneously reduce energy prices, improve its energy security and meet its emission reductions goals. These goals are not only compatible, they are mutually reinforcing. But only by working together will you lower the cost of achieving them,” said Kammer. “This will require a renewed commitment from EU member states to integrate the energy system, coordinate planning and investments, and build the institutions and instruments necessary to overcome barriers to completing the single energy market.” Read the IMF Staff Background Note on EU Energy Market Integration. Read the Speech F&D MAGAZINE Yuval Noah Harari on Humankind’s Comparative Advantage (Credit: Sonia Pulido) Unlike the fictional Homo economicus, the hyperrational model used to explain our financial choices, the decisions of Homo sapiens have always been highly influenced by social settings and the emotional drives prompted by stories. A seeker at an early age, Yuval Noah Harari has written about human evolution as a philosopher and historian. Sapiens: A Brief History of Humankind, published in 2014, became an international phenomenon and is available in nearly 40 languages worldwide. His latest book, Nexus: A Brief History of Information Networks from the Stone Age to AI, looks at the evolution of human communication networks and how artificial intelligence could ultimately beat us at our own game. Harari is currently a lecturer in history at the Hebrew University of Jerusalem and a distinguished research fellow at Cambridge University’s Centre for the Study of Existential Risk. He spoke to F&D’s Bruce Edwards about storytelling, trust, and AI. Read the Interview The International Economic Association’s Women in Leadership in Economics Initiative (IEA-WE) connects women economists worldwide and helps showcase their important empirical research, especially in developing countries. IMF Podcasts has partnered with the IEA-WE to produce a special series featuring the economists behind the invaluable local research that informs policymakers in places often overlooked. This episode of Driving Change features Colombian economics professor Marcela Eslava, whose research looks to fix Latin America’s dysfunctional social security network. Weekly Roundup IMF PUBLICATIONS Annual Report on Exchange Arrangements and Exchange Restrictions The AREAER provides a comprehensive description of restrictions on international trade and payments, capital controls, and measures implemented in the financial sector, including prudential measures that may affect capital flows for all IMF members. It also provides information on the classification of their exchange rate arrangements, operation of foreign exchange markets, restrictions on current international payments and transfers and multiple currency practices subject to the IMF’s jurisdiction in accordance with Article VIII. Descriptions of individual member countries are available at AREAER Online. STAFF PAPER External Knowledge, R&D, and Innovation: Mapping the Market for Technology Across European Industries A well-functioning market for technology, or ideas, is an important determinant for the type, scope, and distribution of innovation activities. In this new IMF staff paper, the authors use a panel of 20 industries across 24 European countries to study the key determinants driving the market for technology, and explore whether the expenditures on external knowledge depends on the sectoral pattern of innovation and an industry’s distance to the global technological frontier. Their findings suggest tailoring innovation policies to help expand both the size of the market for technology and the use of these markets in specific industries. Thank you 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

Stay connected with the International Monetary Fund: