IMF Weekend Read

 

Dear MARIA,   In today's edition, we highlight: Sovereign wealth funds and the need for collective governance  How AI is reshaping finance—and financial crises  Africa’s potential growth gains from AI SOVEREIGN WEALTH FUNDS  Collective Action Can Improve Governance  Sovereign wealth funds now manage more than $16 trillion in assets, up from about $3 trillion in 2008. They are among the most powerful players in global finance, yet “their massive and complex footprint could pose critical vulnerabilities,” as Yan Liu, the director of the IMF’s Legal Department, explains in a new blog.     Robust legal frameworks are essential to ensure these funds best serve the people of their countries. These include clear mandates, strong governance, and ensuring that these funds do not become parallel fiscal authorities.     Leaders of 26 funds developed a set of guidelines and practices, the Santiago Principles, to address such concerns in 2008. However, funds have grown significantly in size, complexity, and diversity since then. To apply the Santiago Principles meaningfully in today’s transformed investment landscape requires the renewed collective engagement of all stakeholders.  Read the blog FINANCIAL STABILITY AI Is Reshaping Finance. It Could Also Reshape Financial Crises  As artificial intelligence becomes embedded in trading, lending, market infrastructure, and supervision, central banks face new challenges: faster-moving shocks, greater concentration risks, and more sophisticated cyber threats.     In a new blog, Tobias Adrian, the director of the IMF’s Money and Capital Markets Department, explores how policymakers can stay ahead of the curve through stronger oversight, better data, and closer international cooperation.     “AI is now a financial‑stability issue that cuts across markets, institutions, financial infrastructures, and supervision,” Adrian writes.     “In an AI‑enabled financial system, stability will depend less on any single model and more on the institutions, incentives, and safeguards that govern their use.”  Read the blog SUB-SAHARAN AFRICA AI Can Power Growth, But Countries Must Prepare   With the right foundations in place, artificial intelligence could boost sub-Saharan Africa’s GDP by about 4 percent over the next decade—equivalent to nearly half a percentage point of additional growth each year. At current levels of preparedness, however, that figure would be just 0.2 percent.    In a new Country Focus blog based on a recent paper, Martin Schindler, Nikola Spatafora, and Andrew Tiffin argue that AI’s greatest promise in Africa lies not in replacing workers but in raising productivity across the economy. By helping farmers improve yields, enabling small businesses to manage inventory more effectively, and supporting teachers, healthcare workers, and tax administrations, AI could help address some of the region’s most pressing development challenges.    “The question for Africa is whether it rides the wave or gets left behind,” the authors write. Realizing AI’s potential will require reliable electricity, affordable internet access, stronger digital skills, and trusted rules that encourage adoption while managing risks. Without these foundations, the region risks falling further behind as other economies move ahead.  Read the Country Focus MIDDLE EAST AND NORTH AFRICA  Trade, Fragmentation, Technology  Jihad Azour, the IMF’s Middle East director, Nadia Fettah Alaoui, Morocco’s finance minister, and the former Chilean finance minister Andrés Velasco were among around 30 speakers to debate global trade, geoeconomic fragmentation, and technological transformation at a two-day research conference in Morocco. Watch all the sessions here PEOPLE IN ECONOMICS Şebnem Kalemli-Özcan: Micro Maestro  Growing up in Türkiye in the 1980s, Şebnem Kalemli-Özcan was exposed to some unusual dinner table conversations. Her father, a prominent surgeon, was serving as health minister. One evening, he recounted how politically connected domestic pharmaceutical companies, fearing competition, had blocked his effort to bring in a European vaccine maker as an investor. That company went to India instead.    Kalemli-Özcan, now a professor of economics at Brown University, tells the story to show how rent seeking—where businesses try to increase revenue by influencing public policy—can impede the flow of capital across borders. “I didn’t understand it then, but later when I was doing my PhD I thought, OK, if there are domestic frictions where some group is earning a rent, that group is going to object to reform,” she says.    Chris Wellisz profiles Brown’s Şebnem Kalemli-Özcan, who mines business-level data to explain global capital flows, in Finance & Development.  Read more 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.  Nicholas Owen Senior Editor | IMF Weekend Read  NOwen@imf.org Stay connected with the International Monetary Fund:       This email was sent to politikimx@gmail.com on behalf of: International Monetary Fund 1900 Pennsylvania Ave NW · Washington, DC · 20431