In today’s edition we focus on a new type of capitalism, the need for urgent action on debt, social spending in the Middle East and Central Asia, infrastructure spending in Europe, monetary policy and inequality, technology as a double-edged sword, and much more.
But first, an introduction. My name is Adam Behsudi, and I’ll be your host this week. I recently joined the IMF Weekend Read editorial team where I’ll be helping Rahim provide you a glimpse into the happenings of the Fund and beyond. I’m looking forward to getting to know you. Don’t hesitate to contact me via my email at the end of the newsletter. And on that note, let’s dive right in.
MACRO DECISIONS, MICRO CONSEQUENCES
In a wide-ranging interview Managing Director Kristalina Georgieva commented on her management style, why she’s an optimist in the face of a U.S.-China rift and how the COVID-19 crisis is an opportunity to pursue a more inclusive, fair and green form of capitalism.
Life behind the Iron Curtain, her work at the World Bank and service as the European Commissioner for Crisis Response and Humanitarian Aid has led an overarching philosophy that “macro decisions have micro consequences,” she said.
A resilient, equitable recovery: MD Georgieva further delved in to the IMF’s efforts to encourage a resilient recovery in an interview with The Banker. The magazine also featured a view of the crisis response from the entire team of Deputy Managing Directors.
MD Georgieva also shared her views this week on how to counter a growing wealth gap in the recovery from the crisis. “Put more money in the hands of women,” she said. Watch the full event with Barron’s Magazine here. The MD also describes in an op-ed in The Guardian newspaper how the crisis will widen the divide between rich and poor unless necessary actions are taken.
Finally, in an interview this week with David Rubinstein, the MD speaks more about how her personal experiences are shaping her approach at the Fund. Watch the entire interview here.
CALLING FOR URGENT ACTION ON DEBT
Reform of the international debt architecture is urgently needed as the COVID-19 crisis has pushed debt levels to new heights. The Fund released a new Policy Paper describing developments, challenges and reform options for resolving sovereign debt involving private-sector creditors. A related IMF Blog authored by Kristalina Georgieva, Ceyla Pazarbasioglu and Rhoda Weeks-Brown describes what specific points of the current debt architecture need to be addressed.
“The world is at a critical juncture and should not sit idle waiting for a crisis,” the authors said. “The alternative could be large-scale defaults that would severely damage economies and set back their recoveries for years.”
The warnings on debt were reiterated by senior IMF officials at a conference this week along with a call to extend the G-20 Debt Service Suspension Initiative (DSSI) for another 12 months to help the most vulnerable countries. “The DSSI extension should create incentives for recipient countries with unsustainable debt to tackle it promptly,” First Deputy Managing Director Geoffrey Okamoto said in remarks at the event hosted by the Peterson Institute for International Economics.
Appealing to world leaders: Addressing debt was a key part of MD Georgieva’s message at a meeting of heads of state and government focused on financing development during the COVID-19 crisis. In her remarks at the meeting convened by the United Nations, Canada and Jamaica, the MD made the case for extending the G-20’s Debt Service Suspension Initiative.
“This would provide up to $12 billion of much needed debt service relief to participating countries,” she said.
BOOSTING SOCIAL OUTCOMES IN THE MIDDLE EAST AND CENTRAL ASIA
Higher and more efficient social spending can significantly improve socioeconomic outcomes in the Middle East and Central Asia, according to a new IMF Departmental Paper on the subject. Education, health and poverty indicators have improved in the region during the past two decades, but progress has slowed. The paper looks at the level of social spending across the region, how countries fare on socioeconomic outcomes, how social spending impacts these outcomes, and the efficiency of social spending in the region.
This charticle breaks down the paper’s findings through its six most-important charts. Deputy Managing Direct Antoinette Sayeh and other IMF officials discuss the findings during a virtual panel. Watch it here.
MD Georgieva and IMF Chief Economist Gita Gopinath took part in a separate virtual event hosted by the IMF and Saudi G-20 Presidency where discussion focused on how to increase access to opportunities in Arab countries. Watch it here.
SUPPORTING EUROPE’S RECOVERY THROUGH WISE PUBLIC INVESTMENT
The COVID-19 crisis could erase almost three years of economic progress in Central, Eastern, and Southeastern Europe. If done right, infrastructure investment could yield significant dividends in the region, according to a new Departmental Paper.
The study finds that for each percent of GDP spent on infrastructure, output could rise by ½ to ¾ percent in the short run and by 2 to 2½ percent in the long run. Don’t have time to read the full paper? Then read this 700 word Country Focus article that gives the highlights.
MD Georgieva joined EU Energy Commissioner Kadri Simson, Estonian President Kersti Kaljulaid and the Atlantic Council’s Fred Kempe to discuss opportunities for infrastructure investment in Central, Eastern, and Southeastern Europe. Watch the event here.
MONETARY POLICY FOR ALL
Fiscal measures and structural reforms have been long known to aid in social mobility, whether through cash transfer schemes, spending on health and education, or labor market reforms. But what role can the central bank play? An IMF Blog explores the topic.
The blog describes new IMF staff research in a recently published Working Paper. The analysis adds to growing evidence that monetary policy can be even more effective when central bankers consider income inequality when setting interest rates, particularly if the bank follows typical interest rate rules. The results bolster the case for more theoretical and empirical work on the issue.
DOES TECHNOLOGY BOOST RESILIENCE OR INCREASE INEQUALITY?
In our latest issue of F&D, Andreas Adriano explore two sides of technology. Is it a friend or a foe in the midst of a pandemic?
The COVID-19 global lockdown triggered an unprecedented experiment. Millions of professionals had to do from home what they used to do in offices. TV anchors hosted from their living rooms; IMF officials working remotely approved more than 70 emergency loans in three months; traders continued to buy and sell stocks from mountain cabins. Companies got over the fear that dispersed teams would be less productive, and many—including Silicon Valley giants—told employees not to worry about returning to the office. Teleworking was promoted to viable long-term solution from temporary fix or precarious freelancer arrangement.
Advances in technology made this global randomized trial possible. Imagine a Webex meeting over a dial-up modem. Laptops, tablets, and smartphones connected to high-speed internet connected to cloud services have kept the world going. Technology has been a resilience factor for the global economy. But for those who can’t afford it or earn a living through it, technology accentuates exclusion and inequality. Read more here. Interested in the PDF? Click here.
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IMF MACRO-FINANCIAL RESEARCH CONFERENCE
Earlier this month, we hosted a wide-ranging conference on macro-financial linkages, including sessions on macroprudential policies, financial frictions, political economy, financial intermediation, monetary policy, credit market competition, and technology in lending.
To dig deeper into these issues, we lined up key experts from not only across the IMF, but also the Federal Reserve, Bank of Canada, Swiss National Bank, Inter-American Development Bank, the World Bank, the University of Maryland, University of North Carolina Chapel Hill, Duke University, Harvard University, University of Virginia, University of Texas Austin, Princeton University, University of Pennsylvania, Ohio State University, Georgetown University, Northwestern University, and Johns Hopkins University.
The conference concluded with a panel discussion on macro-financial policy considerations in the time of COVID-19 led by IMF Chief Economist Gita Gopinath. Click here to view the full program, which includes hyperlinks to the video sessions, conference papers and slides used during the conference.
“To help members cope with this once-in-a-century pandemic, IMF lending programs are adapting—through innovation and increased flexibility—as countries move from the initial containment phase, to stabilization, and eventually to recovery,” write Robert Gregory, Huidan Lin, and Martin Mühleisen in a recent blog.
We also just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board.
To date, 76 countries have been approved for emergency financing, totaling almost US$31 billion. Looking for our Q&A about the IMF’s response to COVID-19? Click here. We are also continually producing a special series of notes—more than 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more.
📅 Our 2020 Annual Meetings take place October 12-16, for which we produce a special daily briefing that guides you through the week—pointing to all of the key publications, live events and more. If you’d like to receive this special series of updates, click here, press send and we’ll add you to the list.
Thank you again very much for your interest in the Weekend Read. We really appreciate your time. If you have any questions, comments or feedback of any kind, please do write me a note.