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celebrate homecoming. https://www.pinterest.com/pin/289145238599552351/ Business Insider urn:uuid:2a44c031-5aad-eaa8-d667-6058c9d5e46c Mon, 13 Oct 2025 21:30:41 +0000 <a href="https://www.pinterest.com/pin/289145238599552351/"><img src="https://i.pinimg.com/236x/ad/0f/ab/ad0fab0c57ddcd6055049c23e1fff361.jpg"></a>For thousands of graduates, fall means making a trip to their alma mater to celebrate homecoming. https://www.pinterest.com/pin/289145238599552350/ Business Insider urn:uuid:b045f63c-6ac3-7ee2-113c-06221289b445 Mon, 13 Oct 2025 21:30:40 +0000 <a href="https://www.pinterest.com/pin/289145238599552350/"><img src="https://i.pinimg.com/236x/32/9c/11/329c11efa4a016523347589f61fd271a.jpg"></a>For thousands of graduates, fall means making a trip to their alma mater to celebrate homecoming. https://www.pinterest.com/pin/289145238599552349/ Business Insider urn:uuid:f00c83eb-e01a-50c1-eb9b-102a62bf06f7 Mon, 13 Oct 2025 21:30:39 +0000 <a href="https://www.pinterest.com/pin/289145238599552349/"><img src="https://i.pinimg.com/236x/56/55/7a/56557a33c67c99d24e4b609edafb9c92.jpg"></a>For thousands of graduates, fall means making a trip to their alma mater to celebrate homecoming. https://www.pinterest.com/pin/289145238599552348/ Business Insider urn:uuid:ced2ee4a-236e-7f69-cae7-a3150afdd180 Mon, 13 Oct 2025 21:30:39 +0000 <a href="https://www.pinterest.com/pin/289145238599552348/"><img src="https://i.pinimg.com/236x/47/f0/18/47f018b6e41a228958130cc908c943cf.jpg"></a>For thousands of graduates, fall means making a trip to their alma mater to celebrate homecoming. https://blogs.imf.org/2021/05/21/a-proposal-to-end-the-covid-19-pandemic/ IMF Blog urn:uuid:5a102f8d-62ad-e8c4-f54c-dddb48e5e13f Fri, 21 May 2021 12:31:57 +0000 By Kristalina Georgieva, Gita Gopinath, and Ruchir Agarwal Български, Español, Русский Many countries have stepped up in the global fight against the pandemic, as have institutions such as the World Health Organization, the World Bank, Gavi (the Global Alliance for Vaccines and Immunization), the African Union, and others. Yet, more than a year into the [...] <p>By <a href="https://www.imf.org/en/About/senior-officials/Bios/kristalina-georgieva">Kristalina Georgieva</a>, <a href="https://blogs.imf.org/bloggers/gita-gopinath/">Gita Gopinath</a>, and <a href="https://blogs.imf.org/bloggers/ruchir-agarwal/">Ruchir Agarwal</a></p> <p><a href="https://www.imf.org/bg/News/Articles/2021/05/21/blog052121-a-proposal-to-end-covid19-pandemic">Български,</a> <a href="https://blog-dialogoafondo.imf.org/?p=15715">Español</a>, <a href="https://www.imf.org/ru/News/Articles/2021/05/21/blog052121-a-proposal-to-end-covid19-pandemic">Русский</a></p> <p>Many countries have stepped up in the global fight against the pandemic, as have institutions such as the World Health Organization, the World Bank, Gavi (the Global Alliance for Vaccines and Immunization), the African Union, and others.<span id="more-33004"></span></p> <p>Yet, more than a year into the COVID-19 crisis, new cases worldwide are higher than ever. Urgent action is needed to arrest the rising human toll and economic strain.</p> <div class="blockquote"> <p><strong>Ending the pandemic is a solvable problem but requires further coordinated global action.</strong></p> </div> <p>As the IMF has warned, economic recoveries are diverging dangerously. The disparities will widen further between wealthy countries that have widespread access to vaccines, diagnostics, and therapeutics, and poorer countries still struggling to inoculate frontline healthcare workers. As of the end of April 2021, less than two percent of Africa’s population had been vaccinated. By contrast, over 40 percent of the population in the United States and over 20 percent in Europe had received at least one dose of the vaccine.</p> <p><a href="https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-1024x947.png"><img class="aligncenter wp-image-33014" src="https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-1024x947.png" alt="" width="676" height="626" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-200x185.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-300x277.png 300w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-400x370.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-600x555.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-768x710.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-800x740.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-1024x947.png 1024w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-1200x1110.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/pandemic-plan-chart-1-1536x1420.png 1536w" sizes="(max-width: 676px) 100vw, 676px" /></a></p> <p>It is well understood that there can be no lasting end to the economic crisis without an end to the health crisis. Pandemic policy is thus economic policy. It is critical for global macroeconomic and financial stability, which makes it of fundamental importance to the IMF and other economic institutions. Ending the pandemic is a solvable problem but requires further coordinated global action.</p> <p>The <a href="https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2021/05/19/A-Proposal-to-End-the-COVID-19-Pandemic-460263"> latest research by IMF staff </a> analyzes multiple dimensions of the fight against the pandemic and proposes realistic targets to bring the pandemic substantially under control everywhere—and the means to achieve them. Building on the work of other agencies, the proposal aims to:</p> <ul> <li>vaccinate at least 40 percent of the population in all countries by the end of 2021 and at least 60 percent by the first half of 2022,</li> <li>track and insure against downside risks, and</li> <li>ensure widespread testing and tracing, maintain adequate stocks of therapeutics, and enforce public health measures in places where vaccine coverage is low.</li> </ul> <p>Importantly, the strategy requires not just commitments but <strong> upfront</strong> financing, <strong>upfront</strong> vaccine donations, and &#8220;<strong>at-risk&#8221;</strong> investment for the world to insure against downside scenarios.</p> <p>The proposal’s total cost of around <strong>$50 billion </strong>would include grants, national government resources, and concessional financing.</p> <p>There is a strong case for grant financing of at least <strong>$35 billion</strong>. The good news is G20 governments have already identified as important to address the $22 billion grant funding gap noted by the <a href="https://www.who.int/initiatives/act-accelerator"> Access to COVID-19 Tools (ACT) Accelerator</a>. This leaves an estimated $13 billion in additional grant contributions needed.</p> <p>The remainder of the overall financing plan—around <strong>$15 billion</strong>—could come from national governments, potentially supported by COVID-19 financing facilities created by multilateral development banks.</p> <p>Saving lives and livelihoods should need no justification, but a faster end to the pandemic could also inject the equivalent of $9 trillion into the global economy by 2025 due to a faster resumption of economic activity. Advanced economies, likely to spend the most in this effort, would see the highest return on public investment in modern history—capturing 40 percent of the cumulative $9 trillion in global GDP gains and roughly $1 trillion in additional tax revenues.</p> <p><strong>Recommendations for action</strong></p> <p>The key proposed steps include:</p> <p><strong><em>Achieving the vaccination targets </em></strong></p> <p>1. <em>Provide additional upfront grants to </em> <a href="https://www.who.int/initiatives/act-accelerator/covax"> <em>COVAX</em> </a> <em> of at least $4 billion</em>. This financing will help finalize orders and activate unused vaccine capacity.</p> <p>2. <em> Ensure free cross-border flows of raw materials and finished</em> vaccines: Such restrictions are jeopardizing access to vaccines for billions of people in the developing world.</p> <p>3. <em>Immediately donate surplus vaccines</em>: We project at least 500 million vaccines courses (equivalent to around 1 billion doses) can be donated in 2021, even if countries give preference to their own populations. Donations, including for delivery costs, should be done through COVAX so vaccines are shared on equitable and public health principles.<a href="https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2.png"><img class="aligncenter wp-image-33016" src="https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2.png" alt="" width="651" height="951" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2-200x292.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2-205x300.png 205w, https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2-400x585.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2-600x877.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/Chart-2-pandemic-plan-chart-2.png 650w" sizes="(max-width: 651px) 100vw, 651px" /></a></p> <p>We project the measures identified in steps 1–3 may be sufficient to achieve the 40 percent vaccination target by the end of 2021 and the 60 percent target by the first half of 2022, if no downside risks materialize.</p> <p><strong><em>Insuring against downside risks</em></strong></p> <p>4. <em> Make at-risk investments to diversify and increase vaccine production capacity by 1 billion doses </em> in early 2022 to handle downside risks in 91 low- and middle-income countries, including from new variants that may require booster shots. [$8 billion]</p> <p>5. <em> Scale up genomic surveillance and systemic supply chain surveillance </em> with concrete contingency plans in place to handle possible mutations or shocks to the supply chain. These plans should be prepared with the participation of multilateral agencies, vaccine developers and manufacturers, and key national governments. [$3 billion]</p> <p><strong> <em>Managing the interim period when vaccine supply is limited</em> </strong></p> <p>6. Ensure widespread <em> testing, sufficient therapeutics, public health measures, and prepare for vaccine deployment </em> . [$30 billion]</p> <p>7. Urgently evaluate and implement (where approved) <em>dose stretching strategies</em> to expand effective supply. [$2 billion]</p> <p>Additional needed measures account for $3 billion. Steps 4–7 are needed to insure against downside risks, and to mitigate the health consequences of the pandemic in the interim period.</p> <p>The proposal complements the work of the G20 High Level Independent Panel, the G7 Pandemic Preparedness Partnership group, and the Report of the Independent Panel for Pandemic Preparedness and Response, which primarily focus on addressing future pandemics. This proposal focuses on what is needed to bring the <em>current</em> pandemic under control. To make it effective, countries need to work together.</p> <p>The world does not have to live through the pain of another record surge of COVID-19 cases. With strong global action now and with very little in terms of financing relative to the outsized benefits, we can durably exit this health crisis.<img class="aligncenter wp-image-33032 " src="https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-840x1024.jpg" alt="" width="709" height="864" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-200x244.jpg 200w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-246x300.jpg 246w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-400x487.jpg 400w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-600x731.jpg 600w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-768x936.jpg 768w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-800x975.jpg 800w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-840x1024.jpg 840w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-1200x1462.jpg 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-1261x1536.jpg 1261w, https://blogs.imf.org/wp-content/uploads/2021/05/Pandemic-Plan-Table-1681x2048.jpg 1681w" sizes="(max-width: 709px) 100vw, 709px" /></p> https://blogs.imf.org/2021/05/20/checking-the-receipts-from-pandemic-related-spending/ IMF Blog urn:uuid:2fdcb57d-ddf6-8d80-2593-47b227408fee Thu, 20 May 2021 14:30:11 +0000 By Chady El Khoury, Jiro Honda, Johan Mathisen, and Etienne Yehoue عربي, 中文, Español, 日本語, Português, Русский Governments around the world are playing a crucial role in providing lifelines to people and firms to help combat the pandemic and its economic fallout. To support the effectiveness of these efforts, it is important that such spending [...] <p>By <a href="https://blogs.imf.org/bloggers/chady-el-khoury/">Chady El Khoury</a>, <a href="https://blogs.imf.org/bloggers/jiro-honda/">Jiro Honda</a>, <a href="https://blogs.imf.org/bloggers/johan-mathisen/">Johan Mathisen</a>, and <a href="https://blogs.imf.org/bloggers/etienne-b-yehoue/">Etienne Yehoue</a></p> <p><a href="https://www.imf.org/ar/News/Articles/2021/05/20/blog-052021-checking-the-receipts-from-pandemic-related-spending"><span dir="RTL" lang="AR-SA">عربي</span></a>, <a href="https://www.imf.org/zh/News/Articles/2021/05/20/blog-052021-checking-the-receipts-from-pandemic-related-spending">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15692">Español,</a> <a href="https://www.imf.org/ja/News/Articles/2021/05/20/blog-052021-checking-the-receipts-from-pandemic-related-spending">日本語</a>, <a href="https://www.imf.org/pt/News/Articles/2021/05/20/blog-052021-checking-the-receipts-from-pandemic-related-spending">Português</a>, <a href="https://www.imf.org/ru/News/Articles/2021/05/20/blog-052021-checking-the-receipts-from-pandemic-related-spending">Русский</a></p> <p>Governments around the world are playing a crucial role in providing lifelines to people and firms to help combat the pandemic and its economic fallout. <span id="more-32995"></span>To support the effectiveness of these efforts, it is important that such spending be subject to adequate <a href="https://blogs.imf.org/2020/07/28/corruption-and-covid-19/"> transparency and accountability</a>.</p> <div class="blockquote"> <p><strong>The IMF presses for better governance through greater transparency.</strong></p> </div> <p>To this end, the IMF has called for ensuring transparency and accountability in pandemic-related spending, so that the money and measures help the people who need it most, using the adage, “<a href="https://blogs.imf.org/2020/04/15/fiscal-policies-to-contain-the-damage-from-covid-19/">spend what you must, but keep the receipts</a>.”</p> <p>The IMF presses for better governance through greater transparency, and has sought specific <a href="https://www.imf.org/en/About/Factsheets/Sheets/2020/04/30/how-imf-covid19-financial-help-is-used"> governance measures</a> for countries receiving IMF financing during the crisis. These include commitments to publish pandemic-related procurement contracts and the beneficial ownership of companies awarded these contracts, as well as COVID-19 spending reports and audit results.</p> <p>The measures are tailored to country circumstances and the severity of corruption risks. In addition, all recipient countries commit to undertake a <a href="https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/21/43/Protecting-IMF-Resources-Safeguards"> Safeguards Assessment</a>—a due diligence exercise that is aimed at ensuring that a country’s central bank is able to provide reliable information and transparently manage the funds that it receives from the IMF.</p> <p>Addressing corruption is a long game. These emergency spending measures are not silver bullets and will only go so far in addressing deeper challenges. Longer-term governance and corruption vulnerabilities will continue to be addressed under the IMF’s broader <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/07/15/Progress-In-Implementing-The-Framework-For-Enhanced-Fund-Engagement-On-Governance-49576"> 2018 Framework for Enhanced Fund Engagement on Governance</a>, with a focus on multi-year IMF lending arrangements, annual health checks of IMF member countries, and capacity development.</p> <p><strong>Are the </strong> <strong>receipts coming in?</strong></p> <p>A year into the emergency response, <a href="https://www.imf.org/-/media/Files/Topics/governance-and-anti-corruption/implementation-status-of-governance-commitments-on-crisis-related-spending-may-2021.ashx">information is becoming available</a> on the progress in implementing these governance measures in pandemic-related spending.</p> <ul> <li>On <strong>publication of contract</strong> information, most of the commitments have or are in the process of being met, including, for example, in the Dominican Republic, Guinea, Nepal, and Ukraine. In some countries, capacity constraints contribute to limited progress. In these cases, the IMF is providing capacity development to support implementation.</li> <li>Collecting and publishing the <strong>beneficial ownership </strong>of contracting companies is a measure that aims to deter corruption, including by facilitating the detection of potential conflicts-of-interest involving public officials. It requires bidding companies to provide the names of the people with effective control over a company, that is the “beneficial owners.” This information is provided to the procurement agency, which must publish it.</li> </ul> <p>Implementation of this innovative practice has proven challenging in some cases, with only half of the countries (including Benin, Ecuador, Jordan, Malawi, and Moldova) having implemented this commitment or made substantial progress toward it.</p> <p>However, such commitments made in the context of IMF financing during the pandemic have helped spur some countries, such as Kenya and the Kyrgyz Republic, to adopt this reform on a permanent basis. That is, beyond just pandemic-related spending.</p> <ul> <li>On <strong>audits of emergency spending</strong>, the deadline for conducting <em>ex-post</em> audits is typically set at 3-12 months after the end of the fiscal year. Accordingly, it is too early to assess implementation—most audits are in preparation based on existing systems.</li> </ul> <p>However, some countries, such as Jamaica, Honduras, Maldives, and Sierra Leone have already taken early action by conducting risk-based, real-time audits. Where needed, the IMF is also stepping up its capacity development to help supreme audit institutions fulfill their responsibility, while also supporting efforts to ensure that such information is easily retrievable.</p> <ul> <li>On <strong>reporting of pandemic-related spending</strong>, most countries are, or will shortly begin, publicly reporting on execution of this spending.</li> <li><strong>Safeguard assessments</strong> are being undertaken rapidly, with the pace of these assessments doubling after the pandemic’s onset.</li> </ul> <p><strong>Tackling deeper challenges </strong></p> <p>Beyond these measures focused on accountability and transparency in the crisis response, broader governance and anti-corruption reforms are also progressing in the context of multi-year IMF financing arrangements.</p> <p>Such reforms cover multiple areas, including fiscal governance in countries such as <a href="https://www.imf.org/en/Publications/CR/Issues/2020/12/23/Ecuador-First-Review-Under-the-Extended-Arrangement-Under-the-Extended-Fund-Facility-and-49980"> Ecuador</a>, <a href="https://www.imf.org/en/News/Articles/2021/04/01/pr2196-gambia-imf-staff-completes-virtual-mission-for-the-second-review-of-the-ecf"> The Gambia</a>, <a href="https://www.imf.org/en/News/Articles/2021/03/30/pr2193-jordan-imf-staff-and-jordan-reach-staff-level-agreement-on-the-second-review-under-eff"> Jordan</a>, <a href="https://www.imf.org/en/Publications/CR/Issues/2021/01/07/Liberia-First-and-Second-Reviews-Under-the-Extended-Credit-Facility-Arrangement-Request-for-49995"> Liberia,</a> <a href="https://www.imf.org/en/Publications/CR/Issues/2021/01/04/Rwanda-Third-Review-Under-the-Policy-Coordination-Instrument-Press-Release-Staff-Report-and-49984">Rwanda</a>, and <a href="https://www.imf.org/en/News/Articles/2021/04/29/pr21117-senegal-imf-staff-reach-agreement-on-3rd-review-pci-and-new-18-month-financing-arrangement"> Senegal</a>; anti-corruption and anti-money laundering frameworks in <a href="https://www.imf.org/en/Publications/CR/Issues/2021/01/19/Angola-Fourth-Review-Under-the-Extended-Arrangement-Under-the-Extended-Fund-Facility-and-50024"> Angola,</a> <a href="https://www.imf.org/en/Publications/CR/Issues/2020/12/16/Republic-of-Armenia-Third-Review-under-the-Stand-By-Arrangement-and-Modification-of-49961">Armenia</a>, <a href="https://www.imf.org/en/Countries/COG">Republic of Congo</a>, <a href="https://www.imf.org/en/News/Articles/2021/02/15/pr2140-imf-and-kenyan-authorities-reach-staff-level-agreement"> Kenya</a>, and <a href="https://www.imf.org/en/Publications/CR/Issues/2021/02/26/Tunisia-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-50128"> Tunisia</a>; and financial sector oversight and central bank governance in <a href="https://www.imf.org/en/Publications/CR/Issues/2021/01/07/Liberia-First-and-Second-Reviews-Under-the-Extended-Credit-Facility-Arrangement-Request-for-49995"> Liberia</a> and <a href="https://www.imf.org/en/Publications/WP/Issues/2021/04/23/Assessing-the-Macroeconomic-Impact-of-Structural-Reforms-in-Ukraine-50345"> Ukraine</a>, among others.</p> <p><strong>Beyond IMF financing</strong></p> <p>Transparency and accountability in the crisis response are important for all countries, regardless of their income level, and such measures are of course commonplace in many countries beyond those receiving IMF financing.</p> <p>These efforts vary. For example, some countries publish comprehensive spending information on dedicated transparency portals as in Brazil, Colombia, Costa Rica, France, and Peru. Others, such as South Korea, conduct frequent external audits to verify pandemic-related spending. Some develop clear guidelines for emergency procurement, as in Spain, and/or detect conflicts-of-interest by analyzing beneficial ownership data and financial disclosures of senior public officials, as in Romania.</p> <p>Through the IMF’s regular “Article IV” health check of the economies of its members, and through regular policy dialogue, IMF staff continue to discuss transparency and accountability in pandemic-related spending, such as in <a href="https://www.imf.org/en/Publications/CR/Issues/2021/02/05/Republic-of-Poland-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-50066"> Poland</a>, the <a href="https://www.imf.org/en/Publications/CR/Issues/2020/12/18/United-Kingdom-2020-Article-IV-Consultation-Press-Release-Staff-Report-Staff-Supplement-and-49971"> United Kingdom</a>, and the <a href="https://www.imf.org/en/Publications/CR/Issues/2020/08/07/United-States-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-49650"> United States</a>, and, more generally, in fiscal, monetary, and financial sector measures.</p> <p><strong>Building on progress</strong></p> <p>Sustained country engagement on governance and anti-corruption will be necessary to support effective implementation of reforms undertaken during the pandemic and beyond. A key component is implementing the IMF’s <a href="https://www.imf.org/en/Publications/Policy-Papers/Issues/2020/07/15/Progress-In-Implementing-The-Framework-For-Enhanced-Fund-Engagement-On-Governance-49576"> 2018 Framework</a>—which remains a priority for the IMF and goes beyond anti-corruption to address fiscal governance, financial sector oversight, central bank governance, market regulation, rule of law, and anti-money laundering frameworks. As the critical capacity to implement governance measures varies across countries and by type of measure, IMF staff will also continue to provide tailored capacity development on these issues through channels such as technical assistance, training, and webinars.</p> <p>The IMF will take stock of progress in implementing the 2018 framework in mid-2022, with a view to assessing how it can continue to support member countries in strengthening governance.</p> <p>Efforts to enhance governance will depend even more crucially on high-level political ownership of reforms, international cooperation, and a joint effort with civil society and the private sector, among other stakeholders. Progress also requires sustained implementation of reforms over an extended period. Such progress is not easy, but it is nonetheless achievable—and it is essential for fostering stronger and more inclusive economic growth.</p> <p>&nbsp;</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=46"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=46"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/05/13/how-strengthening-standards-for-data-and-disclosure-can-make-for-a-greener-future/ IMF Blog urn:uuid:f5754d1f-fce9-142a-cf10-fb5485b910ed Thu, 13 May 2021 14:00:10 +0000 By Caio Ferreira, Fabio Natalucci, Ranjit Singh, and Felix Suntheim Imagine you plan to invest your savings and are looking for a firm or sector with a sustainable business model or a project that can make a real difference in the transition to a low-carbon economy. Where do you get reliable information to assess and [...] <p>By <a href="https://blogs.imf.org/bloggers/caio-ferreira/">Caio Ferreira</a>, <a href="https://blogs.imf.org/bloggers/fabio-m-natalucci/">Fabio Natalucci</a>, <a href="https://blogs.imf.org/bloggers/ranjit-singh/">Ranjit Singh</a>, and <a href="https://blogs.imf.org/bloggers/felix-suntheim/">Felix Suntheim</a></p> <p>Imagine you plan to invest your savings and are looking for a firm or sector with a sustainable business model or a project that can make a real difference in the transition to a low-carbon economy.<span id="more-32942"></span> Where do you get reliable information to assess and compare projects from different companies?</p> <div class="blockquote"> <p><strong>Data gaps make it difficult to assess firms’ exposure to climate risk.</strong></p> </div> <p>To give investors access to decision-useful information to effectively price and manage climate risks, there is an urgent need to strengthen the “climate information architecture.” There are three building blocks needed to support it: (i) high-quality, reliable, and comparable data, (ii) a harmonized and consistent set of climate disclosure standards, and (iii) a broadly agreed upon global taxonomy.</p> <p><strong>High-quality, reliable, and comparable data</strong></p> <p>Currently, investors and policymakers face a lack of forward-looking, granular, and verifiable data—especially on firms’ efforts to move to sustainable business models (e.g., by reducing their greenhouse gas emissions). While a growing number of firms set emission reduction targets for themselves, the vast majority still does not provide this information, as shown in the chart below. Data gaps are particularly large for small and medium enterprises and for firms in emerging markets. These gaps make it difficult to assess firms’ exposure to climate risk and determine the impact of their investments on nonfinancial objectives, such as combating climate change.</p> <p><strong> Harmonized and consistent set of climate disclosure standards </strong></p> <p>One way to close these data gaps is through more and better disclosure of climate information by households, firms, and financial institutions. However, while firms are accustomed to publishing financial statements, “sustainability reporting” of climate-change risks and opportunities—in line, for instance, with the recommendations of the <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.fsb-tcfd.org%2F&amp;data=04%7C01%7CMTurner%40imf.org%7C6c4bad8ec47b440c05f208d914682c2d%7C8085fa43302e45bdb171a6648c3b6be7%7C0%7C0%7C637563259916901800%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=FNjYtrghYcdwC8zr5C4TExDtS2ih1d8p45iuKuE7Hmk%3D&amp;reserved=0"> Task Force on Climate-related Financial Disclosures</a>—is still in its infancy, and uptake is low, especially for smaller firms.</p> <p>Moreover, with more than 200 frameworks, standards, and other forms of guidance on sustainability reporting and climate related disclosures across 40 countries, part of the problem is the multitude of existing frameworks currently used by firms and financial institutions, which undermines consistency and comparability. For example, some corporates may be asked to report according to different frameworks in different countries, making it difficult for investors to assess climate risks faced by such firms.</p> <p><img class=" wp-image-32943 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01.png" alt="" width="712" height="837" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-200x235.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-255x300.png 255w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-400x470.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-600x706.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-768x903.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-800x941.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-871x1024.png 871w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-1200x1411.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-1306x1536.png 1306w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01-1741x2048.png 1741w, https://blogs.imf.org/wp-content/uploads/2021/05/disparity-of-disclosure-alt-01.png 2721w" sizes="(max-width: 712px) 100vw, 712px" /></p> <p><strong>Broadly agreed-upon global taxonomy </strong></p> <p>Taxonomies—such as the recently published <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Fec.europa.eu%2Finfo%2Flaw%2Fsustainable-finance-taxonomy-regulation-eu-2020-852_en&amp;data=04%7C01%7CMTurner%40imf.org%7C6c4bad8ec47b440c05f208d914682c2d%7C8085fa43302e45bdb171a6648c3b6be7%7C0%7C0%7C637563259916911789%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=Oot3A1F65%2FQS6YRV905awefOF0nxoCwbOPMAh7l1yJU%3D&amp;reserved=0"> EU taxonomy</a> are classifications of assets or activities that aim to improve market clarity on the extent to which investments support climate change adaptation and mitigation efforts. A well-designed and globally agreed taxonomy plays an important role in fostering sustainable finance markets, by helping communication with investors and facilitating the flow of capital towards climate-sustainable investments</p> <p>However, by focusing excessively on fully sustainable investments, taxonomies can fail to recognize efforts by firms and countries to <em>transition</em> to a climate-sustainable business model, hindering the flow of capital to such firms. This is especially problematic in emerging markets where investments for transition purposes are needed the most and can have the largest benefits.</p> <p><strong>The way forward</strong></p> <p>Standardized and decision-useful information will be critical to help meet the large financing and investment needs associated with climate change mitigation and adaptation. Work to bridge the data gaps by the <a href="https://nam10.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.ngfs.net%2Fen&amp;data=04%7C01%7CMTurner%40imf.org%7C6c4bad8ec47b440c05f208d914682c2d%7C8085fa43302e45bdb171a6648c3b6be7%7C0%7C0%7C637563259916911789%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&amp;sdata=VjYXiz6xbFhD2Bvv1KgLGk6E2J3iQ85GwIGQWoXNmT0%3D&amp;reserved=0"> Network for Greening the Financial System</a> to produce a detailed list of currently missing data items is an important step toward better data. For its part, the IMF has created a <a href="https://climatedata.imf.org/"> Climate Change Indicators Dashboard</a> that brings together climate-related data needed for macroeconomic and financial policy analysis. Technological solutions, such as artificial intelligence and open-source data platforms and tools, can also be used for data collection and distribution.</p> <p>As earlier IMF <a href="https://www.imf.org/en/Publications/GFSR/Issues/2020/10/13/global-financial-stability-report-october-2020#Chapter5">work</a> has argued, convergence toward more-standardized sustainability reporting should now be a priority. To be useful in decision making, the information that gets reported should, first off, allow for investors to assess the value and the risks of firms and projects. Second, it should enable the monitoring of financial stability risks from climate change—something the IMF has also previously <a href="https://www.imf.org/en/Publications/GFSR/Issues/2020/04/14/global-financial-stability-report-april-2020#Chapter5">examined</a>. And finally, the information should allow investors, policymakers, customers and other stakeholders to understand how firms will transition toward a more climate-sustainable business model.</p> <p>Consolidating the multiple existing reporting initiatives is challenging. The International Financial Reporting Standards Foundation’s initiative to develop global sustainability reporting standards will help to promote transparency and global comparability. Aligning financial and non-financial reporting and providing assurance by auditors would also facilitate decision making, improving market confidence. Moving quickly in this direction is imperative, and building and improving on existing frameworks should be encouraged.</p> <p>While steps towards globally agreed-upon taxonomies are less advanced than those on disclosure and data, efforts by the EU and others are notable. However, taxonomies must be flexible enough to recognize the complex efforts taken by companies to transition to a climate sustainable business model, especially in emerging markets and developing economies where investments are needed the most.</p> <p><strong>Challenges remain</strong></p> <p>To make more progress, a consistent, timely, and uniform implementation of internationally agreed sustainability reporting standards is necessary. Here, strong international commitment will be needed, while taking into account regional, institutional, and legal specificities, and while allowing individual jurisdictions to introduce additional requirements, if necessary. Moreover, implementation challenges for emerging markets—and for many small and medium enterprises—will have to be considered carefully.</p> <p>Looking further ahead, the scope of the standards will need to be widened to address broader sustainability dimensions, for example environmental issues such as the loss of biodiversity, as well as social and governance issues.</p> <p>&nbsp;</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=45"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=45"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/05/12/the-policymakers-trilemma/ IMF Blog urn:uuid:542e1ae2-9637-31e0-7afa-10e2f761a5a8 Wed, 12 May 2021 14:37:31 +0000 By Abebe Aemro Selassie and Andrew Tiffin 中文, Español, Français, 日本語,  Português, Русский Imagine you’re a policymaker in sub-Saharan Africa. You’ve been charged with lifting your country out of the worst health crisis in living memory, and nobody around you knows when it will end—the second wave that gripped the region earlier in the year has eased, [...] <p>By <a href="https://blogs.imf.org/bloggers/abebe-aemro-selassie/">Abebe Aemro Selassie</a> and <a href="https://blogs.imf.org/bloggers/andrew-tiffin/">Andrew Tiffin</a></p> <p><a href="https://www.imf.org/zh/News/Articles/2021/05/12/blog-the-policymakers-trilemma">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15678">Español</a>, <a href="https://www.imf.org/fr/News/Articles/2021/05/12/blog-the-policymakers-trilemma">Français</a>, <a href="https://www.imf.org/ja/News/Articles/2021/05/12/blog-the-policymakers-trilemma">日本語</a>,  <a href="https://www.imf.org/pt/News/Articles/2021/05/12/blog-the-policymakers-trilemma">Português</a>, <a href="https://www.imf.org/ru/News/Articles/2021/05/12/blog-the-policymakers-trilemma">Русский</a></p> <p>Imagine you’re a policymaker in sub-Saharan Africa. You’ve been charged with lifting your country out of the worst health crisis in living memory, and nobody around you knows when it will end—the second wave that gripped the region earlier in the year has eased, but many countries are nonetheless bracing for further waves as winter approaches.<span id="more-32922"></span></p> <p>One piece of <em>good</em> news is that a global recovery is well underway. Key economies are rebounding sharply, global trade has improved, commodity prices are higher, and investment flows have resumed.</p> <p>The <em>bad</em> news is that, for sub-Saharan Africa, at least, near-term growth prospects are somewhat more subdued. And as long as widespread vaccination remains out of reach, you will face the unenviable task of trying to boost your economy while simultaneously dealing with repeated COVID-19 outbreaks as they arise.</p> <div class="blockquote"> <p><strong>How policymakers navigate this trilemma will have a huge bearing on economic and social outcomes.</strong></p> </div> <p><strong>The three challenges</strong></p> <p>This is the situation facing many finance ministers in sub-Saharan Africa today. And they face three immediate challenges: Firstly, to meet increased spending needs; secondly, to contain a pronounced increase in public debt, <em>and</em> finally, to mobilize more tax revenues.</p> <p>How policymakers navigate this trilemma will have a huge bearing on economic and social outcomes in the coming years.</p> <p>An incredibly difficult balancing act is needed as efforts to address one element will inevitably come at the expense of the other two. Higher spending, for example, will require that the authorities <em>either</em> take on more debt <em>or</em> increase taxes. Or both. On the other hand, efforts to boost tax revenues—although politically and socially challenging—would provide much-needed resources to <em>either</em> increase spending <em>or</em> contain debt. Or both.<img class=" wp-image-32981 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2.png" alt="" width="556" height="604" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-200x217.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-276x300.png 276w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-400x434.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-600x652.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-768x834.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-800x869.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-943x1024.png 943w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2-1200x1303.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-1-2.png 1300w" sizes="(max-width: 556px) 100vw, 556px" /></p> <p><strong>Demand for government spending</strong></p> <p>Even before the coronavirus crisis, and in the context of rapid population growth, sub-Saharan Africa’s development needs were already daunting.</p> <p>In the aftermath of the crisis, the region’s development path has been set back by almost a decade, making those spending needs even more pressing. For example, regionwide employment fell by about 8½ percent in 2020 due to COVID-19. More than 32 million people were thrown into poverty, and disruptions to education have jeopardized the prospects of an entire generation of schoolchildren.</p> <p>Moreover, a large proportion of the region’s most marginalized workers were concentrated in some of its hardest-hit sectors, adding to inequality.</p> <p>In this context, demands for increased social spending, and for investment in health, education, and infrastructure, have all, understandably, intensified. And the pressure is only going to get stronger as by 2030 nearly one in two new entrants into the global labor force will come from sub‑Saharan Africa.</p> <p><strong>Rising concerns about debt</strong></p> <p>While there is variation across countries, public debt in sub-Saharan Africa increased to almost 58 percent of GDP in 2020—the highest level in almost 20 years and a jump of more than 6 percentage points in just one year.</p> <p>While below the peaks of the early 2000s in many cases, it is nonetheless a concern, owing to a steadily increasing interest burden.</p> <p>In 2020, for example, interest payments reached a worrying 20 percent of tax revenue for the region as a whole, and exceeded one-third of revenue in a number of cases, diverting scarce resources from critical social and development needs.<img class="aligncenter wp-image-32931 " src="https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-1024x1019.png" alt="" width="617" height="614" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-66x66.png 66w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-150x150.png 150w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-200x199.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-300x300.png 300w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-400x398.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-600x597.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-768x764.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-800x796.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-1024x1019.png 1024w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-1200x1194.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-afr-fiscal-policy-blog-may-4-chart-2-1536x1529.png 1536w" sizes="(max-width: 617px) 100vw, 617px" /></p> <p><strong>Limited progress in raising tax revenues</strong></p> <p>Increased tax revenue mobilization is usually the main policy lever for bridging the gap between spending pressures and sustainable public debt. And yet, progress on this front has typically been slow. The specific requirements for mobilization vary from country to country—for some, the focus needs to be on streamlining exemptions, for others it could be on increasing the efficiency of existing tax systems.</p> <p>But in almost all cases, raising taxes is politically difficult—more so in current circumstances, as the crisis has left many businesses and households with fewer resources. Indeed, in some countries, many have relied on tax forbearance or delayed tax payments to make it through the year.</p> <p><strong>Striking the right balance</strong></p> <p>Weighing these competing needs has never been easy. And the pandemic has made finding the right mix even more difficult. Nonetheless, inaction is not an option. Every country faces its own set of specific needs and difficult tradeoffs, but each must make its way forward as best it can.</p> <p>The international community can provide invaluable breathing room. The immediate need, of course, is for support in ensuring that each country has swift and affordable access to vaccines. More broadly, however, the international community can strengthen the regional recovery by providing resources to help relax the trilemma, including through grants, concessional financing, the extension of the G20 Debt Service Suspension Initiative, or, in some cases, debt treatment under the Common Framework.</p> <p>But the main effort must come from within sub-Saharan Africa. Bold and transformative reforms are needed now more urgently than ever.</p> <p>To engender a robust post-COVID recovery, policymakers need to look for opportunities to expand what’s possible under the trilemma. On the spending side, for example, greater transparency and governance reforms can lift the efficiency of public spending and ensure that the authorities’ scarce resources are helping people who need it most.</p> <p>On the revenue side, such transparency and targeting are also more likely to entice greater tax compliance. Efforts to improve tax administration, including through the use of new digital technologies, can broaden the tax base. And more generally, authorities should seek ways to raise more revenue in a manner that protects the vulnerable and growth.</p> <p>On debt sustainability, medium-term fiscal frameworks are needed to strike a balance between the required short-term, supportive fiscal stance with medium-term consolidation that will be vital in containing borrowing costs and sustaining confidence, especially where debt is high and financing tight.</p> <p>Complementing these efforts, authorities should accelerate reforms to promote private sector activity and economic diversification, which will help lift potential growth and resilience, and create jobs. We will be publishing soon some analysis on the long-run benefits of measures to promote private investment.</p> <p>In all these areas, through program engagement, through emergency financing, through technical assistance, or simply through policy advice, the IMF stands ready to help.</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=44"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=44"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> <p>&nbsp;</p> https://blogs.imf.org/2021/05/10/how-stock-markets-respond-to-social-unrest/ IMF Blog urn:uuid:c111ed6d-e3f8-800b-8ada-f767e994ae20 Mon, 10 May 2021 14:45:59 +0000 Philip Barrett and Sophia Chen What happens to stock markets when social unrest—such as mass protests and riots—occurs? Are investors scared-off by the disorder? Or are they buoyed by the prospect of positive, popular change in response to unrest? Our chart of the week, drawn from our recent IMF staff working paper, uses a new [...] <p><a href="https://blogs.imf.org/bloggers/philip-barrett/">Philip Barrett</a> and <a href="https://blogs.imf.org/bloggers/sophia-chen/">Sophia Chen</a></p> <p>What happens to stock markets when social unrest—such as mass protests and riots—occurs? Are investors scared-off by the disorder? Or are they buoyed by the prospect of positive, popular change in response to unrest?<span id="more-32898"></span></p> <p>Our chart of the week, drawn from our recent <a href="https://www.imf.org/en/Publications/WP/Issues/2021/03/19/Pricing-Protest-The-Response-of-Financial-Markets-to-Social-Unrest-50146"> IMF staff working paper</a>, uses a new dataset of 156 social unrest events during 2011–20 to shed some light on these questions. It shows that in countries with more open and democratic institutions, social unrest events have a negligible impact on stock market returns (blue line). But in countries with more authoritarian regimes, the effect is large and negative: on average, stock market returns fall by 2 percent within 3 days, and by about 4 percent in the following month (black line).</p> <p>These findings are consistent with real-world examples. For instance, stock markets in France—a country with strong and open institutions—were largely unmoved in the days after the Yellow Vest protests began in late 2018.</p> <p>Of course, differences across countries could occur for many reasons other than political institutions. So, we also check that this relationship holds after accounting for other factors that might be correlated with the degree of institutional authoritarianism, including the severity of unrest and the country’s income level.<img class="aligncenter wp-image-32900 " src="https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-843x1024.png" alt="" width="627" height="762" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-200x243.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-247x300.png 247w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-400x486.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-600x729.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-768x933.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-800x972.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-843x1024.png 843w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-1200x1458.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1-1264x1536.png 1264w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-social-unrest-cotw-may-3-chart-1.png 1300w" sizes="(max-width: 627px) 100vw, 627px" /></p> <p>To dig deeper into what sort of institutions might be important, the paper runs further experiments using the six measures of social and political institutions that form the <a href="https://info.worldbank.org/governance/wgi/"> World Bank Governance Indicators</a>. Of these, two factors play a crucial role in mitigating negative stock market reactions to social unrest events: popular participation in government, and the ability of the government to regulate markets in ways that promote private sector development.</p> <p>What sort of investor behavior might explain these patterns?</p> <p>One clue comes from the volume of shares traded, which increases sharply following a severe unrest event. As more trades occur when investors disagree on the value of an asset, a higher trading volume typically reflects more uncertainty over the outlook. This result suggests that social unrest affects stock market returns through an indirect information channel rather than via direct disruption to economic activity.</p> <p>Together, these results imply that in countries with high standards of governance, social unrest does not lead to more disagreement and uncertainty about future economic performance. This perhaps reflects the ability of more open institutions to reconcile divergent opinions and find compromises.</p> <p>In contrast, this flexibility may be missing in more authoritarian systems. There, institutions may be less able to adapt to social problems, meaning that unrest can lead to rising fears of further uncertainty and deter investors.</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=43"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=43"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/05/06/economies-in-the-financial-spotlight-in-2021/ IMF Blog urn:uuid:ce99b8e8-517e-36b9-a78a-9970da92e092 Thu, 06 May 2021 14:00:03 +0000 By IMFBlog Throughout 2020 and into 2021, the global financial system withstood the effects of the global pandemic and economic lockdowns due to unprecedented policy support. Strong financial systems that are well regulated and well supervised help maintain financial stability. But like a well calibrated engine on a car, maintenance is key. Each year the [...] <p>By IMFBlog</p> <p>Throughout 2020 and into 2021, the <a href="https://www.imf.org/en/Publications/GFSR/Issues/2021/04/06/global-financial-stability-report-april-2021"> global financial system </a> withstood the effects of the global pandemic and economic lockdowns due to unprecedented policy support. <span id="more-32868"></span>Strong financial systems that are well regulated and well supervised help maintain financial stability. But like a well calibrated engine on a car, maintenance is key. Each year the IMF takes a look under the hood of select economies, which helps to unmask vulnerabilities that could present bigger problems down the road.</p> <p>The <a href="https://www.imf.org/external/np/fsap/fssa.aspx"> Financial Sector Assessment Program</a>, or “FSAP” as it’s widely known, helps to assess financial vulnerabilities and make financial systems stronger and better able to withstand adverse events. The IMF considers country-specific features of financial systems and tailors its analysis to the needs of each member participating in the program. Assessments for advanced economies are done by the IMF alone, while those for other economies are typically carried out jointly with the World Bank. The IMF’s Executive Board will soon conduct a periodic review of the FSAP.</p> <p>In 2021, the IMF plans to assess the stability of six financial systems. Two assessments cover economies with large financial systems (United Kingdom, Hong Kong SAR). The remaining four focus on the emerging market (Chile, Philippines, South Africa) and frontier (Georgia) economies. For economies with large, systemically important financial systems it is mandatory to undergo financial stability assessments every five years. For others, assessments are carried out at the request of their governments.</p> <p>The 2021 FSAP assessments include the following:</p> <p><strong>Chile</strong> features very large and deep local markets compared to other economies of similar size and level of development. The assessment will focus on the resiliency of the financial system, which exhibits a high level of interconnectedness between banks, mutual funds, pension funds, and insurance companies, particularly in light of the economic shocks that were experienced in the fourth quarter of 2019 and during the pandemic. It will also examine the effectiveness of banking, insurance, and financial market supervision following the reorganization and consolidation of the regulatory structure, with an emphasis on macroprudential policy coordination, the closing of regulatory gaps, and COVID-related forbearance measures.</p> <p><strong>Hong Kong SAR</strong> is a small, open economy, and a major international financial center. The FSAP will assess the financial sector’s cross-sectoral and cross-border linkages, in view of extensive linkages to mainland China, stretched real estate valuations, and exposure to shifts in global market and domestic risk sentiment. The assessment will review the regulatory and supervisory frameworks for fintech developments, in addition to regular risk and regulatory assessments of banking, securities and insurance markets, as well as a review of crisis management arrangements and macroprudential frameworks. In addition, there will be a detailed assessment of payments and financial market infrastructures.</p> <p><strong>Georgia</strong> is a small, open economy with a moderately-sized financial sector comprised almost entirely of banks. The banking system is relatively concentrated and highly dollarized in both deposits and lending—the latter leading to higher credit risks from unhedged borrowers of banks’ loans in foreign currency in case of currency depreciation. Against this backdrop, the FSAP will focus on banks’ solvency and liquidity risks, and carry out assessments of banking supervisory oversight, macroprudential policy (especially with regards to risks from financial dollarization), and financial safety nets, including bank resolution and deposit insurance. The World Bank will also examine financial sector competition, assess oversight of markets and payments systems, and provide guidance for development of capital markets and access to finance for small and medium enterprises.</p> <p><strong> The Philippines&#8217; </strong>assessment was just concluded in March 2021. The country is now recovering from the impact of COVID-19. Banks dominate the financial system and entered the pandemic with solid capital and liquidity buffers. However, they are closely interconnected with nonfinancial corporations where market analysts forecast significant earning shocks, especially in retail, tourism, transportation, and construction industries. While recovering, the economy is also vulnerable to physical risks from climate change owing to its geographical position. The risk assessment examined bank resilience against COVID-19 shocks and physical risks (typhoon) and their interconnectedness with nonfinancial corporations. The assessment also evaluated bank oversight, macroprudential policy, and safety-net arrangements. The World Bank investigated oversight and developmental issues of insurers, payment systems, capital markets, and credit reporting, as well as climate change and environment risks supervision and deepening markets for green growth.</p> <p><strong>South Africa</strong> is home to Africa’s largest financial sector, with large cross-border banking groups and a well-developed investment fund and insurance sector. The assessment will examine the strength of the financial sector in a difficult environment of subdued growth and large fiscal deficits (exacerbated by a weak financial position of state-owned enterprises and the ongoing health and economic impact of COVID). The importance of capital flows to the financial sector will underpin the “capital-flows-at-risk” analysis, as well as the assessment of systemic liquidity management and macroprudential policy. The assessment will also examine banking, insurance, and securities markets; pension and cyber risk supervision; crisis management and resolution; fintech; financial inclusion; climate risk; and capital markets development.</p> <p><strong>The United Kingdom</strong> is one of the world’s most complex and open financial systems, hosting several globally systemic entities, and a large domestic financial sector. The 2021 FSAP will take place during a challenging macrofinancial period: While UK institutions have proven resilient to the pandemic’s sharp economic contraction, there could be scars that challenge the profitability prospects of the financial system. The United Kingdom’s exit from the European Union will lead to structural changes. And there are new developments—such as the growing share of market-based finance, adoption of new technologies, and the increasing importance of climate change and cyber risks—that deserve attention. The FSAP will examine risks in these areas and assess the adequacy of the oversight framework to safeguard financial stability.</p> <p>&nbsp;</p> <p>Related Links:</p> <p><strong> <a href="https://blogs.imf.org/2020/01/30/countries-in-the-imf-financial-spotlight-in-2020/"> Countries in the IMF Financial Spotlight in 2020</a></strong></p> <p><strong><a href="https://blogs.imf.org/2019/01/16/countries-in-the-imf-financial-spotlight-in-2019/">Countries in the IMF Financial Spotlight in 2019</a></strong></p> <p><strong> <a href="https://blogs.imf.org/2018/01/31/countries-in-the-imf-financial-spotlight-in-2018/"> Countries in the IMF Financial Spotlight in 2018 </a> </strong></p> <p><strong> <a href="https://blogs.imf.org/2017/01/05/countries-in-the-imf-financial-spotlight-in-2017/"> Countries in the IMF Financial Spotlight in 2017</a></strong></p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=42"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=42"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/05/05/us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low/ IMF Blog urn:uuid:816759ce-b521-81ac-e15c-5b947b9071dd Wed, 05 May 2021 14:00:04 +0000 By Serkan Arslanalp and Chima Simpson-Bell عربي, 中文, Español, Français, 日本語 Português, Русский The share of US dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020, according to the IMF’s Currency Composition of Official Foreign Exchange Reserves (COFER) survey. Some analysts say this partly reflects the declining [...] <p>By <a href="https://blogs.imf.org/bloggers/serkan-arslanalp/">Serkan Arslanalp</a> and <a href="https://blogs.imf.org/bloggers/chima-simpson-bell/">Chima Simpson-Bell</a></p> <p><a href="https://www.imf.org/ar/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low"><span dir="RTL" lang="AR-SA">عربي</span></a>, <a href="https://www.imf.org/zh/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15649">Español</a>, <a href="https://www.imf.org/fr/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low">Français</a>, <a href="https://www.imf.org/ja/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low">日本語</a> <a href="https://www.imf.org/pt/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low">Português</a>, <a href="https://www.imf.org/ru/News/Articles/2021/05/05/blog-us-dollar-share-of-global-foreign-exchange-reserves-drops-to-25-year-low">Русский</a></p> <p>The share of US dollar reserves held by central banks fell to 59 percent—its lowest level in 25 years—during the fourth quarter of 2020, according to the IMF’s <a href="http://data.imf.org/cofer"> Currency Composition of Official Foreign Exchange Reserves </a> (COFER) survey.<span id="more-32851"></span> Some analysts say this partly reflects the declining role of the US dollar in the global economy, in the face of competition from other currencies used by central banks for international transactions. If the shifts in central bank reserves are large enough, they can affect currency and bond markets.</p> <p>Our Chart of the Week looks at the recent data release from a longer-term perspective. It shows that the share of US dollar assets in central bank reserves dropped by 12 percentage points—from 71 to 59 percent—since the euro was launched in 1999 (top panel), although with notable fluctuations in between (blue line). Meanwhile, the share of the euro has fluctuated around 20 percent, while the share of other currencies including the Australian dollar, Canadian dollar, and Chinese renminbi climbed to 9 percent in the fourth quarter (green line).<img class="aligncenter wp-image-32852 size-large" src="https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-576x1024.png" alt="" width="576" height="1024" srcset="https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-169x300.png 169w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-200x356.png 200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-400x711.png 400w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-576x1024.png 576w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-600x1067.png 600w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-768x1366.png 768w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-800x1423.png 800w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-864x1536.png 864w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-1152x2048.png 1152w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1-1200x2134.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/05/eng-dollar-reserves-cf-apr-28-chart-1.png 1300w" sizes="(max-width: 576px) 100vw, 576px" /></p> <p>Exchange rate fluctuations can have a major impact on the currency composition of central bank reserve portfolios. Changes in the relative values of different government securities can also have an impact, although this effect would tend to be smaller since major currency bond yields usually move together. During periods of US dollar weakness against major currencies, the US dollar’s share of global reserves generally declines since the US dollar value of reserves denominated in other currencies increases (and vice versa in times of US dollar strength). In turn, US dollar exchange rates can be influenced by several factors, including diverging economic paths between the United States and other economies, differences in monetary and fiscal policies, as well as foreign exchange sales and purchases by central banks.</p> <p>The bottom panel shows that the value of the US dollar against major currencies (black line) has remained broadly unchanged over the past two decades. However, there have been significant fluctuations in the interim, which can explain about 80 percent of the short-term (quarterly) variance in the US dollar’s share of global reserves since 1999. The remaining 20 percent of the short-term variance can be explained mainly by active buying and selling decisions of central banks to support their own currencies.</p> <p>Turning to this past year, once we account for the impact of exchange rate movements (orange line), we see that the US dollar’s share in reserves held broadly steady. However, taking a longer view, the fact that the value of the US dollar has been broadly unchanged, while the US dollar’s share of global reserves has declined, indicates that central banks have indeed been shifting gradually away from the US dollar.</p> <p>Some expect that the US dollar’s share of global reserves will continue to fall as emerging market and developing economy central banks seek further diversification of the currency composition of their reserves. A few countries, such as Russia, have already announced their intention to do so.</p> <p>Despite major structural shifts in the international monetary system over the past six decades, the US dollar remains the <a href="https://www.imf.org/en/Publications/WP/Issues/2020/07/17/Patterns-in-Invoicing-Currency-in-Global-Trade-49574"> dominant international reserve currency</a>. As our Chart of the Week shows, <a href="https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2020/11/17/Reserve-Currencies-in-an-Evolving-International-Monetary-System-49864"> any changes </a> to the US dollar’s status are likely to emerge in the <a href="https://blogs.imf.org/2020/12/16/glaciers-of-global-finance-the-currency-composition-of-central-banks-reserve-holdings/"> long run</a>.</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=41"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=41"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/04/30/covid-19-the-moms-emergency/ IMF Blog urn:uuid:4684fb31-73d6-dd9f-5b4c-2f522d32c79e Fri, 30 Apr 2021 13:30:03 +0000 By Kristalina Georgieva, Stefania Fabrizio, Diego B. P. Gomes, and Marina M. Tavares عربي, 中文, Español, Français, 日本語, Português, Русский A year ago, the world changed. While the pandemic’s effect on workers has varied worldwide, the new reality has left many mothers scrambling. With schools and daycares closed, many were forced to leave their jobs &#91;...&#93; <p>By <a href="https://blogs.imf.org/bloggers/kristalina-georgieva/">Kristalina Georgieva</a>, <a href="https://blogs.imf.org/bloggers/stefania-fabrizio/"> Stefania Fabrizio</a>, <a href="https://blogs.imf.org/bloggers/diego-b-p-gomes/"> Diego B. P. Gomes</a>, and <a href="https://blogs.imf.org/bloggers/marina-m-tavares/"> Marina M. Tavares </a></p> <p><a href="https://www.imf.org/ar/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency"><span dir="RTL" lang="AR-SA">عربي</span></a>, <a href="https://www.imf.org/zh/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15629">Español</a>, <a href="https://www.imf.org/fr/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency">Français</a>, <a href="https://www.imf.org/ja/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency">日本語</a>, <a href="https://www.imf.org/pt/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency">Português</a>, <a href="https://www.imf.org/ru/News/Articles/2021/04/30/blog-043021-COVID-19-The-Moms-Emergency">Русский</a></p> <p>A year ago, the world changed. While the pandemic’s effect on workers has varied worldwide, the new reality has left many mothers scrambling. <span id="more-32806"></span>With schools and daycares closed, many were forced to leave their jobs or cut the hours they worked. New <a href="https://www.imf.org/en/Publications/WP/Issues/2021/03/03/COVID-19-She-Cession-The-Employment-Penalty-of-Taking-Care-of-Young-Children-50117"> IMF estimates </a>confirm the outsized impact on working mothers, and on the economy as a whole. In short, within the world of work, women with young children have been among the biggest casualties of the economic lockdowns.</p> <div class="blockquote"> <p><strong>Mothers of young children have been disproportionately affected by the lockdown.</strong></p> </div> <p>Three countries—the United States, the United Kingdom, and Spain—illustrate the varied impact of the pandemic on workers. These three countries were among the most heavily hit by the virus globally, but it is the United States that saw the most job losses. In comparison, UK workers experienced the largest cut in working hours, while in Spain, workers faced a mix of both job losses and reduced hours.</p> <p><img class=" wp-image-32811 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1.png" alt="" width="676" height="1322" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-153x300.png 153w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-200x391.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-400x782.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-524x1024.png 524w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-600x1173.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-768x1502.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-786x1536.png 786w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-800x1564.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-1047x2048.png 1047w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1-1200x2346.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-1.png 1300w" sizes="(max-width: 676px) 100vw, 676px" /></p> <p>These differences were particularly pronounced in the first months of the crisis, and are partly due to differences in government policies. The United States favored supporting unemployed workers through higher unemployment benefits, and over longer periods, whereas the United Kingdom and Spain opted to use retention schemes to preserve ties between workers and employers.</p> <p><strong>Mothers hit the hardest</strong></p> <p>Workers’ experiences not only differ across countries but also across gender. As shown in <a href="https://www.imf.org/en/Publications/WP/Issues/2021/03/31/Gender-and-Employment-in-the-COVID-19-Recession-Evidence-on-She-cessions-50316"> IMF research</a>, in the United States, women were affected more than men, in the United Kingdom it was the other way around, while in Spain men and women shared similar levels of pain.</p> <p>Despite these differences, all three countries shared one thing in common: mothers of young children have been disproportionately affected by the lockdown and resulting containment measures. School closures and the start of remote learning heaped extra care responsibilities on parents, and particularly on mothers.</p> <p>As a result, many women—<a href="https://www.imf.org/en/Publications/WP/Issues/2019/10/15/Reducing-and-Redistributing-Unpaid-Work-Stronger-Policies-to-Support-Gender-Equality-48688">who were largely shouldering the weight of childcare and housework </a> even before the pandemic—left their jobs or cut the number of hours they worked.</p> <p>Women with younger children have suffered larger job losses and/or drop in hours worked than other women and men in all three countries. In the United States, for example, being a mother of at least one child under 12 years old reduced the likelihood of being employed by 3 percentage points compared to a man in a similar family situation between April and December 2020.<img class=" wp-image-32810 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2.png" alt="" width="676" height="605" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-200x179.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-300x268.png 300w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-400x358.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-600x536.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-768x686.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-800x715.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-1024x915.png 1024w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2-1200x1073.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-covid-mom-blog-apr-14-chart-2.png 1300w" sizes="(max-width: 676px) 100vw, 676px" /></p> <p><strong>Greater gender and income inequalities</strong></p> <p><a href="https://www.imf.org/en/Publications/WP/Issues/2021/03/03/COVID-19-She-Cession-The-Employment-Penalty-of-Taking-Care-of-Young-Children-50117"> Our study</a> analyzes in close detail the labor market in the United States and finds that the burden on mothers with young children accounts for 45 percent of the increase in the total employment gender gap. This burden has also caused an economic loss estimated at almost 0.4 percent of output between April and November 2020.</p> <p>The pandemic may end up aggravating not only gender but also income inequality. As we look deeper, mothers with less than a college degree and mothers of color lost or quit their jobs in larger numbers during the early stages of the pandemic, and they are coming back to work at a much slower pace than other groups of workers.</p> <p><strong>Support for mothers</strong></p> <p>Given the disproportionate impact of lockdowns and containment measures on mothers—especially those with young children, targeted measures are needed to ease their return to work.</p> <ol start="1" type="1"> <li><strong>Financial support:</strong> Supporting mothers who have lost their jobs, and struggle to survive and provide for their families is crucial. This can be done through measures such as tax credits for low-income households with children, extension of unemployment benefits, and childcare assistance.</li> </ol> <ol start="2" type="1"> <li><strong>Childcare and schools:</strong> Governments should also incorporate considerations for school reopening when formulating vaccination priority lists. The availability of childcare is crucial to enable mothers to participate in the labor market. Governments should prioritize the reopening of schools and childcare centers and reduce the likelihood of further school closures. This requires investing in infrastructure and procedures to ensure a safe and sustainable reopening of schools.</li> </ol> <ol start="3" type="1"> <li><strong>Reallocation policies:</strong> Mothers, and women in general, are more likely to occupy jobs that require face-to-face interaction. COVID-19 has disproportionately destroyed such jobs, and some of them won’t return. Therefore, governments should support workers in finding other jobs while minimizing their loss of human capital, through hiring subsidies and training programs, including tech training.</li> </ol> <ol start="4" type="1"> <li><strong>Access to finance: </strong> Increasing access to financial services could greatly help women to start/maintain their businesses. For this, tapping the potential of financial technology to achieve greater financial inclusion is essential, particularly in developing countries. Equal access to digital infrastructure, such as access to mobile and internet coverage—as well as greater financial and digital literacy—can be a game changer for women.</li> </ol> <p>Mothers have played a crucial role during this pandemic, taking care of children, and absorbing many of the costs associated with the containment measures introduced to stop the spread of the virus. The recommendations outlined above are all the more imperative as the global economy still grapples with the recovery from the pandemic. In order to fully recover, the world economy needs to fully reintegrate women into the workforce.</p> <p>&nbsp;</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=40"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=40"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/04/29/achieving-the-sustainable-development-goals-will-require-extraordinary-effort-by-all/ IMF Blog urn:uuid:c7562b72-db22-d1b1-a3c0-8bd67efb8a46 Thu, 29 Apr 2021 13:00:07 +0000 by Abdelhak Senhadji, Dora Benedek, Edward Gemayel, and Alexander Tieman عربي, 中文, Español, Français, 日本語, Português, Русский The pandemic’s impact on the world’s poor has been especially harsh. COVID-19 may have pushed about 100 million people into extreme poverty in 2020 alone, while the UN warns that in some regions poverty could rise to levels not &#91;...&#93; <p>by <a href="https://blogs.imf.org/bloggers/abdelhak-senhadji/">Abdelhak Senhadji</a>, <a href="https://blogs.imf.org/bloggers/dora-benedek/">Dora Benedek</a>, <a href="https://blogs.imf.org/bloggers/edward-gemayel/">Edward Gemayel</a>, and <a href="https://blogs.imf.org/bloggers/alexander-f-tieman/">Alexander Tieman</a></p> <p><a href="https://www.imf.org/ar/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals"><span dir="RTL" lang="AR-SA">عربي</span></a>, <a href="https://www.imf.org/zh/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15594">Español</a>, <a href="https://www.imf.org/fr/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals">Français</a>, <a style="color: #3979a6; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; text-decoration: none; word-spacing: 0px; white-space: normal; box-sizing: border-box; orphans: 2; widows: 2; box-shadow: none !important; transition-property: color, background-color, border-color; transition-duration: 0.2s; transition-timing-function: linear; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px;" href="https://www.imf.org/ja/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals">日本語</a><span style="color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; font-style: normal; font-weight: 400; word-spacing: 0px; float: none; display: inline !important; white-space: normal; orphans: 2; widows: 2; background-color: #ffffff; font-variant-ligatures: normal; font-variant-caps: normal; -webkit-text-stroke-width: 0px; text-decoration-thickness: initial; text-decoration-style: initial; text-decoration-color: initial;">, </span><a href="https://www.imf.org/pt/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals">Português</a>, <a href="https://www.imf.org/ru/News/Articles/2021/04/29/blog-achieving-the-sustainable-development-goals">Русский</a></p> <p>The pandemic’s impact on the world’s poor has been especially harsh. COVID-19 may have pushed about <a href="https://www.imf.org/en/Publications/FM/Issues/2020/09/30/october-2020-fiscal-monitor"> 100 million people into extreme poverty in 2020 alone</a>, while the <a href="https://www.wider.unu.edu/publication/estimates-impact-covid-19-global-poverty"> UN warns </a> that in some regions poverty could rise to levels not seen in 30 years.<span id="more-32784"></span> The current crisis has derailed progress toward basic development goals, as low-income developing countries must now balance urgent spending to protect lives and livelihoods with longer-term investments in health, education, physical infrastructure, and other essential needs.</p> <p>In a <a href="https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2021/04/27/A-Post-Pandemic-Assessment-of-the-Sustainable-Development-Goals-460076"> new study</a>, we propose a framework for developing countries to evaluate policy choices that can raise long-term growth, mobilize more revenue, and attract private investments to help achieve the Sustainable Development Goals. Even with ambitious domestic reforms, most low-income developing countries will not be able to raise the necessary resources to finance these goals. They need decisive and extraordinary support from the international community—including private and official donors and international financial institutions.<img class="aligncenter wp-image-32785 " src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-847x1024.png" alt="" width="609" height="736" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-200x242.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-248x300.png 248w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-400x484.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-600x726.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-768x929.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-800x967.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-847x1024.png 847w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-1200x1451.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1-1270x1536.png 1270w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-1.png 1300w" sizes="(max-width: 609px) 100vw, 609px" /></p> <p><strong>Major setback</strong></p> <p>In 2000, global leaders set out to end poverty and create a path to prosperity and opportunity for all. These objectives were anchored by the Millennium Development Goals and 15 years later by the Sustainable Development Goals set out for 2030. The latter represent a shared blueprint for peace and prosperity, for people and the planet, now and into the future. They require significant investments in both human and physical capital.</p> <p>Until recently, development progressed steadily, albeit unevenly, with measurable success in reducing poverty and child mortality. But even before the pandemic, many countries were not on track to meet the Sustainable Development Goals by 2030. COVID-19 hit the development agenda hard, infecting more than 150 million people and killing over three million. It plunged the world into a severe recession, reversing income convergence trends between low-income developing countries and advanced economies.</p> <p>The IMF has provided emergency financing of $110 billion to 86 countries, including 52 low-income recipients, since the pandemic started. We have committed $280 billion overall, and our planned general SDR allocation of $650 billion will benefit poor countries without adding to their debt burdens. The World Bank and other development partners have also offered support. But this alone is not enough.</p> <p>In our paper, we develop a novel macroeconomic tool to help assess development financing strategies, including the financing of the Sustainable Development Goals. We focus on investment in social development and physical capital in five areas at the core of sustainable and inclusive growth—health, education, roads, electricity, and water and sanitation. These key development areas are the largest outlays in most government budgets.</p> <p>We apply our framework to four countries—Cambodia, Nigeria, Pakistan, and Rwanda. These countries will, on average, need additional annual financing of over 14 percent of GDP to meet the Sustainable Development Goals by 2030, some 2½ percentage points per year above the pre-pandemic level. Put differently, without increasing financing, COVID-19 may have delayed progress toward the Sustainable Development Goals by up to five years in the 4 countries.</p> <p><img class="aligncenter wp-image-32786 " src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-867x1024.png" alt="" width="628" height="741" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-200x236.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-254x300.png 254w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-400x473.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-600x709.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-768x907.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-800x945.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-867x1024.png 867w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2-1200x1418.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-sdg-blog-apr-23-chart-2.png 1300w" sizes="(max-width: 628px) 100vw, 628px" /></p> <p>The setback could be much larger if the pandemic results in permanent economic scarring. Lockdown measures have significantly slowed economic activity, depriving people of income and preventing children from attending school. We estimate that the long-lasting damage to an economy’s human capital, and hence growth potential, could increase the development financing needs by an additional 1.7 percentage points of GDP per year.</p> <p><strong>Meeting the challenge </strong></p> <p>How can countries hope to make meaningful progress toward the Sustainable Development Goals under these new, more difficult circumstances triggered by the pandemic?</p> <p>It will not be easy. Countries will have to find the right balance between financing development and safeguarding debt sustainability, between long-term development objectives and pressing immediate needs, and between investing in people and upgrading infrastructure. They will have to continue attending to the matter at hand—managing the pandemic. At the same time, however, they will also need to pursue a highly ambitious reform agenda that prioritizes the following:</p> <ul> <li><strong><em>Fostering growth, </em></strong> which will start a virtuous circle. It enlarges the pie, resulting in additional resources for development, which in turn further spurs growth. Structural reforms that promote growth—including efforts to enhance macroeconomic stability, institutional quality, transparency, governance, and financial inclusion—are thus essential. Our study highlights how Nigeria and Pakistan’s strong growth enabled them to make significant strides in reducing extreme poverty prior to 2015. Jumpstarting growth, which has since stalled in these populous countries, will be crucial.</li> <li><strong> <em>Strengthening the capacity to collect taxes</em> </strong> is vital to pay for the basic public services that are necessary to achieve key development objectives. Experience shows that increasing the tax-to-GDP ratio by an average of 5 percentage points over the medium term through comprehensive tax policy and administration reforms is an ambitious but achievable objective for many developing countries. Cambodia has done it: in the 20 years leading up to the pandemic, it increased its tax revenue from less than 10 percent of GDP to around 25 percent of GDP.</li> <li><strong><em>Enhancing the efficiency of spending</em></strong>. About half of the spending on public investment in developing countries is wasted. Improving efficiency through better economic management together with enhanced transparency and governance will allow governments to achieve more with less.</li> <li><strong><em>Catalyzing private investment</em></strong>. Strengthening the institutional framework through better governance and a more robust regulatory environment will help catalyze additional private investment. Rwanda, for example, was able to increase private investment in the water and energy sectors from virtually nothing in 2005–09 to over 1½ percent of GDP per year in 2015–17.</li> </ul> <p>Pursued in tandem, these reforms could generate up to half the resources needed to make substantial progress toward the Sustainable Development Goals. But even with such ambitious reform programs, we estimate that development objectives would be delayed by a decade or more in three of our four case study countries if they were to go it alone.</p> <p>This is why it is critical for the international community to step up as well. If development partners gradually increase official development aid from the current 0.3 percent to the UN target of 0.7 percent of Gross National Income, many low-income developing countries may well be in a position to meet their development objectives by 2030 or shortly thereafter. Providing such assistance may be a tall order for policymakers in advanced economies, who are likely more focused right now on domestic challenges. But helping development is a worthy investment with potentially high returns for all. In the words of Joseph Stiglitz, the only true and sustainable prosperity is shared prosperity.</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=39"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=39"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table> https://blogs.imf.org/2021/04/22/understanding-the-rise-in-us-long-term-rates/ IMF Blog urn:uuid:b6d80b7a-94fb-e8d6-3a58-5320823568ac Thu, 22 Apr 2021 13:59:57 +0000 By Tobias Adrian, Rohit Goel, Sheheryar Malik, Fabio Natalucci عربي, 中文, Español, Français, 日本語, Português, Русский The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about 70 basis points since the beginning of the year. This reflects in part &#91;...&#93; <p>By <a href="https://blogs.imf.org/bloggers/tobias-adrian/">Tobias Adrian</a>, <a href="https://blogs.imf.org/bloggers/rohit-goel/">Rohit Goel</a>, <a href="https://blogs.imf.org/bloggers/sheheryar-malik/">Sheheryar Malik</a>, <a href="https://blogs.imf.org/bloggers/fabio-m-natalucci/">Fabio Natalucci</a></p> <p><a href="https://www.imf.org/ar/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates"><span dir="RTL" lang="AR-SA">عربي</span></a>, <a href="https://www.imf.org/zh/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates">中文</a>, <a href="https://blog-dialogoafondo.imf.org/?p=15519">Español</a>, <a href="https://www.imf.org/fr/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates">Français</a>, <a href="https://www.imf.org/ja/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates">日本語</a>, <a href="https://www.imf.org/pt/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates">Português,</a> <a href="https://www.imf.org/ru/News/Articles/2021/04/22/blog-understanding-the-rise-in-long-term-rates">Русский</a></p> <p>The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about <em>70 </em>basis points since the beginning of the year. This reflects in part an improving US economic outlook amid strong fiscal support and the accelerating recovery from the COVID-19 crisis. So an increase would be expected. But other factors like investors’ concerns about the fiscal position and uncertainty about the economic and policy outlook may also be playing a role and help explain the rapid increase early in the year.</p> <p>Because US bonds are the basis for fixed-income pricing, and affect almost any security around the world, a rapid and persistent yield increase could result in a repricing of risk and a broader tightening in financial conditions, triggering turbulence in emerging markets and disrupting the ongoing economic recovery. In this blog, we will focus on the key factors driving the Treasury yield to help policymakers and market participants assess the interest-rate outlook and attendant risks.</p> <div><img class=" wp-image-32736 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1.png" alt="" width="616" height="621" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-66x66.png 66w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-150x150.png 150w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-200x202.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-298x300.png 298w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-400x403.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-600x605.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-768x774.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-800x806.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-1016x1024.png 1016w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1-1200x1209.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-1.png 1300w" sizes="(max-width: 616px) 100vw, 616px" /></div> <div> <div> <p><strong>Dissecting yield moves</strong></p> <p>The yield on a 10-year US Treasury reflects different elements. The <em>real</em> Treasury yield, which is a proxy for expected economic growth, as well as the <em>inflation breakeven rate</em>, a measure of investors’ future inflation expectations. Real yield plus breakeven inflation gives us the <em>nominal</em> rate.</p> <p>Importantly, breakeven rates and real yields represent not only current market expectations of inflation and growth. They also include the compensation investors require for bearing the risks associated with both elements. The <em>inflation risk premium </em>is related to future inflation uncertainty. And the real yield includes a <em>real risk premium</em> component, which reflects the uncertainty about the future path of interest rates and economic outlook. The sum of the two, commonly referred to as the <em>term premium</em>, represents the compensation required by investors to bear interest-rate risk embedded in Treasury securities.</p> <p>In addition, the 10-year yield can be usefully split into two different time horizons, as different factors may be at work over the short- versus longer-term: the <em>5-year yield</em>, and what markets call the <em>&#8220;5-year-5-year forward,</em>” covering the second half of the bond’s 10-year maturity.</p> <p>The recent increase in the 5-year yield has been driven by a steep rise in short-term breakeven inflation. This has gone hand in hand with a rise in commodity prices, as the global economic recovery has gained traction, as well as with the Federal Reserve’s reiterated intention to maintain an accommodative monetary policy stance to achieve its objectives of full employment and price stability.</p> <p>By contrast, the increase in the 5-year-5-year forward is primarily due to a sharp rise in real yields, pointing to an improvement in growth outlook with longer-term breakeven inflation appearing well-anchored.</p> <div id="_com_1"><img class=" wp-image-32737 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2.png" alt="" width="675" height="725" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-200x215.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-279x300.png 279w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-400x430.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-600x644.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-768x825.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-800x859.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-954x1024.png 954w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2-1200x1289.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-2.png 1300w" sizes="(max-width: 675px) 100vw, 675px" /></div> </div> </div> <p>Putting all this together, the rise in the 5-year inflation breakeven reflects an increase in both expected inflation and inflation risk premia. Meanwhile, the sharp rise in the longer-term real yield is primarily due to a higher real risk premium. This points to greater uncertainty about the economic and fiscal outlook, as well as the outlook for asset purchases by the central bank, in addition to longer-term drivers such as demographics and productivity.</p> <p><img class="wp-image-32743 aligncenter" src="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1.png" alt="" width="581" height="539" srcset="https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-200x186.png 200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-300x278.png 300w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-400x371.png 400w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-600x557.png 600w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-768x712.png 768w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-800x742.png 800w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-1024x950.png 1024w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1-1200x1113.png 1200w, https://blogs.imf.org/wp-content/uploads/2021/04/eng-yields-blog-apr-19-chart-3-1.png 1300w" sizes="(max-width: 581px) 100vw, 581px" /></p> <p><strong>Implications for monetary policy</strong></p> <p>Should the US central bank control or at least attempt to shape these dynamics? Monetary policy remains highly accommodative, with sharply negative real yields expected in coming years. An overnight policy rate essentially at zero, in combination with the Federal Reserve’s indication that it will allow inflation to moderately overshoot its inflation target for some time, provides significant monetary stimulus to the economy, as investors do not anticipate an increase in the policy rate for at least a couple of years. Careful and well-telegraphed communication about the expected future path of short-term interest rates has shaped the yield curve at the shorter end.</p> <p>However, the longer end of the yield curve is also importantly affected by asset purchases. In fact, asset purchases as the main unconventional monetary policy tool in the United States operate via a compression of risk premia, supporting risky asset prices and easing broader financial conditions. Hence the rise of real risk premia at the 5-year-5-year forward horizon can be interpreted as a reassessment of the outlook for, and risks surrounding, asset purchases, taking into account the expected increase in Treasury supply related to fiscal support in the United States.</p> <p>Forward guidance about the future stance of monetary policy has played a crucial role during the pandemic. There are two aspects of forward guidance that shape the view of investors: <em>the path of policy rates </em>and <em>the strategy about asset purchases</em>. While the path of short-term interest rates appears to be well understood at this point, there is a wide range of views among market participants about the outlook for asset purchases. It is therefore crucial that the Federal Reserve, once the beginning of the policy normalization process draws closer, provides clear and well-telegraphed communication about the pace of future asset purchases to avoid unnecessary volatility in financial markets.</p> <p>A gradual increase in longer-term US rates—a reflection of the expected strong US recovery—is heathy and should be welcomed. It would also help contain unintended consequences of the unprecedented policy support required by the pandemic, such as stretched asset prices and rising financial vulnerabilities.</p> <p>The IMF’s baseline expectation is one of continued easy financial conditions, even if US rates were to rise further. However, a tightening of global financial conditions remains a risk. Given the asynchronous and multispeed nature of the global recovery, fast and sudden increases in US rates could lead to significant spillovers across the world, tightening financial conditions for emerging markets and throwing a wrench in their recovery process.</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <table style="height: 176px; width: 99.1938%; border-collapse: collapse; border-style: solid; background-color: #260d94; border-color: #ffffff;"> <tbody> <tr style="height: 119px;"> <td style="width: 100%; text-align: center; height: 119px;"> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=38"><strong>We want to hear from you!</strong></a></span></p> <p><span style="font-size: 18pt; color: #ffffff;"><a style="color: #ffffff;" href="https://www.cvent.com/d/jjqlz3?refid=38"><strong> Click here for a 3-question survey on IMFBlog.</strong></a></span></p> </td> </tr> </tbody> </table>