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Dear Colleague,
Last week we asked you how the IMF can tackle the big issues—debt, climate, inequality and more—all raised by readers like you navigating the crisis. We received more than 75 very thoughtful responses from every corner of the world, and are now following up on your comments and discussing them with relevant colleagues across the institution.
Looking ahead to next week, be on the lookout for two key publications: our world economic outlook update (24th) and global financial stability report (25th). We're hopeful this fresh analyses helps address many of the key concerns shared with us to date. Questions or comments? Write to me directly.
$10 TRILLION SPENT
"We should remember that during the Great Depression there was very little immediate action by the governments, and I believe that this time around people will recognize the decisiveness with which the administrations and central banks have acted," said Managing Director Kristalina Georgieva in a new 2800-word interview with EL PAÍS. "Fiscal measures totaling $10 trillion have been deployed, while the central banks have injected over $6 trillion in liquidity." MD Georgieva focused on leadership, resilience, recovery and learning from the past—paying specific attention to the current economic climate and policies of the United States, Europe, Spain, Argentina, Mexico and Brazil.
For a closer look at Europe—and Italy in particular—read MD Georgieva's recent speech on the road to recovery in 2021, in which she outlines a number of key issues moving forward. Among them are investing in digital skills and infrastructure, continuing to focus on low-carbon, climate-resilient growth, and stepping up efforts to reduce inequality and poverty.
Like podcasts instead? Listen to a new 40-min discussion between former UK Chancellor Sajid Javid, Sky economics editor Ed Conway and MD Georgieva, focused on the global economic outlook, the level of support the IMF is providing during the pandemic, how globalization can help ease inequality, and the shape of economic recovery. Georgieva said that the IMF would downgrade its outlook for "the majority" of countries, though a small handful of nations, including Germany, were doing better than originally expected.
BUILDING A GREENER, SMARTER WORLD
Earlier this week MD Georgieva also led a virtual discussion hosted by GLOBSEC, Bruegel, and Institut Montaigne on the role of the IMF in fiscal stabilization and recovery post-COVID-19. "We should use fiscal stimuli to create green jobs, move digitalization forward in an equitable way, and ensure that we build shock resilient economies. Tax policies will also need to be changed. A price on carbon will also be needed, as well as how we tax the digital sector," said Georgieva. "The last tools we have are for structural changes which ensure that the economies remain fair and create jobs. We need a greener, smarter world." Read the 1400-word summary of the webinar.
Speaking of digitalization, sub-Saharan Africa is making progress to drive change and build resilience—from kids learning to code outside Niger’s capital, to drones delivering medicines to remote communities in Sierra Leone, to anti-epidemic robots monitoring patients, delivering food and medication in Rwanda. The COVID‑19 pandemic has amplified this reality, but it has also reminded us of a stark, digital divide. For example, mobile download speeds in the region are, on average, more than 3 times slower than in the rest of the world. According to IMF research, expanding internet access in sub-Saharan Africa by an extra 10 percent of the population could increase real per capita GDP growth by 1 to 4 percentage points. Interested in learning more about Africa's digital hopes and hurdles? Read more here.
A GLOBAL LOCKDOWN LIKE NO OTHER
"Aside from its unprecedented scale, the Global Lockdown is playing out in ways that are very different from past crises. These unusual characteristics are emerging all over the world, irrespective of the size, geographic region, or production structure of economies," writes Chief Economist Gita Gopinath in a new 1000-word blog.
Focusing on three distinct features of the Great Lockdown, Gopinath notes that first, this crisis has dealt a uniquely large blow to the services sector. Second, we have thus far seen a decline in inflation and inflation expectations across advanced and emerging market economies, except for food inflation. And third, we see a striking disconnect between financial markets and the real economy, with financial indicators pointing to stronger prospects of a recovery than real activity suggests. Read the full blog, which includes several new charts.
Digging deeper into the nature of unemployment due to COVID-19, the IMF's Mariya Brussevich, Era Dabla-Norris, and Salma Khalid just published a new working paper looking at who bears the brunt of lockdown policies. They found that over 97.3 million workers, equivalent to about 15 percent of the workforce, are at high risk of layoffs and furlough across the 35 advanced and emerging countries in their sample. Moreover, workers least likely to work remotely include those at the bottom of the income scale, suggesting that the pandemic could exacerbate inequality.
PREVENTING ANOTHER FINANCIAL CRISIS
The massive macro-financial shock caused by the pandemic continues to ravage the global economy and has put both banks and borrowers under severe strain. Supervisors find themselves confronted with unprecedented challenges which call for decisive action to ensure that banking systems support the real economy while preserving financial stability. In a new blog by Tobias Adrian (IMF) and Ceyla Pazarbasioglu (WBG), they introduce nine joint IMF-World Bank recommendations to help supervisors navigate these uncharted waters—calling for vigilance regarding policy measures taken that are not consistent with international standards. This is critical to prevent the health and economic crisis morphing into a financial crisis, they write.
CURBING CORRUPTION
In a new interview with Transparency International—launching their Tracking Trillions series—Managing Director Kristalina Georgieva discusses how the IMF is committed to tackling issues of corruption in a systematic way by leveraging all tools and activities of the institution.
"Our analysis of governance and anti-corruption efforts has increased substantially in IMF reports. It is now more granular and better calibrated to the severity of corruption risks," said Georgieva. "Just recently, for instance, our surveillance work has focused on central bank governance and operations in Liberia, financial sector oversight in Moldova and the anti-corruption framework in Mexico." Georgieva then details specific policies and practices in place to curb corruption. Read the full 1800-word interview.
Building on these themes, the IMF's Vitor Gaspar co-authored a crisp 750-word opinion piece on the role of tax in dealing with COVID-19. "International tax cooperation must be part and parcel of a set of effective and well-coordinated multilateral actions to respond to the crisis. In order to expand the fiscal space, it is more urgent than ever to work together to fight tax evasion and tax avoidance, including illicit financial flows," writes Gaspar.
If you're wondering how the IMF is helping ensure transparent and accountable use of COVID-19 financial assistance, read this fact sheet.
BANGLADESH FIGHTS COVID-19
Bangladesh, one of the most densely populated countries in the world, exemplifies the triple blow that many emerging market countries have suffered from COVID-19: domestic slowdown caused by the disease and the efforts to contain its spread; a sharp decline in exports, particularly in the ready-made garment sector, and a drop in remittances. Its once robust economy has dramatically slowed in recent months. To help Bangladesh during this crisis, the IMF has approved emergency loans totaling around $732 million. How will this money be used and what does the road ahead look like? Read a brief interview with resident representative for Bangladesh Ragnar Gudmundsson for IMF Country Focus.
GERMANY'S CRISIS MANAGEMENT TOOL
Kurzarbeit, a German social insurance scheme whereby employers reduce their employees’ working hours instead of laying them off, is attracting attention in light of the pandemic. For example, a worker receives 60 percent of his or her pay for the hours not worked, while receiving full pay for the hours worked. That is, a worker would only experience a 10 percent salary loss for a 30 percent reduction in hours. "In many ways, it is an excellent crisis management tool," said IMF Mission Chief for Germany Shekhar Aiyar in a new interview. Is it working during COVID-19? Read here to find out.
THE LONG ECONOMIC HANGOVER OF PANDEMICS
In our latest issue of F&D magazine, which focuses on economic policymaking and politics in light of the pandemic, Òscar Jordà , Sanjay R. Singh, and Alan M. Taylor of UC Davis write 1200 words on why COVID-19's toll on economic activity in recent months is only the beginning of the story. While the rapid and unprecedented collapse of production, trade, and employment may be reversed as the pandemic eases, historical data suggest that long-term economic consequences could persist for a generation or more. Prefer the PDF? Click here to download.
IMF AND COVID-19
We just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board.
By the end of today, 70 countries will have been approved for emergency financing, totaling about US$25 billion. Looking for our latest Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notes—around 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics.
FINAL THOUGHT
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Thank you again very much for your interest in the Weekend Read. We really appreciate your time. If you have any questions, comments or feedback of any kind, please do write me a note.
Stay healthy and see you next week,
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