📚 Weekend Read: Global Inequality | Tax Policy | Climate Change | Latin America Outlook | SMEs in MENA | Global Debt | Angola | Secret Work of Elephants

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IMF Weekend Read

Dear Colleague,

In today's edition we focus on global inequality, tax policy, climate change, Latin America's outlook, reinvigorating multilateralism, the debt pandemic, the secret work of elephants and much more. On that note, let's dive right in.

📅 But first, our 2020 Annual Meetings take place October 12-16, for which we produce a special daily briefing that guides you through the week—pointing to all of the key publications, live events and more. If you'd like to receive this special series of updates, click here, press send and I'll add you to the list.

COMMUNISM, CARBON AND COVID-19

"I vividly remember getting up at 4 o'clock in the morning, queueing up to buy milk for my daughter," said Managing Director Kristalina Georgieva in a new Oxfam podcast. "I also vividly remember my mother losing her life-long savings to hyperinflation."

How worried should we be about a spike in inequality after the crisis? (Hint: very). What does communism have to do with fighting today’s pandemic? How do we fight climate change as we climb out of the COVID-19 crisis? In a wide-ranging personal and professional discussion, MD Georgieva digs deeper into these topics and more. Listen here to the 30-minute podcast.

Also, MD Georgieva recently spent 10-minutes with The Banker in a video interview on how the IMF has, during the pandemic, kept focus on the UN Sustainable Development Goals, issues of inequality, and climate change. Watch the full clip here.

CORPORATIONS MUST PAY THEIR FAIR SHARE

Speaking to a joint IMF, World Bank, OECD conference on how to prevent losing hard-won gains against income inequality and poverty, IMF Chief Economist Gita Gopinath addressed a question about high levels of inequality by noting a rising concentration of wealth.

She said that it’s absolutely urgent that everybody pays their fair share of taxes, and that that there are high income, high profit, high wealth corporations that are paying very little in taxes. Change must happen at the international level, she said, to avoid unfair competition.  Watch the full panel discussion here with WB Chief Economist Carmen Reinhart and OECD Chief Economist Laurence Boone.

TACKLING THE PANDEMIC IN LATIN AMERICA

In a new virtual discussion with Stephanie Segal of the CSIS Economics Program, First Deputy Managing Director Geoffrey Okamoto explains how the Covid-19 pandemic is affecting the outlook in Latin America, and how the IMF has engaged with the region during the crisis.

More broadly, the panel focused on how the ongoing surge in cases across Latin America raises questions about the timing of recovery, adequacy of macroeconomic responses, and the role of private and official sectors in responding to the unprecedented health and economic challenges. The event also explored sector-specific outlooks in the wake of the pandemic, and the outlook for sovereign and corporate debt. Watch the full 20-minute exchange with FDMD Okamoto.

MORE MULTILATERALISM, NOT LESS

"We need to acknowledge that multilateralism is bigger than the international organizations charged with its stewardship. In particular, we need to forge new partnerships to bring in other players, including private investors and civil society," said Deputy Managing Director Tao Zhang in his opening remarks to the 2020 International Conference on Sustainable Development earlier this week.

In his speech, DMD Zhang focused on why renewed multilateralism is needed to address the challenges faced by developing economies, as well as for tackling climate change.

THE EUROPEAN UNION FIGHTS CLIMATE CHANGE

Speaking of climate change, the President of the European Commission Ursula von der Leyen made an ambitious proposal last week. By 2030, the European Union would aim to reduce greenhouse gas emissions by at least 55 percent below their 1990 levels. And this is just an intermediate target. The final goal is for the EU to become climate neutral by 2050, as stated in the European Green Deal.

"These goals are appropriately ambitious, while also realistic and achievable. Climate change mitigation is not a luxury but a necessity if we want to avoid a climate crisis," write Dora Iakova, Alfred Kammer, and James Roaf in a new blog. "To limit global warming to 1.5°C above pre-industrial levels—a level considered relatively safe by climate experts—the whole world would need to become climate neutral by 2050, and the EU is leading the way."

Two new IMF staff papers suggest that a carefully designed package of policies would allow the EU to achieve its emission goals while maintaining dynamic growth. With a careful sequencing, these policies would also support the economic recovery from the COVID-related recession. Prioritizing investments in green and digital technologies would lead to job-rich growth in the EU in the near term. As the recovery takes hold, a progressive increase in carbon prices would provide much-needed revenues while creating greater incentives to invest in clean technologies and energy efficiency.

The authors argue that this new strategy should focus on 5 key elements: a gradual increase of the carbon price; use carbon pricing revenues to support sustainable growth; support green investments and targeted nonprice policies; ensure a just transition; and prevent "carbon leakage" through global cooperation. Click here to read more.

For a crisp visual look at EU climate policies across key sectors in the context of their 2050 ambitions, check out these 7 charts by Nicolas Arregui and Andreas A. Jobst of the IMF European Department.

DIGITAL SOLUTIONS FOR SMALL BUSINESSES IN MENA

Small and medium-sized enterprises dominate the business landscape in the Middle East and North Africa region. These enterprises account for more than 90 percent of the region’s businesses and, in some countries, contribute as much as 50 percent of employment and 70 percent of GDP.

Yet they face impediments to growth, and their contribution to employment is below potential. In much of the region, small and medium-sized enterprises are handicapped by limited access to credit, unfavorable business environments, and talent gaps.

In a new blog, Inutu Lukonga writes that digital technologies present new opportunities for these businesses to achieve faster growth. Emerging technologies and broadband internet can facilitate operational efficiencies, innovation, access to markets and finance, and can enable firms to operate remotely during lockdowns. The flexibility of remote working, she writes, can help integrate women and youth in the labor market. But so far, small and medium-sized enterprises in the region have been slow to embrace digital technologies and e-commerce, and businesses trail governments and consumers in internet usage.

Because small and medium-sized enterprises hold the key to employment generation, governments can help expedite their digital transformation by developing and implementing national strategies that address both supply and demand constraints standing in the way of digitalization. Click here to learn more.

ANGOLA IN FOCUS

The COVID-19 pandemic and the shock from the falling price of oil have put severe pressure on Angola since the country’s second review under the Extended Fund Facility (What is an EFF?) in December 2019. 

Angola adopted timely measures to tackle the challenges arising from the pandemic. Measures to protect public health included quarantine, social distancing, closing of borders with limited exceptions, closures of schools, restaurants, and public events, and limited transportation. The government recently approved a prudent supplementary budget for 2020 using a conservative oil reference price. It has also introduced a comprehensive set of fiscal and monetary measures to support economic activities.

In a new Country Focus article, we dive into how the Angolan authorities responded to the crisis, the role of the IMF, and the path to recovery.

THE DEBT PANDEMIC AND DEBT RELIEF

In our latest issue of F&D, Carmen Reinhart, Kenneth Rogoff, Jeremy Bulow, and Christoph Trebesch write that new steps are needed to improve sovereign debt workouts.

"The COVID-19 pandemic has greatly lengthened the list of developing and emerging market economies in debt distress. For some, a crisis is imminent. For many more, only exceptionally low global interest rates may be delaying a reckoning," they write. "Default rates are rising, and the need for debt restructuring is growing. Yet new challenges may hamper debt workouts unless governments and multilateral lenders provide better tools to navigate a wave of restructuring." Interested in their solutions? Jump to the full 1750-word article. Prefer the PDF? Click here to download.

We also recently published a new article by Kevin Watkins of Save the Children UK on how best to deliver debt relief to the poorest. 

"For children in many countries, debt relief is—quite literally—a life and death issue," he writes. "Research at Johns Hopkins University estimates that the disruption of routine health services because of COVID-19 could result in additional half-a-million child deaths over six months—a devastating reversal of the hard-won progress achieved over the past five years." Read the full 1800-word article.

📢 Also, whether you live in New York or Nairobi, if you're interested in receiving a free print copy of the magazine every quarter in your preferred language, click here to access an exclusive mailing form for newsletter subscribers.

THE SECRET WORK OF ELEPHANTS

While the African elephant is the largest and the most famous land animal in the world, very few people know anything about the African forest elephant. Forest elephants are smaller and live in densely wooded rainforests. Their numbers are declining thanks to deforestation and poachers, and they likely face extinction if nothing is done to protect them. Other than local conservationists and the biologists who study them, forest elephants have few advocates.

But what if people knew that African forest elephants provide carbon-capture services valued at over $150 billion? And what if those countries that host them could tap into that equity and benefit from their conservation efforts?

Read this online F&D exclusive from the IMF's Ralph Chami, Connell Fullenkamp, Thomas Cosimano and Fabio Berzaghi, and listen to the 25-minute podcast here on why placing a monetary value on the services provided by forest elephants could help prevent their demise.

IMF LENDING

"To help members cope with this once-in-a-century pandemic, IMF lending programs are adapting—through innovation and increased flexibility—as countries move from the initial containment phase, to stabilization, and eventually to recovery," write Robert Gregory, Huidan Lin, and Martin Mühleisen in a recent blog.

We also just updated our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19, and we are regularly updating our lending tracker, which visualizes the latest emergency financial assistance and debt relief to member countries approved by the IMF’s Executive Board.

To date, 76 countries have been approved for emergency financing, totaling almost US$31 billion. Looking for our Q&A about the IMF's response to COVID-19? Click here. We are also continually producing a special series of notes—more than 50 to date—by IMF experts to help members address the economic effects of COVID-19 on a range of topics including fiscal, legal, statistical, tax and more.

FINAL THOUGHT

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. 

And if you're on LinkedIn, subscribe to this newsletter in a more 📈 visual format.

Sincerely,

Rahim Kanani

Rahim Kanani
Editor, IMF Weekend Read
rkanani@IMF.org

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