About IMFBlog

IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day. The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.

Sharing the Recovery: SDR Channeling and a New Trust

2021-10-12T14:32:37-04:00October 8, 2021|

By Ceyla Pazarbasioglu and Uma Ramakrishnan

عربي, Español, 日本語, Português, Русский

Options to magnify the impact of the Special Drawing Rights Allocation through voluntary channeling.

One of the most significant measures introduced by the International Monetary Fund in response to the global pandemic was the recent historic allocation of Special Drawing Rights, or SDRs. The challenge now is to ensure this distribution is redirected—or channeled—to where the need is greatest. To that end, we are exploring three options to enable more resilient and sustainable economic futures for the poorest and most vulnerable countries.

The task now is to redirect the SDRs to their greatest effect.

The IMF’s response to COVID-19

Since the onset of the COVID-19 pandemic, the IMF has lent nearly $117 billion to 87 countries. We reshaped our lending policies to enhance our support to members, and recently reformed our concessional lending policy framework under the Poverty Reduction and Growth Trust (PRGT) to expand our lending to low-income countries.

We have also joined forces with the other international organizations to help accelerate the global vaccine rollout, and improve access to non-vaccine therapeutics and diagnostics.

But we didn’t stop there. The historic SDR allocation, back in August, equivalent to $650 billion, […]

Why Basic Science Matters for Economic Growth

2021-10-12T14:36:58-04:00October 6, 2021|

By Philip Barrett, Niels-Jakob Hansen, Jean-Marc Natal and Diaa Noureldin

عربي, 中文, Español, Français,  日本語, Português, Русский

Public investment in basic research will pay for itself.

The pandemic has rolled back decades of economic progress and wrought havoc on public finances. To build back better and fight climate change, sizable public investment needs to be sustainably financed. Boosting long-term growth—and thereby tax revenue—has rarely felt more pressing.

But what are the drivers of long-term growth? Productivity—the ability to create more outputs with the same inputs—is an important one. In our latest World Economic Outlook, we emphasize the role of innovation in stimulating long-term productivity growth. Surprisingly, productivity growth has been declining for decades in advanced economies despite steady increases in research and development (R&D), a proxy for innovation effort.

Knowledge transfer between countries is an important driver of innovation.

Our analysis suggests that the composition of R&D matters for growth. We find that basic scientific research affects more sectors, in more countries and for a longer time than applied research (commercially oriented R&D by firms), and that for emerging market and developing economies, access to foreign research is especially important. Easy technology […]

Inflation Scares in an Uncharted Recovery

2021-10-12T14:38:41-04:00October 6, 2021|

By Francesca Caselli and Prachi Mishra

عربي中文, Español, Français, 日本語, Português, Русский

A key question is what combination of events could cause persistently faster price gains.

The economic recovery has fueled a rapid acceleration in inflation this year for advanced and emerging market economies, driven by firming demand, supply shortages, and rapidly rising commodity prices.

We forecast in our latest World Economic Outlook that higher inflation will likely continue in coming months before returning to pre-pandemic levels by mid-2022, though risks of an acceleration do remain.

Policymakers must walk a fine line between patient support for the recovery and being ready to act quickly.

The good news for policymakers is that long-term inflation expectations are well anchored, but economists still disagree about how enduring the upward pressure for prices will ultimately be.

Some have said government stimulus may push unemployment rates low enough to boost wages and overheat economies, possibly de-anchoring expectations and resulting in a self-fulfilling inflation spiral. Others estimate that pressures will ultimately be transitory as a one-time surge in spending fades.

Inflation dynamics and recovering demand

We examine if headline consumer price index inflation has moved in line with unemployment. Although the pandemic period poses […]

Crypto Boom Poses New Challenges to Financial Stability

2021-10-12T14:41:35-04:00October 1, 2021|

By Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou

عربي, 中文Español, Français, 日本語, Português, Русский

As crypto assets take hold, regulators need to step up.

Crypto assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem.

Consumer protection risks remain substantial given limited or inadequate disclosure and oversight.

But along with the opportunities come challenges and risks. The latest Global Financial Stability Report describes the risks posed by the crypto ecosystem and offers some policy options to help navigate this uncharted territory.

The Crypto Ecosystem—What Is It, What’s at Risk?

The total market value of all the crypto assets surpassed $2 trillion as of September 2021—a 10-fold increase since early 2020. An entire ecosystem is also flourishing, replete with exchanges, wallets, miners, and stablecoin issuers.

Many of these entities lack strong operational, governance, and risk practices. Crypto exchanges, for instance, have faced significant disruptions during periods of market turbulence. There are also several high-profile cases of hacking-related thefts of customer funds. So far, these incidents have not had a significant impact on financial stability. However, […]

A Shot in the Arm—How Special Drawing Rights Can Help Struggling Countries

2021-08-26T12:53:30-04:00August 26, 2021|

By IMFBlog

The largest allocation of Special Drawing Rights, or SDRs, in history—about $650 billion—came into effect earlier this week. The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis.

The SDR allocation will provide additional liquidity to the global economic system—supplementing countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt. Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the crisis.

SDRs are being distributed to countries in proportion to their quota shares in the IMF. This means about $275 billion is going to emerging and developing countries, of which low-income countries will receive about $21 billion—equivalent to as much as 6 percent of GDP in some cases.

Read more about the historic allocation and how many of the IMF’s poorest member countries can benefit.

And listen to the podcast by Ceyla Pazarbasioglu, head of the Strategy, Policy and Review Department at the IMF, where she explains why the SDR allocation will go a long way toward helping vulnerable countries.

IMF Summer Reads

2021-08-13T09:01:19-04:00August 13, 2021|

By IMFBlog

A book is a must, as you head off to visit family and friends, or take time off during the summer to unwind. A good book can bring in new thinking and perspective from the past. And it can inspire and motivate us to act. […]

Coming Together

2021-08-11T10:34:32-04:00August 10, 2021|

By Vitor Gaspar and Gita Gopinath

عربيEspañolFrançais, PortuguêsРусский

Differences in vaccine access and the ability to deploy policy support are creating a growing divergence between advanced economies from many emerging market and developing economies. Faced with high deficits and historic levels of debt, countries with limited access to financing are walking a fiscal tightrope between providing adequate support and preserving financial stability. […]

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