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CHART OF THE WEEKMission Impossible? Can Fragile States Increase Tax Revenues?

1 day ago

By Bernardin Akitoby, Jiro Honda, and Keyra Primus
The COVID-19 shocks are proving to be especially challenging for fragile states. Pre-COVID, fiscal revenues were low in such countries and governments were struggling to raise them. Now, COVID-19 is hitting them hard and fiscal revenues are falling. Once the pandemic abates, restoring and further enhancing tax collection is even more important to secure debt sustainability, facilitate the post-COVID-19 recovery, and meet development financing needs in order to meet the Sustainable Development Goals. This is a formidable challenge. However, our new staff research finds that achieving sizable gains in tax collection in fragile environments is not “mission impossible.”
As our chart shows, four fragile states (Liberia, Malawi, Nepal, and

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How to Meet the European Union’s Ambitious Climate Mitigation Goals

2 days ago

By Dora Iakova, Alfred Kammer, and James Roaf
عربي, 中文, Español, Français, 日本語, Português, Русский 
Last week, the President of the European Commission Ursula von der Leyen made an ambitious proposal. 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. 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

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Digital Solutions for Small Businesses in the Middle East and North Africa

4 days ago

By Inutu Lukonga
عربي, Français
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.
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

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IMF Lending During the Pandemic and Beyond

9 days ago

By Robert Gregory, Huidan Lin, and Martin Mühleisen
In the face of unprecedented uncertainty and the severe economic impact triggered by COVID-19, the Fund continues to adapt its lending. At the same time, it aims to ensure realistic targets, uphold the credibility of programs, and foster national ownership.
To date, the Fund has provided financial assistance, mainly through emergency lending and precautionary lending tools, to about 80 countries.
In addition, more than 30 countries have expressed an interest in Fund-supported programs to rebuild financial safety nets, and deal with the immediate aftermath of the pandemic.
To help members cope with this once-in-a-century pandemic, IMF lending programs are adapting—through innovation and increased flexibility—as countries move

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Charting a Path for a Resilient Recovery in Sub Saharan Africa

11 days ago

By Kristalina Georgieva and Abebe Aemro Selassie
Perhaps first among the many lessons of 2020 is that the notion of so‑called black swan events is not some remote worry. These purportedly once‑in‑a‑generation events are occurring with increasing frequency.
Take climate‑related shocks, especially in sub‑Saharan Africa. More than any other region, it is vulnerable to these events because of its heavy dependence on rain‑fed agriculture and its limited ability to adapt to shocks. Every year, the livelihoods of millions are threatened by climate‑induced disasters.
As we all continue to grapple with the COVID‑19 crisis, policymakers also need to look ahead. Countries need to ensure that the vast global fiscal support deployed to fight the pandemic also works to build a smarter, greener and more

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Chart of the WeekTrade as a Tool for an Efficient Recovery

12 days ago

By Jesus Gonzalez-Garcia and Yuanchen Yang
As economies now look for paths to recovery from the COVID-19 crisis, new evidence reaffirms that policies for more open and trade-integrated economies could significantly benefit domestic competition and ultimately may help lower costs for consumers in emerging and developing economies.
A recent Working Paper, building on the Regional Economic Outlook chapter on competition, competitiveness and growth in Sub-Saharan Africa, examines the effect of trade liberalization using a large firm-level dataset covering about 400,000 firms in 83 emerging and developing economies from 2000 to 2017. The study also focuses on 29 nations in sub-Saharan Africa where greater trade integration led to significantly lower markups. Markups show the ability of firms

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Supporting Migrants and Remittances as COVID-19 Rages On

15 days ago

By Saad Noor Quayyum and Roland Kangni Kpodar
Just as COVID-19 has disproportionately impacted some communities more than others, globally, the virus has had an oversized negative impact on migrant workers.
Perhaps surprisingly, despite the bleak experience for foreign overseas workers during the pandemic, the effect on remittances—the flow of money they send back home—has, in many cases, proven resilient. But that trend may yet be upended.
The predicament of migrant workers over the last few months has highlighted the pressing need—now greater than ever—to support them and their families back home. We offer some suggestions below.

Remittances often hold up in response to adverse shocks in recipient countries.

The plight of the migrant worker
In the wake of the pandemic, many overseas

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Guilt, Gender, and an Inclusive Recovery: A Lesson from Japan

17 days ago

By Chie Aoyagi
Japan’s voluntary month-and-a-half shutdown of the economy in April due to COVID-19 has had a higher cost for women than men. A key reason: a “guilt gap” between women and men, where women often feel compelled to take on more professional sacrifices.
Close to one million women—the majority of whom worked in temporary and part-time positions—left the labor force between December and April.
Amid massive disruptions to childcare and schools, research in an IMF Working Paper has helped solidify a universal truth: Women rather than men often face greater responsibility and guilt for being neither the ideal mother nor the ideal employee.
If the labor market was more supportive of work-life balance, then we may have seen a more balanced outcome during the pandemic with both men

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How Strong Infrastructure Governance Can End Waste in Public Investment

23 days ago

By Gerd Schwartz, Manal Fouad, Torben Hansen, and Geneviève Verdier
عربي, 中文, Español, Français, 日本語, Português, Русский 
COVID-19 has had a profound impact on people, firms, and economies all over the world. While countries have ramped up public lifelines to individuals and firms they will face enormous challenges to recover from the pandemic, amidst low economic activity and unprecedented levels of debt.
Public infrastructure investment will play a key role in the recovery. But with resources tight, governments need to spend taxpayer money wisely on the right projects. For this, countries need good infrastructure governance—strong institutions and frameworks to plan, allocate, and implement quality public infrastructure.  

Countries waste on average about 1/3 of their infrastructure

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Healing the Fractures of the Global Economy

25 days ago

Gita Bhatt
As the world seeks to comprehend the new normal, we face many unknowns. Will jobs come back? How will we travel again? What will recovery look like? Much is still a question mark. In fact, we are living in the most “unmeasurable of times,” writes the IMF’s Geoffrey Okamoto, making it hard to quantify high uncertainty and risk.
What we do know is that the age of COVID-19 has painfully exposed and widened existing economic and social divisions and created new ones. It has accentuated disparities among workers, especially the young, female, and least educated. It has made more acute frailties in public health systems, the precariousness of work, and the digital divide. It has challenged governments, which now face higher spending needs and ballooning debts. And it has brought to

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COVID-19: Without Help, Low-Income Developing Countries Risk a Lost Decade

August 27, 2020

By Daniel Gurara, Stefania Fabrizio, and Johannes Wiegand
While the COVID-19 crisis is sending shockwaves around the globe, low-income developing countries (LIDCs) are in a particularly difficult position to respond. LIDCs have both been hit hard by external shocks and are suffering severe domestic contractions from the spread of the virus and the lockdown measures to contain it. At the same time, limited resources and weak institutions constrain the capacity of many LIDC governments to support their economies.

Absent a sustained international effort to support low-income developing countries, permanent scars are likely to harm development prospects.

Growth in LIDCs is likely to come to a standstill this year, compared to growth of 5 percent in 2019. Further, absent a sustained

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Chart of the WeekTourism Trauma and COVID-19

August 20, 2020

By Cyril Rebillard
Pandemic-related lockdowns, flight cancellations, and border closures may be putting a crimp on summer vacation plans. However, the precipitous drop in tourism will have an outsized impact on countries that rely on foreign travelers—with potentially large-scale effects on their economies’ national accounts.
Costa Rica, Greece, Morocco, Portugal, and Thailand could be among the hardest hit with losses in tourism proceeds exceeding 3 percent of GDP, according to the IMF’s recently released 2020 External Sector Report.
The chart calculates direct tourism impacts on imports, exports, and current account balances under a scenario that envisions gradual reopenings in September but a drop of about 70 percent in tourism receipts and international tourism arrivals in 2020.

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Top 10 Blogs on COVID-19

August 13, 2020

By IMFBlog
The pandemic has altered people’s lives in both enormous and small ways. Our editors have picked the top recent blogs that dig into the details of what COVID-19 means for people: the impact on women and the young, what it means for the food supply, and how it can increase already growing inequality, to name a few.
COVID-19 is a stark reminder of longstanding inequities in our societies, and how policies need to pay specific attention to protect and lift the least advantaged in society.
Unemployment in Today’s Recession Compared to the Global Financial Crisis 
Ippei Shibata

Low Internet Access Driving Inequality
Mercedes García-Escribano
The COVID-19 Gender Gap 
Kristalina Georgieva, Stefania Fabrizio, Cheng Hoon Lim, Marina M. Tavares

Why Sustainable Food Systems are

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Chart of the WeekAging Economies May Benefit Less from Fiscal Stimulus

August 7, 2020

By Jiro Honda and Hiroaki Miyamoto
In the midst of the current COVID-19 pandemic, policymakers around the world are undertaking fiscal stimulus—a combination of spending increases and tax reductions—to support their economies. Even before the present crisis, the importance of fiscal policy has been increasing, with monetary policy constrained by near-zero interest rates. Our new staff research finds that age also matters when considering fiscal stimulus. Specifically, we find that fiscal policy isn’t as effective in boosting growth in economies with older populations, compared to economies with younger populations.
As our chart shows, fiscal stimulus in economies with a younger population has a significantly positive effect on growth, but the effect is much weaker in aging economies.

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COVID-19 Response in Emerging Market Economies: Conventional Policies and Beyond

August 6, 2020

By Martin Mühleisen, Tryggvi Gudmundsson, and Hélène Poirson Ward
Español, Português
The economic impact of the COVID-19 pandemic on emerging market economies far exceeded that of the global financial crisis. Unlike previous crises, the response has been decisive just like in advanced economies. Yet, conventional policies are reaching their limit and unorthodox policies are not without risks.
A pandemic still unfolding
COVID-19 is still to play out fully in the emerging market universe (see chart for country list), posing risks to both people and economies. While countries such as China, Uruguay, and Vietnam have managed to contain the virus, others such as Brazil, India, and South Africa continue to grapple with a rise in infections.

Emerging markets are likely to face an uphill

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Global Imbalances and the COVID-19 Crisis

August 4, 2020

By Martin Kaufman and Daniel Leigh,
عربي, 中文, Español, Français, Português, Русский 
The world entered the COVID-19 pandemic with persistent, pre-existing external imbalances. The crisis has caused a sharp reduction in trade and significant movements in exchange rates but limited reduction in global current account deficits and surpluses. The outlook remains highly uncertain as the risks of new waves of contagion, capital flow reversals, and a further decline in global trade still loom large on the horizon.
Our new External Sector Report shows that overall current account deficits and surpluses in 2019 were just below 3 percent of world GDP, slightly less than a year earlier. Our latest forecasts for 2020 imply only a further narrowing by some 0.3 percent of world GDP, a more modest

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Transparency Makes Central Banks More Effective and Trusted

July 30, 2020

By Tobias Adrian, Ghiath Shabsigh, and Ashraf Khan
The role and mandates of central banks have become broader and more complex since the 2008 global financial crisis. The unconventional nature and growing scale of interventions (as seen again during the COVID-19 pandemic) have brought on much higher scrutiny. More transparency and accountability are required to maintain public support, safeguard independence, and enhance policy effectiveness.
The IMF has developed a Central Bank Transparency Code to help member countries answer these demands and increase trust and support. It aims to facilitate more effective communication between central banks and their various stakeholders, reducing uncertainty and contributing to better policy choices.

More transparency and accountability are required

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Impact of Conflict and Political Instability on Banking Crises in Developing Economies

July 29, 2020

By Montfort Mlachila and Rasmane Ouedraogo
While the economic effects of conflict and political instability have been analyzed extensively, much less attention has been paid to how banks are affected.
Our IMF staff paper addresses this gap by investigating whether rising conflict and political instability globally over the past several decades has led to more banking crises in developing countries. Our study focuses on the potential impact of conflict and political instability on systemic banking crisis in 92 developing countries over the period 1970-2016.

The odds of a banking crisis are 2.5 times greater when a country is affected by conflict

We find that the odds of a banking crisis are 2.5 times greater when a country is affected by a conflict. Conflicts and political

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Corruption and COVID-19

July 28, 2020

By Vitor Gaspar, Martin Mühleisen, and Rhoda Weeks-Brown
عربي,  中文, Português, Русский 
Corruption, the abuse of public office for private gain, is about more than wasted money: it erodes the social contract and corrodes the government’s ability to help grow the economy in a way that benefits all citizens. Corruption was a problem before the crisis, but the COVID-19 pandemic has heightened the importance of stronger governance for three reasons.
First, governments around the world are playing a bigger role in the economy to combat the pandemic and provide economic lifelines to people and firms. This expanded role is crucial but it also increases opportunities for corruption. To help ensure the money and measures are helping the people who need it most, governments need timely and

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Chart of the WeekUnemployment in Today’s Recession Compared to the Global Financial Crisis

July 23, 2020

By Ippei Shibata
There has been much discussion in recent months about how workers who transitioned to working from home—and those who were deemed “essential”—are less affected by the layoffs and job losses brought on by lockdowns than are workers in “social” jobs that require closer human interaction, like restaurant workers. However, our new IMF staff research suggests that this does not tell the full story.
In particular, we find that while teleworkable jobs are indeed more secure than non-teleworkable occupations during the current pandemic-related recession, this pattern has also been observed during the global financial crisis of 2007–09—meaning that something more than pandemic-related restrictions is at play.
As the chart shows, unemployment has increased less for teleworkable

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The COVID-19 Gender Gap

July 21, 2020

By Kristalina Georgieva, Stefania Fabrizio, Cheng Hoon Lim, and Marina M. Tavares
عربي, 中文, Español,  Français, 日本語, Português, Русский 
The COVID-19 pandemic threatens to roll back gains in women’s economic opportunities, widening gender gaps that persist despite 30 years of progress.
Well-designed policies to foster recovery can mitigate the negative effects of the crisis on women and prevent further setbacks for gender equality. What is good for women is ultimately good for addressing income inequality, economic growth, and resilience.

It is crucial that policymakers adopt measures to limit the scarring effects of the pandemic on women.

Why has COVID-19 had disproportionate effects on women and their economic status? There are several reasons.
First, women are more likely than men to

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Dominant Currencies and the Limits of Exchange Rate Flexibility

July 20, 2020

By Gustavo Adler, Gita Gopinath and Carolina Osorio Buitron
Faced with an unprecedented shock of collapsing global demand and commodity prices, capital outflows, major supply chain disruptions and a generalized drop in global trade, many emerging markets and developing economies’ (EMDEs) currencies have weakened sharply. Will these currency movements support the recovery of these economies?
Building on a new dataset, research laid out in a new IMF Staff Discussion Note indicates that the short-term gains from weaker currencies may be limited. This is especially true for EMDEs where firms price their international sales and finance themselves in a few foreign currencies, notably the US dollar—so-called Dominant Currency Pricing and Dominant Currency Financing.

The prevalence of dominant

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The Next Phase of the Crisis: Further Action Needed for a Resilient Recovery

July 16, 2020

By Kristalina Georgieva
عربي, Español, Français, 日本語, Português,
When the Group of Twenty industrialized and emerging market economies (G-20) finance ministers and central bank governors last met in April, the world was in the midst of the Great Lockdown forced by the outbreak of COVID-19. As they meet virtually this week, many countries are gradually reopening, even as the pandemic remains with us. Clearly, we have entered a new phase of the crisis—one that will require further policy agility and action to secure a durable and shared recovery.

I believe that despite the pain and suffering that the pandemic has caused, we can aspire to transform our world.

Last month, the IMF reported a worsened economic outlook and projected global growth to contract by 4.9 percent this year. Some

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Why Sustainable Food Systems are Needed in a post-COVID World

July 14, 2020

By Nicoletta Batini, James Lomax, and Divya Mehra
Food systems are essential to economic activity because they provide the energy that we need to live and work. However, macroeconomists have long ignored them in the belief that the global agri-food industry, now highly mechanized, subsidized and concentrated, offers all we could wish for when it comes to food.

2020 will be a year of reckoning for the world’s food systems.

2020 will be a year of reckoning for the world’s food systems. In just months, COVID-19 shut down half the globe. Images of panic buying, empty grocery shelves and miles-long queues at food banks have suddenly reminded us how important food systems are in our lives and how imbalanced they have become.
Pandemic-induced runs on food, however, do not merely reflect human

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Toward an Integrated Policy Framework for Open Economies

July 13, 2020

By Tobias Adrian and Gita Gopinath
While capital mobility provides many benefits, capital flows to emerging market and developing economies are often volatile and depend critically on global financial conditions. The risks posed by volatile capital flows to macroeconomic and financial stability are often difficult to address with conventional monetary policy tools. Hence, policymakers have complemented interest rate policy with additional tools—including foreign exchange intervention, capital flow measures, and macroprudential actions—to achieve their objectives.
A significant shortcoming of this more eclectic approach is the lack of clear frameworks to guide how these tools should be used in concert to achieve central bank objectives. Accordingly, IMF staff have been engaged in a major

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Toward a More Resilient Europe

July 12, 2020

By Poul M. Thomsen
中文, Français, Português, Русский 
Europe, like the rest of the world, faces an extended crisis. An element of social distancing—mandatory or voluntary—will be with us for as long as this pandemic persists. This, coupled with continued supply chain disruptions and other problems, is prolonging an already difficult situation. Based on updated IMF projections released last month, we now expect real GDP in the European Union to contract by 9.3 percent in 2020 and then grow by 5.7 percent in 2021, returning to its 2019 level only in 2022. If an effective treatment or vaccine for COVID-19 is found, the recovery could be faster—but the opposite would hold true if there are large new waves of infection.

Some European countries will face a tougher recovery path than others.

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Fiscal Policies for a Transformed World

July 10, 2020

By Vitor Gaspar and Gita Gopinath
The ongoing COVID-19 pandemic has already prompted an unprecedented fiscal policy response of close to $11 trillion worldwide. But with confirmed cases and fatalities still rising fast, policymakers will have to keep the public health response their No. 1 priority while retaining supportive and flexible fiscal policies and preparing for transformational economic change.

Policymakers should tackle the rising poverty and inequality, as well as the structural weaknesses exposed by the crisis to better prepare for future shocks.

In the face of a sharp decline in global output, a massive fiscal response has been necessary to increase health capacity, replace lost household income and prevent large-scale bankruptcies. But the policy response has also

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Teleworking is Not Working for the Poor, the Young, and the Women

July 7, 2020

By Mariya Brussevich, Era Dabla-Norris, and Salma Khalid
The COVID-19 pandemic is devastating labor markets across the world. Tens of millions of workers lost their jobs, millions more out of the labor force altogether, and many occupations face an uncertain future. Social distancing measures threaten jobs requiring physical presence at the workplace or face-to-face interactions. Those unable to work remotely, unless deemed essential, face a significantly higher risk of reductions in hours or pay, temporary furloughs, or permanent layoffs. What types of jobs and workers are most at risk? Not surprisingly, the costs have fallen most heavily on those who are least able to bear them: the poor and the young in the lowest-paid jobs.
In a new paper, we investigate the feasibility to

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Digital Financial Inclusion in the Times of COVID-19

July 1, 2020

By Ulric Eriksson von Allmen, Purva Khera, Sumiko Ogawa, and Ratna Sahay
 中文, Español, Français, 日本語, Português, Русский 
The COVID-19 pandemic could be a game changer for digital financial services. Low-income households and small firms can benefit greatly from advances in mobile money, fintech services, and online banking. Financial inclusion as a result of digital financial services can also boost economic growth. While the pandemic is set to increase use of these services, it has also posed challenges for the growth of the industry’s smaller players and highlighted unequal access to digital infrastructure. Several actions will need to be taken to ensure maximum inclusion going forward.

Low-income households and small firms can benefit greatly from advances in mobile money, fintech

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Reopening Asia: How the Right Policies Can Help Economic Recovery

June 30, 2020

By Chang Yong Rhee
 中文, Español, Français, Русский 
For the first time in living memory, Asia’s growth is expected to contract by 1.6 percent—a downgrade to the April projection of zero growth. While Asia’s economic growth in the first quarter of 2020 was better than projected in the April World Economic Outlook—partly owing to early stabilization of the virus in some—projections for 2020 have been revised down for most of the countries in the region due to weaker global conditions and more protracted containment measures in several emerging economies.

Asia is heavily dependent on global supply chains and cannot grow while the whole world is suffering.

In the absence of a second wave of infections and with unprecedented policy stimulus to support the recovery, growth in Asia is

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