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Fiscal Policy for an Uncertain World

3 days ago

By Vitor Gaspar, Sandra Lizarazo, Paulo Medas, and Roberto Piazza
 中文,  Español, Français, 日本語, Português, Русский
As public debt rises to record levels, countries need to calibrate fiscal policies to their own unique circumstances.
Vaccination has saved lives and helped economic recovery in many countries, but uncertainty remains high amid new virus variants. The pandemic will leave a lasting mark on inequality, poverty, and government finances, our latest Fiscal Monitor finds.
With the pandemic, global debt in 2020 jumped by 14 percent to a record high $226 trillion. This figure includes both public and nonfinancial private sector debt. The latter will need to be monitored carefully, as excess private debt can eventually turn into higher public debt.

The pandemic will leave a lasting

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Uncertainty Grips Markets as Optimism Wanes

4 days ago

By Tobias Adrian
عربي, 中文, Español, Français, 日本語, Português, Русский
Market sentiment has deteriorated since earlier this year amid still elevated financial vulnerabilities and mounting concerns about risks to inflation.
Amid the prolonged and painful pandemic, risks to global financial stability have remained contained—so far. But with economic optimism fading, and with financial vulnerabilities intensifying, this is a time for careful policy calibration. To an unprecedented degree, the world’s central banks, finance ministries, and international financial institutions have asserted—for a year and a half—policy support for economic growth. Now they must craft strategies that safely approach the next stage of monetary and fiscal policy action.

The sense of optimism that had propelled

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A Hobbled Recovery Along Entrenched Fault Lines

4 days ago

By Gita Gopinath
عربي, 中文, Español, Français, 日本語, Português, Русский
The global recovery continues amid increasing uncertainty, more complex policy trade-offs.
The global recovery continues but momentum has weakened, hobbled by the pandemic. Fueled by the highly transmissible Delta variant, the recorded global COVID-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy. Pandemic outbreaks in critical links of global supply chains have resulted in longer than expected supply disruptions, feeding inflation in many countries. Overall, risks to economic prospects have increased and policy trade-offs have become more complex.

The dangerous divergence in economic prospects across countries remains a major concern.

Compared to our July

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Sharing the Recovery: SDR Channeling and a New Trust

8 days ago

By Ceyla Pazarbasioglu and Uma Ramakrishnan
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

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When It Comes to Public Finances, Credibility Is Key

9 days ago

By Raphael Espinoza, Vitor Gaspar, and Paolo Mauro
عربي, Español, 日本語, Português, Русский
Ending the health crisis and addressing its immediate fallout remains the top priority, but governments would also benefit from committing to fiscal responsibility.
From the outset of the COVID-19 pandemic, governments have extended massive fiscal support that has saved lives and jobs. As a result, public debt has reached a historic high, although it is expected to decrease marginally in the next few years. These developments raise questions about how high debt can go without being disruptive.

Commitment to budget discipline and clear communication of policy priorities pays off.

Addressing the health emergency remains crucial, especially in countries where the pandemic is not yet under control,

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Why Basic Science Matters for Economic Growth

10 days ago

By Philip Barrett, Niels-Jakob Hansen, Jean-Marc Natal and Diaa Noureldin
عربي, 中文, Español, Français, Português
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

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Inflation Scares in an Uncharted Recovery

10 days ago

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

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How Investment Funds Can Drive the Green Transition

12 days ago

By Fabio Natalucci, Felix Suntheim, and Jérôme Vandenbussche
عربي, 中文, Español, Français, 日本語, Português, Русский
Sustainable investment funds need to be scaled up to support a successful transition to a green economy
The transition to net-zero greenhouse gas emissions requires unprecedented change by companies and governments, as well as additional investment of as much as $20 trillion over the next two decades. Strong fiscal policies, complemented by a broad range of regulatory and financial policies, will be necessary to facilitate the green transition.
The world’s $50 trillion investment fund industry, especially funds with a sustainability focus, can play an important role financing the transition to a greener economy and helping to avoid some of the most perilous effects of climate

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Crypto Boom Poses New Challenges to Financial Stability

15 days ago

By Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou
عربي, 中文, Español, Français, 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

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How Countries Can Diversify Their Exports

24 days ago

By Gonzalo Salinas
Four economy-wide factors—governance, education, infrastructure, and trade policy—relate closely to more varied and complex exports across countries
As the world’s biggest copper producer, Chile’s shipments of the metal meet around one-third of global demand and represent about half its goods exports.
But beyond mining’s dominance, Chile’s trade flows are more varied and complex than they may appear, with significant exports of vehicles, pharmaceuticals and telecommunications equipment. And according to a recent IMF staff paper, the Andean economy is among those that shine as a role model for diversification policies.

The new approach to explaining diversification underscores the need to effectively shorten geographic distance by enhancing connectivity between

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To Safeguard Global Financial Stability, Boost the Resilience of Investment Funds

29 days ago

By Tobias Adrian, Antonio Garcia Pascual, Ranjit Singh, and Jay Surti
Investment funds were hit hard by the pandemic; their response amplified its adverse impact on financial markets and capital flows.
Our brush last year with one of the biggest economic shocks of our lifetimes revealed some fundamental vulnerabilities that could affect global financial stability. Caught up in the financial market turmoil generated by risk averse investors, many investment funds were heavily affected by the “dash-for-cash” that extended across borders—and which triggered significant outflows from risky assets and from emerging and developing economies. As this happened, and investor capital flowed out of money market and open-end mutual funds, asset managers were forced to fire-sell these assets, which

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How to Tax in Asia’s Digital Age

September 14, 2021

By Era Dabla-Norris, Ruud De Mooij, Andrew Hodge, and Dinar Prihardini
New global reforms will change where tech giants pay taxes in Asia and make the international tax system more robust.
Digitalization —the technology that powers fintech, e-commerce, and online services—enables us to make mobile money transfers, purchase goods and services online, and interact with people across the globe. It has created some of the largest global businesses, such as online platforms and marketplaces connecting producers and consumers across the world.

The agreed changes could spur more comprehensive reforms applied to all companies and to a larger share of profits.

Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies

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The Climate Issue

September 7, 2021

By Gita Bhatt
In Ernest Hemingway’s novel The Sun Also Rises, a character is asked how he went bankrupt. “Two ways,” he answers. “Gradually, then suddenly.”
It’s the same with climate change. The damage is becoming less and less gradual, and unless we take action, the world could suddenly reach an irreversible tipping point.
We now know the problem is much worse than we once thought. It requires not incremental change, but radical overhaul—roughly halving carbon emissions each decade through 2050. Getting there demands that we rapidly shift to renewables, build new electricity networks, increase energy efficiency, and embrace low-carbon transport. Cheaper renewable energy and technology advances make the move from carbon affordable and feasible.
This special issue on climate, in

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Your Top 5 Back-to-School Blogs

September 2, 2021

By IMFBlog
What’s on your mind as you (or your kids) head back to school?
To help you stay on top of the news and policy debates from the past few months, our IMFBlog editors have put together a list of our top reads on economics and finance.
Our list of blogs gives you a snapshot on the state of the global economy, a glimpse at the new world of cryptocurrencies, and some insight into the phenomenon of rising prices.
Urgent Action Needed to Address a Worsening “Two-Track” Recovery 
Cryptoassets as National Currency? A Step Too Far
US Dollar Share of Global Foreign Exchange Reserves Drops to 25-Year Low
Four Facts about Soaring Consumer Food Prices
Four Factors Behind the Metals Price Rally


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

August 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

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Your Weekend Podcast Roundup

August 20, 2021

By IMFBlog
We may not be commuting as much, but it seems we’re still listening. According to the latest Infinite Dial survey from Edison Research and Triton Digital, the percentage of people listening to podcasts weekly grew 17 percent in 2021.
Whether you’re hitting the road this weekend, or re-organizing the kitchen cupboards (again), here’s a list of podcast interviews with some of the brightest minds in economics and development, as selected by our editors at Finance & Development.

Ruchir Agarwal with a Proposal to End the Pandemic: There will be no durable end to the economic crisis until enough people around the world are vaccinated against Covid-19. Economist Ruchir Agarwal and IMF Chief Economist Gita Gopinath have joined forces to come up with a plan that would make that

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Pacific Island Airlines: Flying on Empty?

August 18, 2021

By Vybhavi Balasundharam and Leni Hunter
With virtually no international travel since March 2020, national airlines in the Pacific face mounting financial difficulties. For Pacific Island countries this shock is particularly severe given the weak financial condition of national carriers prior to the pandemic, the reliance of these countries on airline connectivity to support tourism, and limited fiscal space to provide ongoing or future financial support to these airlines.

Recovery from this crisis presents an opportunity to overhaul governance and oversight of national airlines.

Recovery from this crisis presents an opportunity to overhaul governance and oversight of national airlines to mitigate future risks, according to recent IMF staff research.
The Pacific Islands are among the

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From the History Books: The Rethinking of the International Monetary System

August 16, 2021

By Atish Rex Ghosh

Fifty years ago, the world changed. On August 15, 1971, US President Richard Nixon slammed shut the “gold window,” suspending dollar convertibility. Although it was not Nixon’s intention, this act effectively marked the end of the Bretton Woods system of fixed exchange rates. But, in truth, with the rise of private cross-border capital flows, a system based on fixed exchange rates for the major currencies was no longer viable and Nixon’s decision—decried at the time as an abrogation of America’s international responsibilities—paved the way for the modern international monetary system.

The collapse of Bretton Woods prompted a fundamental rethink about what would give stability to the international monetary system.

The Bretton Woods era
When the Bretton Woods system was

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IMF Summer Reads

August 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.
Below you’ll find some additions to your summer reading list, and possibly some food for thought, based on a selection of recent book reviews by our editors at Finance & Development (F&D).

Rebellion, Rascals, and Revenue: Tax Follies and Wisdom through the Ages by Michael Keen and Joel Slemrod

“This is a rare find that can and should be read and enjoyed not only by experts but by anyone who has ever had questions about taxation. As Michael Keen (of the IMF) and Joel Slemrod (University of Michigan) show, ‘taxes are us’ in the sense that everywhere

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CHART OF THE WEEKPutting Public Investment to Work

August 11, 2021

By Mariano Moszoro
For countries on the path to recovery, reviving economic activity is a major priority. And what better way to support a come-back than by creating jobs. Our new IMF staff research shows that when governments spend on infrastructure, they create many new jobs.
Drawing on a 19-year dataset of over 5,600 construction companies from 27 advanced economies and 14 emerging market economies, we use an innovative approach to measure the direct employment effect of $1 million of infrastructure spending by country income group and sector—electricity, roads, schools, hospitals, and water and sanitation. Because there is no data available for low-income developing countries, we estimate the employment impact by extrapolating from advanced economies and emerging market economies.

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Coming Together

August 10, 2021

By Vitor Gaspar and Gita Gopinath
عربي, Español, Français, Português, Русский
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.

IMF support focused most where it mattered the most.

Without resolute measures to address this growing divide, COVID‑19 will continue to claim lives and destroy jobs, inflicting lasting damage to investment, productivity, and growth in the most vulnerable countries. The pandemic will further disrupt the lives of the most vulnerable,

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Women in Economics

August 6, 2021

By IMFBlog
Women remain underrepresented in economics, yet many have made an outsized impact on the field. Whether it’s in working to eliminate poverty, reinventing development economics, examining social safety nets, or improving democratic institutions, Finance & Development magazine has regularly highlighted the contributions made by women economists.
In F&D’s People in Economics series, the work of women economists has featured prominently. To add to your summer reading list, below are some of the profiles from recent years of the important thinkers who are leaving a mark.

Rohini Pande of Yale University has been called one of the most influential development economists of her generation and has made groundbreaking contributions to political economy, international development,

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Managing the Political Economy of Climate Change Policies

August 5, 2021

By Davide Furceri, Michael Ganslmeier, and Jonathan D. Ostry
Few issues have sparked more attention than how to avoid environmental and human catastrophe from climate change. But even in the wake of massive public protests and an ambitious agenda since the 2015 Paris Agreement, governments are wary of the political costs of enacting climate mitigation policies.
In recent IMF staff research, we identify strategies that can minimize or even eliminate such challenges.
In the first analysis of its kind, we combined information on the political aftermath (governmental popular support) of policy changes with information on the policy changes themselves in a sample of 31 OECD countries. Our data on political support comes from the private consultancy PRS Group’s International Country Risk

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Chart of the WeekHow To Escape The Perils of Fragility

August 3, 2021

By Olusegun Akanbi, Kenji Moriyama, Keyra Primus
Already facing huge development needs, the COVID-19 pandemic is exacerbating the challenges facing fragile and conflict states—a group of currently about 40 countries trapped in cycles of low administrative capacity, political instability, conflict, and weak economic performance. Our new IMF staff working paper, which analyzes the experiences of 196 countries between 1979 and 2018, shines a light on how countries can avoid or break out of this trap.
As our chart of the week shows, weaker growth raises the probability of falling into fragility, particularly for countries in the middle-range of government effectiveness (measured by, e.g., the ability to collect taxes and enforce contracts). The top chart measures the change in the probability

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How the Pandemic Widened Global Current Account Balances

August 2, 2021

By Martin Kaufman and Daniel Leigh
عربي, 中文, Español, 日本語, Português, Русский
2020 was a year of extremes. Travel all but ceased for a period. Oil prices wildly fluctuated. Trade in medical products reached new heights. Household spending shifted to consumer goods rather than services and savings ballooned as people stayed home amid a global shutdown.

If not for the crisis, global current account balances would have continued to decline.

Exceptional policy support prevented a global economic depression, even as the pandemic took a heavy toll on lives and livelihoods. The global reaction, as seen in major shifts in travel, consumption, and trade, also made the world a more economically imbalanced place as reflected in current account balances—a record of a country’s transactions with the

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Making The Digital Money Revolution Work for All

July 29, 2021

By Tobias Adrian and Tommaso Mancini-Griffoli
History moves in uneven steps. Just as the telegraph erased time and distance in the 19th century, today’s innovations in digital money may bring significant changes in the way we lead our lives. The shift to electronic payments and social interactions brought on by the pandemic may cause similarly rapid and widespread transformations.

The challenges are significant, and so is the potential reward. But policy action must begin immediately.

But we must look beyond the dazzle of technology and the alluring image of futuristic payment services. At the IMF, we must identify and help countries solve the deeper policy tradeoffs and challenges that are arising.
The rapid pace of change is a call to action—for countries to guide, and not be guided

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Drawing Further Apart: Widening Gaps in the Global Recovery

July 27, 2021

By Gita Gopinath
عربي, 中文, Español, Français, 日本語, Português, Русский
The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies. Our latest global growth forecast of 6 percent for 2021 is unchanged from the previous outlook, but the composition has changed.

The recovery is not assured until the pandemic is beaten back globally.

Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia. For 2022, we project global growth of 4.9 percent, up from our previous forecast of 4.4 percent. But again, underlying this is a sizeable upgrade

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Cryptoassets as National Currency? A Step Too Far

July 26, 2021

By Tobias Adrian and Rhoda Weeks-Brown
New digital forms of money have the potential to provide cheaper and faster payments, enhance financial inclusion, improve resilience and competition among payment providers, and facilitate cross-border transfers.
But doing so is not straightforward. It requires significant investment as well as difficult policy choices, such as clarifying the role of the public and private sectors in providing and regulating digital forms of money.
Some countries may be tempted by a shortcut: adopting cryptoassets as national currencies. Many are indeed secure, easy to access, and cheap to transact. We believe, however, that in most cases risks and costs outweigh potential benefits.
Cryptoassets are privately issued tokens based on cryptographic techniques and

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Stepping Up to Meet Low-Income Countries’ Pandemic Recovery Needs

July 26, 2021

By Christian Mumssen and Seán Nolan 
 中文, Español, 日本語, Português, Русский
Low-income countries have been hard hit by the pandemic. Their large financing needs are only likely to grow as they deal with the crisis and its economic aftermath. The IMF has approved a far-reaching package of support that would expand their access to financial assistance at zero-interest rates, while providing stronger safeguards against taking on debt they cannot handle. For these efforts to succeed, economically stronger member countries will have to play their part.
A rapid, unprecedented response
The pandemic has dealt a severe blow to the economies of many low-income countries: output growth stopped or reversed, living standards declined, poverty increased, and a decade of solid progress is now threatened.

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Reaching Net Zero Emissions

July 22, 2021

By Florence Jaumotte and Gregor Schwerhoff
عربي, 中文, Español, 日本語, Português, Русский
Climate action is gaining momentum. Since the 2015 Paris Agreement, countries have intensified climate action and many have committed to reach net zero emissions by 2050, meaning that any additional carbon emissions will be offset completely by carbon emissions withdrawn from the atmosphere.
However, the carbon budget, or maximum amount of emissions allowable, to limit global warming to well below 2°C is running out quickly. More frequent and intense disasters, a decline in agricultural productivity, and rising sea levels will only grow more common if this critical goal is not met.

Our analysis shows that delaying action on carbon pricing by 10 years would likely result in missing a mid-century net zero

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