March 12, 2021/IMF
In today’s edition we focus on US climate policy, how to build back a greener future, women and economics, how gender equity benefits us all, government budgeting with women in mind, help for small businesses, Vietnam’s successful handling of the pandemic, and much more. On that note, let’s dive right in.
📣 But first, don’t forget to tune in on Monday at 9 a.m. to a panel discussion on rising corporate market power and declining competition. The event hosted by the Brookings Institution and Bruegel, a Brussels-based think tank, accompanies the release of an IMF paper examining how the pandemic could further consolidate the power of dominant firms. The panel will feature IMF Managing Director Kristalina Georgieva, European Commission Executive Vice President Margrethe Vestager, and US Senator Amy Klobuchar. Watch the discussion on YouTube and click “Set Reminder” to be notified.
A NEW VISION FOR US CLIMATE POLICY
The United States has put forward a new climate plan that pledges US carbon neutrality by 2050. The plan envisions stronger energy efficiency standards, clean technology subsidies, and $2 trillion of public funding over ten years for clean energy infrastructure and critical technologies, such as green hydrogen.
New IMF staff research helps make a case for specific fiscal actions that would help curb emissions and broaden support for US policies to tackle climate change, the IMF’s Ian Parry writes in a new blog.
New policies could combine carbon pricing, both in the form of carbon taxes and a border carbon adjustment with sectoral-level incentives such as feebates and subsidies based on carbon dioxide emission rates. On the international front, a promising mechanism to complement countries’ Paris Agreement pledges would be an international carbon price floor, where large emitting countries agree to implement a minimum price on their carbon emissions.
“Under any emissions mitigation strategy, the clean energy transition will provide many opportunities in sectors such as technology and renewable energy, while negatively impacting some existing industries: measures will be needed for assisting vulnerable workers and regions in these sectors,” Parry writes.
Read more about the IMF and climate change here.
PREPARING FOR CARBON PRICING
IMF Managing Director Kristalina Georgieva took a broader view on the need to move forward with policies to address climate change in the wake of the pandemic.
“We cannot have macroeconomic and financial stability without environmental and social sustainability,” she said during an online panel discussion hosted by the United Nations Environment Programme and Oxford University.
No time to waste: “We have run all the possible analysis on the transition to the new climate economy. It cannot happen fast enough without carbon pricing and right now, where are we? On average carbon price on a global scale is $2 per ton. Where we should be at this moment is $75 per ton,” she said.
The MD, however, readily acknowledged political challenges of moving forward with carbon price policies, particularly a carbon tax, and made clear that it can be approached in a just manner with the right balance.
“It is politically difficult unless it is done right. When we factor in who needs to be compensated and protected by the pressures that come from carbon price, when we redistribute we get revenues and then we give it back–then it is possible to move on carbon price,” she said. “Not all countries are ready to do a tax, which in our view is the most efficient way to introduce carbon price, but all countries can do some form of pricing through trade or feebates.”
THE AGE OF WOMENOMICS
US Treasury Secretary Janet Yellen joined the MD for a conversation on women in economics and finance to mark International Women’s Day. During a wide ranging discussion, the question of how to create a future where more women are making a mark in the field.
“Often the way economics is taught is a turn off to [women],” Yellen said. “What you and I just talked about—how important economics is to human welfare. They don’t see that in an introductory economics class.”
The two discussed their own paths to the economics profession. Yellen, whose academic career has focused on employment and business cycles, took her first economics course as an undergraduate Brown University where she found the field offered answers for addressing the human toll caused by unemployment. Georgieva focused her early career on environmental economics after a family member fell ill from groundwater pollution. The focus on the environment also allowed her to be free from the Communist strictures of Cold War-era Bulgaria
Two lessons for women: The MD talked about two lessons she learned in her own professional life.
First is the danger of women trying to blend in a male-dominated environment: “It is dangerous because what we want is diversity, we want women to bring ideas and perspectives that otherwise will not be in the conversation to emphasize topics that otherwise may be underrepresented in research.”
Second: “There simply have to be more women in senior positions. And these women in senior positions ought to mentor other women, to make sure that they create that sense of confidence for younger women to step up.”
Watch the full event here and listen to it in podcast form here.
THE BENEFIT OF WOMEN’S ECONOMIC EMPOWERMENT
IMF Chief Economist Gita Gopinath made the point during this year’s International Women’s Day that gender equity is not just morally right but has a clear economic case as well.
“Why do we as an institution also care so deeply about women’s empowerment and inclusive growth? We care about it not only because it is a moral imperative, but because gender empowerment is critical for the economic wellbeing of both men and women, and for societies as a whole,” she said in a keynote speech at the inaugural Dr. Hansa Mehta Lecture.
She outlined three ways gender equity can lead to inclusive and stronger global economic growth:
1. Gender equity in the labor market can deliver significant gains to national income. IMF research has shown that if women were to participate in the labor force to the same extent as men, national income could increase significantly.
2. Better economic opportunities and equal pay for women not only lowers gender inequality but also lowers income inequality.
3. Women’s empowerment enhances economic resilience. Recent IMF staff research has made a strong case that more women leaders in finance would not only reduce existing gender employment gaps in the corporate sector, but also strengthen bank stability.
Watch the full speech here.
BUDGETING WITH WOMEN IN MIND
“Women have borne the economic and social brunt of the pandemic. With many governments preparing budgets for the next fiscal year, we now have a golden opportunity to counter this inequity,” IMF Deputy Managing Director Antoinette Sayeh writes in a blog this week with the IMF’s Jiro Honda, Carolina Renteria, and Vincent Tang.
Gender budgeting brings the powerful tool of national budgets to bear on gender inequalities. It integrates gender into the policies and processes of public financial management. Assessing where the needs are, allocating resources for helping women, and tracking expenditures and evaluating impacts can help countries focus resources on women, and ensure future budgets are better for them than previous ones.
Read the full blog here.
HELPING SMALL BUSINESSES SURVIVE
Small and medium enterprises have an out-sized impact on local economies. They account for half to two-thirds of private sector employment in the United States and the European Union, respectively, and contribute close to 40 percent of national income in emerging economies.
But small companies face greater constraints in accessing finance than larger firms, especially during economic crises, the IMF’s Kazuko Shirono, Esha Chhabra, and Yingjie Fan write in a new blog.
Our chart of the week, based on the IMF’s Financial Access COVID-19 Policy Tracker, reveals the most common government support measures used by 130 countries to help cash-strapped small businesses. The data show that overall, financial assistance such as grants was the most used policy measure (adopted by 77 percent of countries), followed by public guarantees on loans (50 percent), delays in loan repayments (30 percent), tax relief (28 percent), and lower interest rates (24 percent).
Read the full blog here.
VIETNAM SUCCESSFULLY NAVIGATING THE PANDEMIC
Despite the pandemic, Vietnam’s economy has remained resilient, expanding by 2.9 percent in 2020—one of the highest growth rates in the world. In 2021, growth is projected to be 6.5 percent. This is thanks to strong economic fundamentals, decisive containment measures and well-targeted government support, according to the IMF’s latest annual assessment of the country’s economy.
Going forward, it is imperative for policymakers to limit permanent economic scarring and support a robust recovery, while setting the stage for reforms to boost productivity and reduce economic dualism, the IMF’s Era Dabla-Norris and Yuanyan Sophia Zhang write in a new Country Focus article.
Check out these five charts on Vietnam’s outlook to learn more.
THE NEED FOR DEBT TRANSPARENCY
The economic crisis caused by the COVID-19 pandemic has exacerbated debt-sustainability concerns. Today, more than half of low-income countries eligible for relief under the Group of 20’s Debt Service Suspension Initiative are either in debt distress or at high risk, doubling in the last decade.
Debt transparency will become critical as the crisis has pushed more and more countries to the brink of debt sustainability, Ceyla Pazarbasioglu, Director of the IMF’s Strategy, Policy, and Review Department, and World Bank Chief Economist Carmen Reinhart write in an op-ed this week.
Transparency cannot overcome all the challenges, but it can go a long way to increasing the success of the Common Framework for Debt Treatments by increasing trust among creditor groups, which at present is rather low. Conversely, the framework can be a powerful tool to enhance transparency, as accurate and shared information is needed to get the negotiations on a speedier track. Disclosure must come from all creditors and debtors, as multilaterals continue to expand their coverage of data gaps in existing databases while building more encompassing ones, and revise their lending policies to enhance disclosure requirements.
Read the full op-ed here.
F&D: REMAKING THE POST-COVID WORLD
In our Spring 2021 issue of F&D on the digital future, launched last week, MIT economics professor Daron Acemoglu penned the 2200-word cover story, and argued that to reverse widening inequality, we must keep a tight rein on automation.
Acemoglu writes:
Ever since weaving and spinning machines powered Britain’s Industrial Revolution, automation has often been an engine of economic growth. In the past, however, it was part of a broad technology portfolio, and its potentially negative effects on labor were counterbalanced by other technologies boosting human productivity and employment opportunities. Not today.
The next phase of automation, relying on AI and AI-powered machines such as self-driving cars, may be even more disruptive, especially if it is not accompanied by other types of more human-friendly technologies. This broad technological platform, with diverse applications and great promise, could help human productivity and usher in new human tasks and competencies in education, health care, engineering, manufacturing, and elsewhere. But it could also worsen job losses and economic disruption if applied exclusively for automation.
Interested in learning more? Read the full piece here, download the PDF, or continue reading the full article below for your convenience.
MARK YOUR CALENDAR
On Thursday, March 18, the Managing Director will participate in a one-on-one conversation with Microsoft President Brad Smith on the digital divide, the changing nature of employment, and the importance of cybersecurity for financial stability. Watch the event on IMF Live.
IMF AROUND THE WORLD
IMF staff announced the conclusion of a virtual staff visit to the Solomon Islands. The South Pacific-island nation has been one of the few countries with no record of local transmission of COVID-19, but the economic impact of COVID-19 has been severe.
IMF staff this week also concluded an Article IV economic assessment mission to Aruba where GDP contracted sharply given the country’s high dependency on tourism. IMF staff also issued a concluding statement following an Article IV mission to Chile.
IMF management approved the first review of Sudan‘s Staff Monitored Program, which supports the government’s home-grown program of reforms aimed at stabilizing the economy, strengthening social protection, boosting the private sector, and strengthening governance.
GENDER AND REVENUE PODCAST
The IMF’s Fiscal Affairs Department Gender Initiative has teamed up with the Tax Administration Diagnostic Assessment Tool funded by IMF Capacity Development and its partners on a special Gender and Revenue Administration Podcast Series.
The podcast–launched on the occasion of the International Women’s Day–highlights policies that promote the participation of women in the economy. The inaugural episode features the Vice President of the Republic of Ecuador, María Alejandra Muñoz; the Commissioner General of Jamaica’s Customs authorities, Velma Rickets-Walker; and the IMF’s Katherine Baer.
Listen to the podcast here.
IMF LENDING
Check out our global policy tracker to help our member countries be more aware of the experiences of others in combating COVID-19. We are also 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, 80 countries have been approved for emergency financing, totaling over US$32 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.
HAVE YOUR SAY
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