International Monetary Fund. Strategy, Policy, & Review Department
Over the course of the pandemic, the Fund has made several modifications to the access limits on the use of Fund’s resources to increase the borrowing space under the hard caps on emergency financing and under the annual limits that trigger exceptional access (EA) safeguards under GRA and PRGT. The current temporarily-increased access limits expire at end-December 2021, and absent policy changes, the limits would return to the lower pre-pandemic levels or to the new PRGT annual access limit. Staff proposes to let all access limits return to pre-pandemic levels (or the new PRGT annual access limit), with the exception of the cumulative access limits for emergency financing instruments, which would be extended at the current level for another 18 months.
This Selected Issues paper aims at identifying some of the main channels of transmission through which political instability feeds and foster fragility and provide an estimate of the “fragility gap” that haunts the Bissau-Guinean society. This paper argued that, until today, due to chronic political instability, Guinea-Bissau has been in a costly fragility trap. This analytical piece argues that the major factor behind Guinea-Bissau’s fragility has been the chronic political instability. It also uncovers some of the main transmission channels from political instability to fragility and provides simple estimates about the cost of instability. Estimates based on reasonable assumptions reveal that, considering only Guinea-Bissau’s post-war period, without chronic political instability real GDP per capita could have been at least two thirds higher than its 2013 level. This assessment shows the crucial importance of the security sector reform. It also shows that the current estimated cost of the security sector reform is modest in comparison, since it puts into perspective its monetary costs—which are easy to calculate and mostly frontloaded—vis-à-vis its wide and deep benefits, which are not as explicit and accrue over time.
Mr. Johannes Mueller, Irene Yackovlev, and Hans Weisfeld
Most WAEMU countries are likely to see economic growth deteriorate over the next two years as a result of the global economic crisis, and some WAEMU countries will be more severely affected by the crisis than others. This could have a detrimental effect on efforts to reduce poverty. Deteriorating remittances and commodity export prices are projected to negatively affect the WAEMU countries’ external current account deficit and reserves, although the impact should be cushioned by positive terms-of-trade shocks, such as declining import prices for food and fuel products. These developments should also help lower inflation pressures, bringing WAEMU inflation closer to its historical level of about 2 percent by 2010.
The first part of this paper lays out the process of program design and briefly describes some of the analytical tools--including the financial programming framework, the balance sheet approach, and the debt sustainability template--employed by Fund country teams in advising national authorities on policy formulation. The second part of paper seeks to assess how well this process works in practice.
Do exchange-rate-based stabilizations generate distinctive economic dynamics? To address this question, this paper identifies stabilization episodes using criteria that differ from those in previous empirical studies of exchange-rate-based stabilizations. We find that, while some differences can be detected between exchange-rate-based stabilizations and stabilizations where the exchange rate is not the anchor, the behavior of important variables does not appear to differ—especially output growth, which is good in both cases. There is also no evidence that fiscal discipline is enhanced by adopting an exchange-rate anchor, or that there are any systematic differences in the success records of stabilizations that use the exchange rate as a nominal anchor and those that do not.
Uncertainty about the export earnings accruing to a country (sometimes referred to as export instability) is an important source of macroeconomic uncertainty in many developing countries. Theory predicts that countries should react to increases in this form of uncertainty by increasing their level of savings. The resulting asset accumulations would then act as the country’s insurance against the greater riskiness in its income stream. The paper tests this implication for a large sample of developing countries. In general, the results suggest that developing countries have indeed responded to increases in export instability by building up precautionary savings balances.
International Monetary Fund. Secretary's Department
The speeches made by officials attending the IMF–World Bank Annual Meetings are published in this volume, along with the press communiqués issued by the International Monetary and Financial Committee and the Development Committee at the conclusion of the meetings.