March of the Billionaires


CliftJBy Jeremy Clift

Whether combating malaria through the provision of mosquito nets or building schools and providing basic sanitation, philanthropy is helping transform the developing world. Rich donors are devoting fortunes—many of them earned through computer software, entertainment, and venture capitalism—to defeating poverty and improving lives, supplementing and in some cases surpassing official aid channels.

From billionaires Bill and Melinda Gates and Warren Buffett to Aliko Dangote and George Soros, the titans of capitalism are backing good causes with their cash. By financing new vaccines, championing maternal health, supporting learning, building libraries, or buying up Amazon rain forest to protect the environment, philanthropists are backing innovations and new approaches that are changing lives and building dreams.

The new issue of Finance & Development magazine looks at the world of targeted giving and social entrepreneurship.

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Middle East and North Africa Face Historic Crossroads


By David Lipton

(Version in عربي)

Almost two years since the Arab Awakening started, the future of the Middle East and North Africa is in a flux, with fledgling democracies struggling to find their way and renewed outbreaks of violence adding to the challenges the region is facing. Some are starting to worry aloud that the revolutionary path may hit a dead end.

To me, a useful way to think about the present situation is that the region could end up taking any one of three alternative paths, as far as its economic future is concerned. We could witness either:

  • Economic deterioration, if squabbling over political power prevents stabilization, let alone reform;
  • Stabilization through a reassertion of vested business interests that would offer a respite from eroding economic conditions, but condemn the region to a return to economic stagnation or at best tepid growth;
  • Or we could see a new economy emerge, as newly elected governments gradually find a way to end economic disruptions and undertake reforms that open the way to greater economic opportunity for their people.

While the first two paths would be undesirable, they could come to pass. Needless to say, the third path of transformation would be best.

No doubt the Arab countries in transition will chart their own paths. But I strongly believe that the international community also has a role in helping them avoid the unfavorable outcomes. Let me share some thoughts on how we can provide support.

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Policy Interest Rates in Latin America: Moving to Neutral?


By Nicolas Magud and Evridiki Tsounta 

(Version in Español)

Many Latin American countries have strengthened their monetary policy frameworks in recent years to keep the rate of inflation in check. Some of them have adopted an inflation target and use the policy interest rate as the main tool to achieve that target.

But how do central bankers know whether monetary policy is expansionary or contractionary? Policymakers would need to know how the current policy rate compares to a benchmark or neutral rate.

The neutral interest rate is the real interest rate consistent with the economy operating at full employment and stable inflation. If the economy is operating above its potential capacity and inflation is rising, policymakers should increase the policy interest rate above the neutral level to cool down the economy. Conversely, if the economy is operating below its full employment level, interest rates may need to be lowered below the neutral level.

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Jobs. Jobs. Jobs. Getting the Labor Markets Working Again


By Olivier Blanchard

The sharp and persistent rise in unemployment in advanced economies since the 2008-09 financial crisis is a hotly debated policy issue.  Rightly so:  High persistent unemployment has major human and economic costs, from loss of morale to loss of skills.  More broadly, it seems to undermine the very fabric of society.

Against this backdrop, the theme for the IMF’s 13th Jacques Polak Annual Research Conference, “Labor Markets through the Lens of the Great Recession,” could not be timelier. This year’s conference program weaves together a number of contributions by researchers both inside and outside the IMF, aiming to shed light on those labor market issues that are central to the current economic and social landscape.

Cyclical vs. structural

Peter Diamond, Nobel Prize winner in Economics and Professor of Economics at MIT, will give the keynote Mundell-Fleming lecture on the controversial issue of cyclical vs. structural unemployment.

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Seeing Our Way Through The Crisis: Why We Need Fiscal Transparency


by Carlo Cottarelli

Version in Français

Without good fiscal information, governments can’t understand the fiscal risks they face or make good budget decisions. And unless that information is made public, citizens and their legislatures can’t hold governments accountable for those decisions.

Fiscal transparency—the public availability of timely, reliable, and relevant data on the past, present, and future state of the public finances—is thus crucial to the foundation of effective fiscal management.

A new paper from the IMF on fiscal transparency, accountability, and risk considers the progress we have made in opening up the “black box” of fiscal policymaking over the past decade, the lessons of the recent crisis for current fiscal reporting standards and practices, and the steps we need to take to revitalize the global fiscal transparency effort.

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Latin America and the Caribbean: Dealing with Another Food Price Shock


By Luis Cubeddu and Sebastián Sosa

(Version in Español)

World food prices are on the rise again owing mainly to global weather-related shocks. This has led to concern that the rise could result in higher inflation and hurt the most vulnerable.

Two points to note are that the recent increase in food prices has been less acute than the two previous episodes (in mid-2008 and early 2011), and features important differences across commodities. For example, while the price of soybeans, corn and wheat are up sharply, coffee and sugar prices are down. Market projections suggest that corn, soy, and wheat prices will stay high through end-2012, but then decline gradually as supply conditions normalize.

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Debt in a Time of Protests


by Nemat Shafik

As the world economy continues to struggle, people are taking to the streets by the thousands to protest painful cuts in public spending designed to reduce government debt and deficits. This fiscal fury is understandable.

People want to regain the confidence they once had about the future when the economy was booming and more of us had jobs.

But after a protracted economic crisis, this will take planning, fair burden-sharing, and time itself.

If history is any guide, there is no silver bullet to debt reduction. Experience shows that it takes time to reduce government debt and deficits. Sustained efforts over many years will ultimately lead to success.

Most countries have made significant headway in rolling back fiscal deficits. By the end of next year in more than half of the world’s advanced economies, and about the same share of emerging markets, we expect deficits —adjusted for the economic cycle—to be at the same level or lower than before the global economic crisis hit in 2008.

But with a sluggish recovery, efforts at controlling debt stocks are taking longer to yield results, particularly in advanced economies. Gross public debt is nearing 80 percent of GDP on average for advanced economies—over 100 percent in several of them—and we do not expect it to stabilize before 2014-15.

So what can governments do to ease the pain and pave the way for successful debt reduction?

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Tharman Sees “Greater Global Policy Resolve”


“Although the economic environment has weakened, the policy resolve has strengthened.” This is how Tharman Shanmugaratnam, Singapore’s Deputy Prime Minister and Minister for Finance , who is Chair of the IMF’s policy-setting committee, described the outcome of the IMF-World Bank annual meetings in Tokyo.

Growth is slower than anyone expected,” he admitted in a video interview.  “It is slower in Europe, it is not as fast as it should be in the United States, not as fast as it should be to bring unemployment down, and it is slowing in Asia to a greater extent than was expected. Tharman is chair of the 24-member IMFC.

“But we are now in a much better situation than six months ago when it comes to policy solutions.” He said there had been major steps forward in Europe “despite some disagreement on individual pieces.”  But underlying problems in the Eurozone, budget problems in the United States, and structural problems in global economy are longer term problems and “cannot be fixed quickly.”

For a quick brief on the outcomes from the meetings in Tokyo, take a look at:

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Taking Stock: Public Finances Now Stronger in Many Countries


By Carlo Cottarelli

(Versions in  عربي, 中文EspañolFrançaisРусский日本語)

The slow global recovery is making fiscal adjustment more difficult around the world, but this doesn’t mean that little has been accomplished.

In fact, significant progress in many countries has been made during the past two years in strengthening their fiscal accounts after the 2008–09 deterioration.  The IMF’s latest Fiscal Monitor takes stock of this progress.

Deficits are lower, and in many cases debt is too

Let me first say something about advanced economies, which is where the most urgent fiscal problems exist.

Most advanced economies have made good progress lowering their fiscal deficits (the imbalance between spending and revenues). Deficits, adjusted for the economic cycle, fell by about ¾ of a percentage point of GDP in 2011 and 2012, and are projected to do so by about 1 percentage point of GDP in 2013.

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Global Economy: Some Bad News and Some Hope


By Olivier Blanchard

(Versions in  عربي中文EspañolFrançaisРусский日本語)

The world economic recovery continues, but it has weakened further.  In advanced countries, growth is now too low to make a substantial dent in unemployment.  And in major emerging countries, growth that had been strong earlier has also decreased.

Let me give you a few numbers from our latest projections in the October World Economic Outlook released in Tokyo.

Relative to the IMF’s forecasts last April, our growth forecasts for 2013 have been revised down from 1.8%  to 1.5% for advanced countries, and from 5.8% down to 5.6% for emerging and developing countries.

The downward revisions are widespread.  They are however stronger for two sets of countries–for the members of the euro area, where we now expect growth close to zero in 2013, and for three of the large emerging market economies, ChinaIndia, and Brazil.

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