Signs of Fiscal Progress: Will It Be Enough?


By Carlo Cottarelli

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We’ve just updated our latest assessment of the state of government finances, debts, and deficits in advanced and emerging economies.

Fiscal adjustment is continuing in the advanced economies at a speed that is broadly appropriate, and roughly what we projected three months ago. In emerging economies there’s a pause in fiscal adjustment this year and next, but this too is generally appropriate, given that many of these countries have low debt and deficits.

The improvement in fiscal conditions in many advanced economies is welcome, but it’s going to take more than lower deficits to get countries under market pressure out of the crosshairs.
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Risks to Financial Stability Increase, Bold Action Needed


By José Viñals

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Our latest update of the Global Financial Stability Report has three key messages.

First, financial stability risks have increased, because of escalating funding and market pressures and a weak growth outlook.

Second, the measures agreed at the recent European leaders’ summit provide significant steps to address the immediate crisis, but more is needed. Timely implementation and further progress on banking and fiscal unions must be a priority.

And third, time is running out. Now is the moment for strong political leadership, because tough decisions will need to be made to restore confidence and ensure lasting financial stability in both advanced and emerging economies. It is time for action.

Now, why have financial stability risks increased?

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It’s the Years, Not The Mileage: IMF Analysis of Pension Reforms in Advanced Economies


By Benedict Clements

Indiana Jones, the fictional character of the namesake movies, once said “It’s not the years, it’s the mileage.” This quote comes to mind as many advanced economies wrestle with pension reform and the best way to ensure both retirees and governments don’t go broke.

Our view, explained in a new study, is that the years do matter.

Our analysis shows that gradually raising retirement ages could help countries contain increases in pension spending and boost economic growth. Further cuts in pension benefits, or raising payroll contributions, are also options countries could consider, although many countries will find many advantages in raising retirement ages.

The challenge is to reform pension systems without hurting their ability to provide income security for the elderly and prevent old-age poverty. Continue reading

A Spotlight on the IMF’s Technical Assistance


By Nemat Shafik

(Version in عربي)

Of the three main pillars of the IMF’s work, technical assistance has been a sort of middle child; it doesn’t get the attention of the oldest and youngest children, yet in many ways is the glue that holds the family together.

The other two pillars are well known: we lend money to countries in times of need and crisis, and conduct annual check-ups of their economies and financial systems, known as surveillance.

As countries around the world cope with the global economic crisis, the IMF’s technical assistance is a vital part of the work that we do to help countries prevent, prepare for and resolve crises.  Technical assistance also helps countries master the form and details to govern themselves in an effective and legitimate way. Continue reading

Interest Rates and Investor Decisions: The Long and Short of It


By Erik Oppers

What drives the investment decisions of investors with a longer time horizon? Our research found these investors generally do not look at differences in interest rates among countries when deciding where to invest.

It turns out the factors they do consider in making these decisions are good and stable growth prospects, low country risks—including political and economic stability—and a stable exchange rate. This all makes good sense for long-term investors such as pension funds and insurance companies.

So why all this talk about how low interest rates in advanced economies are “pushing” investment flows to emerging countries, where interest rates are generally higher—is this story wrong? Continue reading

Global Growth Hits a Soft Patch


By Olivier Blanchard

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Today we’re in Sao Paulo, Brazil, to release our update to the IMF’s World Economic Outlook.

Despite a mild slowdown, the global economic recovery continues but the road to health will be a long one.  Downside risks, both old and new, are increasing.

Our world forecast is 4.3% growth for 2011, and 4.5% for 2012, so down by 0.1% for 2011, and unchanged for 2012, relative to April.  This figure hides very different performances for advanced economies on the one hand, and for emerging and developing economies on the other.  Continue reading

A Problem Shared Is a Problem Halved: The G-20’s “Mutual Assessment Process”


By Olivier Blanchard 1

The Group of Twenty industrialized and emerging market economies (G-20) has broken new ground over the past year or two. It has embraced the type of collaborative approach to policy design and review that is well suited to today’s interdependent world, where policies in one country can often have far-reaching effects on others.

Collective action by the G-20 in response to the recent crisis was critical in avoiding a catastrophic financial meltdown and a potential second Great Depression. Exceptional policy responses around the globe—including macroeconomic stimulus and financial sector intervention—indeed helped avoid the worst. These actions were notable, both for their scale and force, but also for their consistency and coherence.

Keen to build on this success, G-20 Leaders pledged at their 2009 Pittsburgh Summit to adopt policies that would ensure a lasting recovery and a brighter economic future. To meet this goal, they launched the “Framework for Strong, Sustainable, and Balanced Growth.” The backbone of this framework is a multilateral process, where G-20 countries together set out objectives and the policies needed to get there. And, most importantly, they undertake a “mutual assessment” of their progress toward meeting those shared objectives. With this, the G-20 Mutual Assessment Process or the “MAP” was born.

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