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21. What’s the Best Way to Bolster the IMF’s Capacity to Lend to Low-Income Countries?

Author:
David Andrews
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
The IMF’s concessional lending to low-income countries through its Poverty Reduction and Growth Trust (PRGT) has risen dramatically since the start of the pandemic and demand for the PRGT resources is expected to remain above pre-pandemic levels for quite some time. But the surge in lending has strained the PRGT's finances—loan resources have dwindled, subsidy costs have risen sharply, and reserves need bolstering. Projections show the risks to PRGT financing are accentuated given the Russian invasion of Ukraine and rising global interest rates. A multi-pronged decade-long effort is needed to ensure sound PRGT financing: (1) reinforce current fundraising efforts for loan and subsidy resources; (2) promote the use of the PRGT's deposit investment account; (3) terminate the reimbursement of PRGT administrative resources to the IMF's General Resources Account and (4) begin a discussion on IMF gold sales to take place in the out years. Each prong of the effort should start immediately, given the time lags involved in reaching consensus and implementation.
Topic:
Development, International Cooperation, Finance, and IMF
Political Geography:
Global Focus

22. The IMF, Africa, and Climate Change—Making Sense of an Implausible Trilogy

Author:
Daniel Citrin and Daouda Sembene
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
Evidence suggests that Africa is the most vulnerable continent to climate change. While African countries contribute relatively little to global emissions, they remain significantly vulnerable to the devastating economic effects of this phenomenon. This paper reviews IMF activities and explores how best the IMF could support efforts by African countries to cope with macroeconomic policy and structural challenges associated with climate change. To this end, while recognizing the relative significance of the overall IMF contribution to addressing this global challenge, we make several recommendations about potential ways to strengthen the role of IMF surveillance, capacity development and financing. First, IMF staff should ensure that policy advice in the context of global, regional and country surveillance fit specific circumstances and institutional capacity of African countries as well as their economic vulnerabilities to climate change. To enable timely response to climate-related crises, staff teams should also be prepared to provide advice on a flexible basis, without being tied to formal periodic work schedules. Additionally, the IMF could facilitate adaptation and mitigation by engaging in intensive outreach activities about the economic impact of climate change. Second, there is merit in developing comprehensive IMF capacity development strategies in close collaboration with the authorities in climate-vulnerable countries. For effective implementation, the IMF will need to identify and actively seek adequate financing for capacity development activities on climate issues. Finally, while the Resilience and Sustainability Trust (RST) is a welcome addition to the IMF toolkit and represents a potentially significant source of financing for some sub-Saharan African countries, specific amendments could be considered notably with a view to limiting the potential cost for low-income borrowers to access its resources. Moreover, successful operationalization of the RST hinges on careful and flexible design of conditionality and how programs under the new facility will be linked to concurrent upper-credit tranche programs.
Topic:
Climate Change, International Cooperation, Finance, and IMF
Political Geography:
Africa

23. Domestic Revenue Mobilization and Debt Relief: The Lack of Any Link

Author:
Mark Plant and Nancy Lee
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
As the global financial community considers how to extend debt relief accompanied by IMF adjustment programs to vulnerable low-income countries, the issue of policy conditions for fiscal adjustment will inevitably arise. This paper considers the effectiveness of conditions related to domestic revenue mobilization (DRM) in the last systematic round of debt relief in the early 2000s Highly Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative (HIPC/MDRI). We find that debt relief had no impact on low-income countries’ DRM. Countries benefitting from debt relief had roughly the same DRM as those that did not. And DRM grew only slightly over time for both sets of countries. In the months to come there will be pressure to use debt restructuring and leverage to accelerate fiscal reforms and boost domestic revenue mobilization so that LICs can be seen to be contributing “their fair share” to economic recovery and transformation. Experience with the HIPC/MDRI tells us that we must be realistic in our expectations: external forces have limited impact unless combined with strong internal will and implementation capacity.
Topic:
Debt, Economics, IMF, and Credit
Political Geography:
Global Focus

24. Country Platforms and Delivery of Global Public Goods

Author:
Daouda Sembene, Nancy Lee, and Mark Plant
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Center for Global Development (CGD)
Abstract:
This paper discusses three potential requirements for country platforms to facilitate effective delivery of GPGs. We propose that existing country platforms be repurposed to coordinate the contribution of domestic and external stakeholders to GPG delivery efforts at the country level. For this proposed approach to be successful, an explicit link must be introduced between country-level efforts and global initiatives to provide GPGs. There is also merit in setting up country and global coordination mechanisms, with relevant agencies assigned to operate them both at the national and international levels. Using relevant country platforms, we suggest that international financial institutions (IFIs) such as the IMF and multilateral development banks (MDBs) be mandated with helping developing countries meet the financing needs associated with the provision of GPGs. In addition, technical support from the IFIs should be put on the table to improve the effectiveness of developing countries’ contribution to GPG delivery. In this regard, MDBs can and must play a central role in developing capacities in these countries as part of their own contribution to GPG delivery. At the same time, securing the contribution of civil society and the private sector to GPG delivery efforts is essential given the magnitude of potential financing needs.
Topic:
International Cooperation, Finance, Multilateralism, IMF, and Public Goods
Political Geography:
Global Focus

25. CAN DEBT RELIEF CONSTRAIN REPRESSIVE GOVERNMENTS?

Author:
Brett L. Carter
Publication Date:
10-2022
Content Type:
Commentary and Analysis
Institution:
Political Violence @ A Glance
Abstract:
The African continent is confronting the prospect of a new debt crisis. The COVID-19 pandemic wreaked havoc on government finances. The Russian government’s war against Ukraine has increased the cost of food and energy, and compelled investors to sell off government bonds in emerging markets. Rising interest rates in the United States will increase the cost of borrowing. The Chinese economy is struggling under the weight of Xi Jinping’s “Zero COVID” policy and accumulated real estate debt. In 2015, the International Monetary Fund announced that eight countries were in debt distress. By March 2022, 23 were. In June, public debt ratios reached a 20-year high. Africa’s debt-distressed governments “are unlikely to default” in 2022,” The Economist observed, “but face trouble by 2024.” There is some evidence that the debt crisis is especially acute for Africa’s non-democracies. The impending debt crisis coincides with a general sense that Africa is experiencing a democratic recession. Voters are increasingly subject to intimidation and violence. Incumbent presidents are removing term limits. The longstanding norm against military coups is fading.
Topic:
Cold War, Debt, World Bank, GDP, Repression, and IMF
Political Geography:
Africa, Russia, China, Ukraine, Asia, Democratic Republic of the Congo, and United States of America

26. Lending to Defaulters: The IMF Updates Its Lending into Arrears Policy

Author:
Gregory Makoff
Publication Date:
08-2022
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
The International Monetary Fund’s (IMF’s) “lending into arrears” policy outlines the criteria used by the IMF in deciding whether to loan to a country in default. This policy brief focuses on one of the conditions a country must meet when seeking debt relief from the IMF: it must engage in good faith negotiations with its creditors (known as the good faith criterion). The country must also implement significant financial reforms and provide assurances that it will be able to meet its financial obligations. This policy brief looks at the history of the lending into arrears policy, the controversy surrounding its use during Argentina’s 2005 debt restructuring and the May 2022 update to the policy.
Topic:
Economics, International Cooperation, Finance, and IMF
Political Geography:
Argentina and South America

27. The IMF should enhance the role of SDRs to strengthen the international monetary system

Author:
Edwin M. Truman
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The special drawing right (SDR), issued by the International Monetary Fund (IMF), has the potential to strengthen dramatically the international monetary system. Established in 1969 and allocated twice during its first decade, the SDR was in the institutional closet from 1980 until 2009, when $250 billion in SDRs was allocated to members of the IMF to help address the global financial crisis. In 2021 another $650 billion in SDRs was allocated to help address the coronavirus pandemic. The SDR has proved itself as a crisis instrument. This paper addresses critically the arguments against SDR allocations. It proposes regular annual SDR allocations, along with measures to make the SDR more attractive to critics and measures to build out the SDR system in support of the international monetary system. The paper includes an appendix on the history of the SDR. A second appendix analyzes SDR use following the 2009 and 2021 allocations and finds that contrary to the popular myth, many countries other than low-income members of the IMF benefited directly in multiple ways from those allocations.
Topic:
International Trade and Finance, Financial Crisis, Finance, and IMF
Political Geography:
Global Focus

28. The World Bank, the IMF, and the GATT/WTO: Which institution most supported trade reform in developing economies?

Author:
Douglas A. Irwin
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
The 1980s and 1990s saw a policy revolution in developing countries in which many highly protected (if not closed) economies were opened to world trade. These reforms were largely undertaken unilaterally, but international economic institutions such as the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade/World Trade Organization supported these efforts. This paper examines the ways in which these institutions promoted, or failed to promote, trade policy reform during this pivotal period.
Topic:
Development, World Bank, Reform, Trade, IMF, and WTO
Political Geography:
Global Focus

29. Throwing Down the Gauntlet: What the IMF Can Do About Egypt’s Military Companies

Author:
Yezid Sayigh
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Until recently, both the International Monetary Fund (IMF) and the World Bank were wholly reticent to say anything about the involvement of the Egyptian Armed Forces (EAF) and other military agencies in Egypt’s civilian economy. This is a longstanding problem. By turning a blind eye to the diversion of resources to the military sector and to the increasingly significant impacts on the economy and public finances, these international financial institutions (IFIs) have undermined the effectiveness of their own programs and allowed their resources to be invested in support of suboptimal policies by the Egyptian government. There is a question of propriety when international assistance allows distorted policy incentives to continue or even intensify and disregards the fact that much of the hype about global growth in the Egyptian economy obscures the very real constraints imposed on private sector development. It is high time to throw down the gauntlet: IFIs and their governmental sponsors should tackle the reality of military involvement systematically in their programs and policy recommendations, and they should confront the issue head on in their dealings with Egypt’s authorities. Reticence persists but is starting to dissipate. A report released by the World Bank in December 2020 noted that military agencies account for an appreciable proportion of all state-owned enterprises producing capital goods; consumer durables and apparel; materials; food, beverages, and tobacco; automobiles and components; retailing; media and entertainment; semiconductors and intelligent transportation system equipment; and technology hardware and equipment.1 The IMF went further in a July 2021 review of its loan agreement with Egypt, in which it referred to the presence and role of Egyptian military companies for the first time ever.2 Significantly, it included them explicitly in its assessment of state-owned enterprises in general—many of which, the report noted, are “registering weak financial performance while some are benefiting from an uneven playing field”—and implied that military companies should come under the same broad reform policies that the IMF proposes for the public sector as a whole. Now that the IMF, in particular, has broken its former silence, it should refine its approach so as to tackle the Egyptian military’s economic role in a more targeted and consistent manner—hence making its approach more effective and sustainable. This requires a mix of measures. The first set involves bringing military agencies and companies within the scope of recommendations proposed by the IMF for Egypt’s civilian public sector and state-owned enterprises as a whole. These first measures therefore engage with IMF recommendations and Egyptian government policy initiatives relating to broad questions of ownership, regulation, and financing strategy. The second set of measures tackles the specific aspects of the legal, regulatory, and judicial frameworks that enable the military’s activities in the civilian domain. Unless they are revised, these enabling frameworks will impede wider reforms, but the Egyptian government and IMF have, for the most part, neither reviewed nor addressed them to date.
Topic:
Regulation, Economy, Business, IMF, Civil-Military Relations, and Military
Political Geography:
Middle East, North America, and Egypt

30. Argentina 20 Years After La Crisis del 2001

Author:
María Félix Herrera and María Félix Herrera
Publication Date:
04-2022
Content Type:
Commentary and Analysis
Institution:
The North American Congress on Latin America (NACLA)
Abstract:
As the government closed a new agreement with the International Monetary Fund, Argentine societyrevisited painful memories from its biggest financial crisis in recent history.
Topic:
Financial Crisis, Economy, and IMF
Political Geography:
Argentina and South America