Read more about the article Emerging Markets and Developing Economies in the Global Financial Safety Net

Emerging Markets and Developing Economies in the Global Financial Safety Net

When countries face external financial shocks, they must rely on financial buffers to counter such shocks. The global financial safety net is the set of institutions and arrangements that provide lines of defense for economies against such shocks. From any individual country standpoint, there are three lines of defense in their external financial safety nets: international reserves, pooled resources (swap lines and plurilateral financing arrangements), and the International Monetary Fund. We argue here that there is a need to extend and facilitate access to the ultimate global financial safety net layer: the IMF. We illustrate that by pointing out how Morocco and Mexico have boosted their defensive power by having access to IMF precautionary lines of credit.

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Read more about the article Argentina avoids falling into arrears with the IMF

Argentina avoids falling into arrears with the IMF

On January 28, both Argentina’s government and the International Monetary Fund staff made announcements about an understanding on a new support program. Meanwhile, in addition to the payment of an amortization due on January 28, another payment is also expected in the first week of February. For now, at least Argentina’s default with the IMF has been avoided. The course ahead will depend on IMF disbursements as targets are reached.

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Read more about the article Helicopter Reserves to the Rescue

Helicopter Reserves to the Rescue

A new allocation of US$650 billion in Special Drawing Rights (SDRs) by the International Monetary Fund (IMF) to its member countries has entered into force last Monday. The extraordinary character of the allocation initiated this time is seen in the fact that its amount corresponds to more than double the sum of all allocations made to date. As allocations follow country IMF quotas, relief for those in need of reserves will come as an excess in other cases. The IMF set out to find ways in which countries with SDR surpluses can voluntarily channel them to those in need.

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Read more about the article Por que maiores déficits em conta corrente não são problemáticos na crise de Covid

Por que maiores déficits em conta corrente não são problemáticos na crise de Covid

Apesar do aumento dos saldos em conta corrente em termos absolutos em 2020 (em 0,4 ponto percentual do PIB global), os desequilíbrios globais excessivos —ou seja, a soma dos valores absolutos dos saldos considerados divergentes dos níveis correspondentes a fundamentos e políticas adequadas no médio prazo— se mantiveram em torno de 1,2% do PIB mundial, próximos aos anteriores.

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Read more about the article China’s renminbi needs convertibility to internationalize

China’s renminbi needs convertibility to internationalize

Commercial transactions and reserves of central banks and other global public investors could strengthen the position of the Renminbi as an alternative currency to the dollar, euro, yen and pound sterling. However, the qualitative leap towards the internationalization of the Chinese currency as a full reserve currency will only happen when confidence in its convertibility is sufficient to convince unofficial (private) investors to hold much more reserves denominated in it.

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Read more about the article 2 VIDEOS – Latin America and the multilateral world + Macroeconomic Policies in times of COVID-19 in Emerging Markets: Early Lessons

2 VIDEOS – Latin America and the multilateral world + Macroeconomic Policies in times of COVID-19 in Emerging Markets: Early Lessons

Latin America and the multilateral world — Otaviano Canuto Today's episode with Otaviano Canuto (ex World Bank, IMF, IDB) covers the current state of the region's economy, the role of multilateral organizations, Brazil's economic prospects and the post-COVID scenario for Latin America. ------------------- Macroeconomic Policies in times of COVID-19 in Emerging Markets: Early Lessons Moderator: Andrés Schipani, East and Central Africa Correspondent, Financial Times Speakers: - Otaviano Canuto, Senior Fellow, Policy Center for the New South - Karim El Aynaoui, President, Policy Center for the New South, Dean, Faculty of Governance, Economics and Social Sciences, Mohammed VI Polytechnic University - Célestin Monga, Professor of Public Policy, Harvard Kennedy School

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Read more about the article PODCAST Who do the IMF and World Bank really serve?

PODCAST Who do the IMF and World Bank really serve?

How the IMF and World Bank came into existence, why they are needed, what were the problems these institutions were designed to fix? So why has it seemed that, in recent decades, these institutions have become more concerned with promoting capital account liberalization more so than anything else? A case could be made that some of the prescriptions of the IMF and World Bank may not actually improve the economic prospects of the countries they engage with. What is your take on their effectiveness? Can the IMF do a better job of perhaps staying away or “doing no harm” by choosing not to lend to countries who are insolvent, or are there actually things that they can do to help? So, could these institutions use a healthy dose of not only educational diversity, but also geographical diversity in its leadership and staff? Is there a world where we shift away from austerity being a condition for lending, or is the IMF so concerned about getting its money back—and a decent return—that they feel they have to impose these measures so they can appease the US and other member countries that hold large voting blocs? If the IMF and World Bank are to be truly international institutions, with input from all of its member countries, doesn’t the voting structure have to change, and isn’t the current voting framework quite different from how it was when the IMF and World Bank were created? So, what are some things they should be proud of, and what do you believe should be the role of the IMF and World Bank in the 21st century?

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Read more about the article Don’t Expect Miracles From the Multilaterals
A pedestrian wearing a protective mask walks past the International Monetary Fund (IMF) headquarters in Washington, D.C., U.S., on Tuesday, April 14, 2020. In its first World Economic Outlook report since the spread of the coronavirus and subsequent freezing of major economies, the IMF estimated today that global gross domestic product will shrink 3% this year. Photographer: Andrew Harrer/Bloomberg

Don’t Expect Miracles From the Multilaterals

With Latin America and the Caribbean potentially facing years of difficulties due to the pandemic and related economic crises, attention has shifted to what multilateral institutions like the International Monetary Fund (IMF) might do to help. There’s no doubt they can play a crucial role in preventing another lost decade in the region. But these institutions will also face limitations because of capital constraints and other factors. 

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Read more about the article WEBCAST: Disaster Recovery: The Future of Multilaterals in Latin America
US Secretary of State Mike Pompeo (C) sits with Organization of American States Secretary General Luis Almagro (L) and Minister-Counselor Riyad Insanally, at the OAS during a gathering of the representatives in Washington, DC on January 17, 2020. (Photo by ANDREW CABALLERO-REYNOLDS / AFP) (Photo by ANDREW CABALLERO-REYNOLDS/AFP via Getty Images)

WEBCAST: Disaster Recovery: The Future of Multilaterals in Latin America

How will organizations such as the IDB, IMF, and OAS help Latin America emerge from the wreckage of COVID-19? What kind of support and cross-border leadership is crucial to ensure the region doesn’t endure another “lost decade”?

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Read more about the article Aljazeera – How unpaid corporate taxes led to violent protests in Ecuador

Aljazeera – How unpaid corporate taxes led to violent protests in Ecuador

Otaviano Canuto, a senior fellow at the Policy Center for the New South who has also held roles at the IMF and the World Bank, tells Al Jazeera that the scrapping of fuel subsidies had differentiated impacts on the social structure in Ecuador. "Cutting the fuel subsidies, paradoxically, while in some other countries it might benefit particularly the poor, because as long as it is accompanied by compensatory social policies, the fact is that the major beneficiaries very often are the middle classes who use cars, who benefit from the oil subsidies and so on," Canuto says.

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Read more about the article The IMF, Argentina and Ecuador: Have Lessons Been Learned?
People receive a free meal from a soup kitchen in front of the International Monetary Fund (IMF) offices in Buenos Aires, on October 31, 2019, during the first social protest since Argentina's president-elect Alberto Fernandez won the South American country's presidential election. - The return to power of protectionist Peronists comes amid a lengthy recession and a debt crunch, raising market fears of a possible default on a $57 billion IMF loan. Fernandez has insisted his government would not default but rather seek to renegotiate the terms of the IMF loan, and sought to reassure voters that their bank deposits would be safe under his administration. (Photo by RONALDO SCHEMIDT / AFP) (Photo by RONALDO SCHEMIDT/AFP via Getty Images)

The IMF, Argentina and Ecuador: Have Lessons Been Learned?

One major difficulty faced by the IMF, or whoever designs macroeconomic adjustment policies in the current Latin American context, is the difficulty involved in reading appropriately – and responsibly – a country’s political dynamics and how people will react to austerity policies. Even if the IMF could hire Machiavelli as an adviser, its ability to take political tea leaves into account would not improve. As for avoiding risks entirely, that would only happen if the IMF fundamentally changes its mission – and stops lending to troubled countries entirely.

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Read more about the article Nouveaux défis pour les institutions de Bretton Woods

Nouveaux défis pour les institutions de Bretton Woods

Au cours de leurs 75 années d’existence, les institutions nées à Bretton Woods, que l’on appelle souvent les soeurs jumelles de Bretton Woods, se sont transformées, pour répondre à l’évolution de l’économie mondiale et aux défis que celle-ci a posés. Plus récemment, trois changements dans l'ordre international ont apporté une nouvelle série de défis: l'émergence de nouveaux pôles géo-économiques; la prédominance des politiques nationalistes par rapport au multilatéralisme; et la fragmentation du système des institutions plurinationales.

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Read more about the article The IMF needs a bridge-builder at the helm – that’s what it looks set to get

The IMF needs a bridge-builder at the helm – that’s what it looks set to get

If appointed, the Bulgarian-born economist Kristalina Georgieva will be the first managing director of the IMF to come from Eastern Europe. She can be a strong advocate for all economies, and for the policies needed to prevent further global fracture, stimulate growth and help more people fulfil their potential.

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Read more about the article Argentina’s half-baked adjustment has not worked

Argentina’s half-baked adjustment has not worked

Argentina’s peso tumbled and stocks plunged after last Sunday’s primary elections. The perception of a likely victory of President Macri’s opponents – Alberto Fernandez, and running mate, Christina Fernandez de Kirchner - has sparked a new shift in investor preferences away from peso assets, pressures on the exchange rate, and hikes on sovereign spreads. Unless fears of a return to policies prevailing before Macri are assuaged, the market rout tends to deepen.

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