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International Monetary Fund. African Dept.
The economic shock associated with the COVID-19 pandemic is set to have long-lasting effects on the economic outlook for CEMAC. The pandemic itself seems to be now broadly under control in the region, and the policy response from national and regional authorities, supported by significant emergency financing by the Fund, helped mitigate the initial economic fallout. With lower medium-term oil prices, the outlook projects that CEMAC’s fiscal and external adjustments will be slower than previously envisaged, entailing large external financing needs (around €6.6 billion for 2021–23). Gross international reserves will now reach the equivalent of 5 months of imports by 2025 vs. 2022 pre-pandemic, while net foreign assets (NFA) will be below previous expectations. Public debt would remain at elevated levels, albeit on a declining trend after the increase in 2020. This outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices. Other significant risks include: delayed implementation of the ongoing or a second phase of new Fund-supported programs, difficulties in filling large external financing needs, and a deterioration in the security situation.
Philipp Engler, Nathalie Pouokam, Diego Rodriguez Guzman, and Mrs. Irina Yakadina
Voluntary and government-mandated lockdowns in response to COVID-19 have caused causing drastic reductions in economic activity around the world. We present a parsimonious two-country-SIR model with some degree of substitutability between home and foreign goods, and show that trading partners’ asynchronous entries into the global pandemic induce mutual welfare gains from trade. Those gains are realized through exchange rate adjustments that cause a temporary reallocation of production towards the economy with the lowest infection rate at any point in time. We show that international cooperation over containment policies that aim at optimizing global welfare further enhances the ability of countries to exploit trade opportunities to contain the spread of the pandemic. We characterize the Nash game of strategic choices of containment policies as a prisoners’ dilemma.
Nina Biljanovska and Alexandros Vardoulakis
We study how financial frictions amplify labor supply shocks in a macroeconomic model with occasionally binding financing constraints. Workers supply labor to entrepreneurs who borrow to purchase factors of production. Borrowing capacity is restricted by the value of capital, generating a pecuniary externality when financing constraints bind. Additionally, there is a distributive externality operating through wages. The planner’s allocation can be decentralized with two instruments: a credit tax/subsidy and a labor tax/subsidy. Labor shocks, such as the COVID-19 shock, amplify the policy responses, which critically depend on whether financing constraints bind or not.
International Monetary Fund. Finance Dept.
This paper focuses on Ukraine’s Ex-Post Evaluation of Exceptional Access Under the 2015 Extended Arrangement. Sound fiscal and monetary policies since the 2014–2015 crisis have resulted in a sharp reduction in Ukraine’s external and internal imbalances. Public debt was put on a downward path, inflation has declined, and international reserves have recovered. The new Stand-By Arrangement will provide an anchor for the authorities’ efforts to address the impact of the crisis, while ensuring macroeconomic stability and safeguarding achievements to date. Together with support from the World Bank and the European Union, it will help address large financing needs. The program will focus on safeguarding medium-term fiscal sustainability, preserving central bank independence and the flexible exchange rate, and enhancing financial stability while recovering the costs from bank resolutions. The National Bank of Ukraine has skillfully managed monetary policy during a very challenging period. Central Bank independence should be preserved, and monetary and exchange rate policies should continue to provide a stable anchor in the context of the inflation-targeting regime, while allowing orderly exchange rate adjustment and preventing liquidity stress.
International Monetary Fund. Middle East and Central Asia Dept.
This paper presents Jordan’s 2020 Article IV Consultation and Request for an Extended Arrangement Under the Extended Fund Facility (ECF). Jordan’s IMF-supported economic reform program is anchored on structural reforms designed to spur growth by creating jobs—especially for women and young people—and reduce poverty. The Jordanian economy has continued facing significant challenges. Macroeconomic stability and external buffers have been preserved, but fiscal vulnerabilities remain. Structural reforms and continued fiscal consolidation efforts are critical to lift growth, reduce unemployment and bring debt on a downward path. Continued support from donors, particularly through concessional loans and budget grants, will be critical to help Jordan cope with humanitarian and economic needs. The coronavirus disease 2019 (COVID-19) outbreak poses significant risks to the program implementation. The authorities have implemented measures to help contain the impact of the pandemic; however, adjustments to the program modalities might be necessary considering the rapidly changing circumstances. Donor support through budget grants and concessional financing will be critical to help Jordan cope with the effects of the COVID-19 outbreak and the Syrian refugee crisis and to support program objectives.
International Monetary Fund. External Relations Dept.
This article presents an overview of the life of Richard Layard, who believes that the basic purpose of economics is the maximization of happiness and well-being. As director of the Wellbeing Programme at the London School of Economics’ Centre for Economic Performance, Layard focuses on the study of happiness. Layard was a distinguished labor economist long before he turned his attention to happiness. He is best known for his research in the 1980s on unemployment and for his advocacy of policies to support unemployed people on the condition that they try to find work. This “welfare to work” approach became popular in parts of continental Europe and was a mainstay of British Prime Minister Tony Blair’s economic program. Layard’s other current preoccupation is climate change. He is one of the drivers of the Global Apollo Program, a project to make renewable energy cheaper than fossil fuels within 10 years through publicly funded, internationally coordinated research and innovation.
International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance Report discusses the results of applying the value-added tax (VAT) gap estimation methodology of the Revenue Administration Gap Analysis Program (RA-GAP) to South Africa for the period 2007–12. It is found that the compliance gap is estimated to be between 5 percent and 10 percent of potential VAT revenues during the period 2007–12, and peaking in 2008 and 2009. The estimated compliance gap for VAT in South Africa between 2007 and 2012 is hump-shaped. The results also reveal that the level of the VAT policy gap in South Africa is low by international standards, owing to its simple VAT policy structure.
Mr. Peter S. Heller and Mr. William C. Hsiao


This primer explains why macroeconomists need to be concerned with issues of health policy and elaborates the essential information that a macroeconomist should know in providing inputs to discussions on health sector policy. The primer illustrates how these issues and the range of appropriate policy options may differ depending on the state of development of an economy and the particular approach taken by a country in structuring its health system. The primer also highlights the appropriate roles for the state and market in health care financing and provision, taking account of the various sources of market failure in the health sector.

International Monetary Fund
This report highlights the growth and macroeconomic policies in Malawi, and also analyzes the interaction between aid flows and macroeconomic stabilization policy. The paper reviews the country's recent trade reform program and summarizes other associated reforms and changes in the pattern of trade. It provides a survey of selected studies on the direct impact of HIV/AIDS on mortality and morbidity, measures of their possible effects on output, growth, and the fiscal position, and also a statistical appendix is provided for the country.