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  • Welfare, Well-Being, and Poverty: General x
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Mr. Mark Allen, Mr. Tony Killick, Yegor Gaidar, Karl Otto Pöhl, Adrian Wood, Nora Lustig, Ricardo López Murphy, and Dennis T. Yasutomo

For the latest thinking about the international financial system, monetary policy, economic development, poverty reduction, and other critical issues, subscribe to Finance & Development (F&D). This lively quarterly magazine brings you in-depth analyses of these and other subjects by the IMF’s own staff as well as by prominent international experts. Articles are written for lay readers who want to enrich their understanding of the workings of the global economy and the policies and activities of the IMF.

International Monetary Fund. External Relations Dept.
Leaders of the Group of Eight countries gathered in Kananaskis, Canada, June 26–27, for a summit that focused on terrorism, the global economy, and building a new partnership for Africa’s development. It was their first meeting since the terrorist attacks of September 11. It was announced that Russia, which since 1997 has participated in summit meetings with the Group of Seven immediately following the annual G-7 summits, and which this year participated more fully as a member of the summit group, will in 2006 assume the presidency of the G-8 and host the summit. The June 2003 summit will be held in France.
Mr. Benedikt Braumann
Empirical data show that real wages fall sharply during periods of high inflation. This paper suggests a simple general equilibrium explanation, without relying on nominal rigidities. It presents an intertemporal two-sector model with a cash-in-advance constraint. In this setting, inflation reduces real wages through (1) a decline of the capital stock, and (2) a shift in relative prices. The two effects are additive and make the decline in real wages exceed the decline in per-capita GDP. This mechanism may contribute to rising poverty during periods of high inflation.
Domenico Lombardi
Drawing on recent research, this study elaborates on the role of the IMF in support of its lowincome members, pointing to the global character of the institution and to its superior ability-given its multilateral nature-to serve as a financial institution, an information provider, and a commitment device. The IMF assists low-income members through a range of activities that are normally bundled together, including lending, offering policy advice, and providing assistance with capacity building. The study reviews the features of IMF policies towards its low-income membership and points to the main challenges to their success.
International Monetary Fund. External Relations Dept.

Although Latin America is growing at its best sustained pace since the 1970s, the apparent dissatisfaction of many voters there “has its roots in real economic problems, especially in growth, which remains too low, and poverty levels, which remain too high in many countries,” IMF Managing Director Rodrigo de Rato told the Latin American Business Association Conference at Columbia University Business School in New York on February 16. The solution, he said, is “to continue with policies that have been shown to work, to refine these policies where necessary to promote further growth and address poverty and inequality, and to do so with sensitivity to both the importance of institutions and the circumstances of individual countries.”

International Monetary Fund. External Relations Dept.

On March 4, 2004, Horst Kohler stepped down as IMF Managing Director following his nomination for the office of German president (the election will take place on May 23). In an interview with Laura Wallace in late April, he said that it might be time for Europe to make a bold political gesture, consolidating its own representation on the IMF’s Executive Board to help enhance the voice of developing countries. He also supported other changes in the IMF’s governance structure that would benefit small, low-income countries and emerging market members whose quotas no longer reflect their true weight in the world economy.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The pandemic continues to spread in Latin America and the Caribbean (LAC), but economic activity is picking up. After a deep contraction in April, activity started recovering in May, as lockdowns were gradually eased, consumers and firms adapted to social distancing, some countries introduced sizable policy support, and global activity strengthened. Real GDP is projected to contract by 8.1 percent in 2020, followed by a mild recovery in 2021 reflecting persistent spread of the virus and associated social distancing and scarring. Risks to the outlook remain tilted to the downside, and uncertainty about the pandemic’s evolution is a key source of risk. Containing the spread of the virus and addressing the health crisis remain the key policy priorities. In countries where lockdowns still hamper activity, policies should focus on ensuring that firms have sufficient liquidity, and on protecting employment and income, while developing medium-term fiscal consolidation plans to safeguard debt sustainability. In countries that are easing lockdowns, efforts should focus on supporting the recovery, including through structural reforms. Once the pandemic is under control, and the recovery is on a strong footing, fiscal policy will need to focus on rebuilding buffers. Monetary policy should remain accommodative as long as inflation stays within the target range and inflation expectations are well anchored.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The pandemic continues to spread in Latin America and the Caribbean (LAC), but economic activity is picking up. After a deep contraction in April, activity started recovering in May, as lockdowns were gradually eased, consumers and firms adapted to social distancing, some countries introduced sizable policy support, and global activity strengthened. Real GDP is projected to contract by 8.1 percent in 2020, followed by a mild recovery in 2021 reflecting persistent spread of the virus and associated social distancing and scarring. Risks to the outlook remain tilted to the downside, and uncertainty about the pandemic’s evolution is a key source of risk. Containing the spread of the virus and addressing the health crisis remain the key policy priorities. In countries where lockdowns still hamper activity, policies should focus on ensuring that firms have sufficient liquidity, and on protecting employment and income, while developing medium-term fiscal consolidation plans to safeguard debt sustainability. In countries that are easing lockdowns, efforts should focus on supporting the recovery, including through structural reforms. Once the pandemic is under control, and the recovery is on a strong footing, fiscal policy will need to focus on rebuilding buffers. Monetary policy should remain accommodative as long as inflation stays within the target range and inflation expectations are well anchored.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The pandemic continues to spread in Latin America and the Caribbean (LAC), but economic activity is picking up. After a deep contraction in April, activity started recovering in May, as lockdowns were gradually eased, consumers and firms adapted to social distancing, some countries introduced sizable policy support, and global activity strengthened. Real GDP is projected to contract by 8.1 percent in 2020, followed by a mild recovery in 2021 reflecting persistent spread of the virus and associated social distancing and scarring. Risks to the outlook remain tilted to the downside, and uncertainty about the pandemic’s evolution is a key source of risk. Containing the spread of the virus and addressing the health crisis remain the key policy priorities. In countries where lockdowns still hamper activity, policies should focus on ensuring that firms have sufficient liquidity, and on protecting employment and income, while developing medium-term fiscal consolidation plans to safeguard debt sustainability. In countries that are easing lockdowns, efforts should focus on supporting the recovery, including through structural reforms. Once the pandemic is under control, and the recovery is on a strong footing, fiscal policy will need to focus on rebuilding buffers. Monetary policy should remain accommodative as long as inflation stays within the target range and inflation expectations are well anchored.

International Monetary Fund. External Relations Dept.

Following a decade of economic stagnation under a centrally planned system in the 1980s, Burkina Faso adopted market principles in 1991, instituting reforms that yielded higher growth and increased competitiveness. But a decade later, poverty remains widespread, and the country is burdened with massive debt. Burkina Faso is tackling these problems through its poverty reduction strategy paper (PRSP), and although the first year’s results are mixed, there are many promising signs.