Under the first Millennium Development Goal (MDG1), the international community aims to halve the global rate of extreme income poverty—as measured by the share of the population living on less than $1 per day—between 1990 and 2015. Current trends and growth forecasts indicate that this goal will be achieved, although not in Sub-Saharan Africa. High growth in China and India explains much of the reduction in the global poverty rate, although progress toward MDG1 has also quickened in many other developing countries. High growth has continued in most of the developing world in the past year as a result of better policies in developing countries and a favorable global environment. The outlook for growth and poverty reduction remains favorable, although some risks remain. In particular, low-income country per capita growth is expected to remain above 5 percent in 2007.1
What is the human cost of the global economic crisis? How many people will the crisis prevent from escaping poverty, and how many will remain hungry? How many more infants will die? Are children being pulled out of schools, making it virtually impossible to reach 100 percent completion in primary education by 2015? What are the gender dimensions of the impacts? These are some of the questions as the global economy comes out of the worst recession since the Great Depression.
With less than five years left to achieve the Millennium Development Goals (MDGs), the international development community is showing renewed urgency to assess the various development efforts, especially in light of the recent global economic crisis and the still-fragile recovery. What are the prospects and challenges for reaching the goals? Answers are clearly linked to the complex tapestry of progress that lies below the global numbers.
The deepening global recession, rising unemployment, and high volatility of commodity prices in 2008 and 2009 have severely affected progress toward poverty reduction (Millennium Development Goal [MDG] 1). The steady increases in food prices in recent years, culminating in exceptional price shocks around mid-2008, have thrown millions into extreme poverty, and the deteriorating growth prospects in developing countries will further slow progress in poverty reduction. The prospects for an economic recovery, essential for alleviating poverty, are highly dependent on effective policy actions to restore confidence in the financial system and to counter falling international demand. While much of the responsibility for restoring global growth lies with policy makers in advanced economies, emerging and developing countries have a key role to play in improving the growth outlook, maintaining macroeconomic stability, and strengthening the international financial system.
This paper summarizes major measures taken in the international exchange and trade systems in 1988 and developments in exchange arrangements and the evolution of exchange rates. The exchange arrangements adopted by members since 1973 cover a broad spectrum of degrees of flexibility, from single-currency pegs to a freely floating system. Most countries have adopted arrangements that fall clearly into one or another of the major categories of the present classification system adopted by the IMF in 1982, and countries with dual markets usually have one market that is clearly more important than the other, which allows accurate classification by major market. Changes in IMF members' arrangements for their currencies during this decade have shown a distinct tendency to move toward more flexible arrangements and away from single-currency pegs, continuing a trend that began in the mid-1970s. A qualitative sense of the significance of the trend toward more flexible arrangements can be conveyed by the degree that world trade is affected by countries adopting different arrangements.
This paper describes that in developing countries, the moves toward more flexible exchange rate arrangements and liberalization of exchange controls often occurred in the context of comprehensive macroeconomic adjustment programs supported by the IMF. These programs featured a broad range of policy actions, including an increasing emphasis on structural reforms aimed at improving resource allocation and enhancing the supply response of the economy. With respect to restrictive systems, the trend toward liberalization of nontrade current and capital transactions continues, primarily because it is seen as ineffective, even counterproductive, to try to control such financial flows. This trend contrasts with trade where it appears that some major participants have been awaiting the outcome of the Uruguay Round before further reducing restrictions. A single currency peg has been the exchange arrangement most frequently used by developing countries, of which over one third currently have such an arrangement. This type of peg has the merit of being easy to administer and is generally chosen by countries that have a large share of foreign exchange transactions in the currency chosen as the peg.