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International Monetary Fund. External Relations Dept.

Why have some African countries attracted large amounts of foreign direct investment? In a recent IMF study, Foreign Direct Investment in Africa—Some Case Studies, Anupam Basu of the African Department and Krishna Srinivasan of the International Capital Markets Department find that, while natural resources, locational advantages, and targeted policies can lure investors, political and macroeconomic stability and structural reforms have been consistently important factors in attracting FDI to the region.

International Monetary Fund. External Relations Dept.
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. African Dept.

This paper discusses Mozambique’s First Review Under the Policy Support Instrument (PSI) and Request for Modification of Assessment Criteria. Mozambique’s macroeconomic outlook remains favorable and the PSI-supported program is broadly on track. All assessment criteria were met and most indicative targets, but there was some slippage on structural reforms. Economic growth is robust and inflation remains moderate. In spite of risks stemming from the uncertain global economy, growth is expected to be sustained in the medium term by the natural resource boom and infrastructure investment. Structural reforms along a broad policy spectrum should be implemented vigorously to foster sustained and more inclusive growth.

International Monetary Fund

Papua New Guinea’s economic performance has strengthened since the last Article IV Consultation. The country has significant underlying vulnerabilities. The economy is exposed to commodity price shocks, and mineral production is expected to decline over the medium to longer term. However, macroeconomic vulnerabilities have intensified, in particular, the potential for higher unproductive fiscal spending to raise demand pressures and spur inflation. Prudent fiscal policies are welcomed. Implementation of the multi-donor technical assistance plan is encouraged. The authorities are encouraged to accelerate the structural reforms and improve infrastructure.

Mr. Jeromin Zettelmeyer
After the break-up of the Soviet Union, Uzbekistan’s output fell less than in any other former Soviet Republic, and growth turned positive in 1996/97. Given the country’s hesitant and idiosyncratic approach to reforms, this record has suprised many observers. This paper first shows that a standard panel model of growth in transition systematically underpredicts Uzbek growth from 1992-1996, confirming the view that Uzbekistan’s performance consitutes a puzzle. It then attempts to resolve the puzzle by appropriately extending the model. The main result is that Uzbekistan’s output performance was driven by a combination of low initial industrialization, its cotton production, and its self-sufficiency in energy.
Mr. Sebastian Acevedo Mejia, Claudio Baccianti, Mr. Mico Mrkaic, Natalija Novta, Evgenia Pugacheva, and Petia Topalova
We explore the extent to which macroeconomic policies, structural policies, and institutions can mitigate the negative relationship between temperature shocks and output in countries with warm climates. Empirical evidence and simulations of a dynamic general equilibrium model reveal that good policies can help countries cope with negative weather shocks to some extent. However, none of the adaptive policies we consider can fully eliminate the large aggregate output losses that countries with hot climates experience due to rising temperatures. Only curbing greenhouse gas emissions—which would mitigate further global warming—could limit the adverse macroeconomic consequences of weather shocks in a long-lasting way.
International Monetary Fund
This paper analyzes the importance of developing market-enhancing institutions for restoring economic growth in transition economies during 1991–98. The paper’s main finding is that the development of an institutional framework has indeed a significant positive impact on growth, but that progress in achieving macroeconomic stabilization and implementing broad-based economic reforms remain the key determinants of growth in transition economies.
International Monetary Fund. External Relations Dept.

George T. Abed, a Palestinian and a Jordanian national, took over this summer as Director of the IMF’s Middle Eastern Department. In his distinguished 20-year career at the IMF, he has worked on the Middle East and on fiscal policy issues worldwide. Outside the IMF, he taught at the University of California, Berkeley, and managed a development assistance foundation in Geneva, Switzerland. Laura Wallace spoke with him about the region’s prospects amid political tensions and difficult economic challenges. Besides modernizing the state and liberalizing the region’s economy, he stressed the paramount importance of democracy, human development, and attention to social needs.

International Monetary Fund. External Relations Dept.

The analysis and adjustment of government expenditure in less developed countries is discussed. A better balance between supply and demand in the public sector can be achieved by raising budgetary revenues, or by cutting budgetary expenditures, or by some combination of both. The IMF devotes considerable attention to assisting countries to make their tax systems more buoyant, to reduce the disincentive effects of taxation, and to administer their tax systems more effectively. Government expenditure policies are often important elements in programs of external adjustment supported by the IMF.