5. Prior to the global crisis, the Fund was often portrayed as losing relevance to the global economy, in view of its diminishing financing role and the widespread belief in the “Great Moderation.”2 During the immediate pre-crisis period, except for low-volume lending to low-income countries, the IMF was almost exclusively focused on surveillance. Many of the large advanced and emerging economies had lost interest in engaging with the Fund. Key stakeholders argued for downsizing the Fund, as they saw little likelihood that the global economy would again need an “emergency firefighter” for emerging market economies.3 Consequently, the institution was seen as struggling to redefine its strategic role.
10. This evaluation considers the period from 2005 to the present, with an emphasis on the period since the onset of the global crisis in 2007–08. This period allows an examination of whether the IMF’s provision of crisis-related financing and the many new initiatives may have changed country authorities’ perceptions of the Fund.
14. What does it mean for the Fund to be a trusted advisor? And for whom? As noted earlier, this evaluation focuses primarily on the Fund as trusted advisor to its individual member countries (at the bilateral level), since policy is implemented at the national level. But the Fund’s surveillance mandate to underpin global economic and financial stability nevertheless suggests the importance of developing trust with the wider constituency of global stakeholders (at the multilateral level). Chapter 5, Section B discusses some of the trade-offs and complementarities that arise from attempting to build trust at both the bilateral and multilateral levels.
20. How well does the Fund perform with regard to the criteria outlined above? Given the complexity of the issue, there is no simple answer. Based on evidence from both the interviews and surveys of country authorities, the Fund received high marks in many dimensions of the trusted advisor role. Moreover, the Fund can be rightfully proud of its achievements in improving its overall image in the aftermath of the global crisis. But the evaluation also identified areas where the Fund falls short, some representing longstanding problem areas.
72. The present time offers a unique window of opportunity to lay the groundwork to make the upswing in trust sustainable in a post-crisis environment. To do so, the Fund needs to have an institutional and incentive structure suited not only to dealing with member countries during crises, but also for periods of relative calm. The true test for the Fund will be in periods of calm, when a trusted advisor role is even more critical for traction and is likely best supported by an intellectually diverse culture and a flexible, open-minded approach to engaging with countries.
Belgium’s current policies fall short of achieving its climate targets and promoting emissions reductions at limited economic costs. We recommend that domestic carbon pricing form the centerpiece of an emissions reduction package, as pricing promotes mitigation at the lowest economic cost, can be phased in as international energy prices fall, and generates revenue to compensate vulnerable households and reduce taxes on productive activities. Sectoral policies, such as subsidy-tax schemes to promote low emissions vehicles, should reinforce carbon pricing and regional efforts, while the social protection system can be made more efficient and environmentally friendly by switching from energy subsidies to income-based support. Belgium should also promote dialogue at the EU-level to harmonize ETS prices and include all sectors under a single trading scheme.
Features of Belgium’s wage-formation process. It then tries to identify some weaknesses and policy recommendations that strive to strike a balance between maintaining benefits of wage indexation while attenuating drawbacks for the economy. Inflation at record levels is putting the sustainability of Belgium’s wage indexation system to the test by weighing on corporate and government finances. Current price pressures in Belgium show parallels to periods of elevated inflation in recent history yet also involve some important differences. Energy price inflation in Belgium is among the highest in the euro area, in part driven by the relatively low taxation of energy products. Compared to the median euro area country, Phillips curve estimates point toward some differences in the inflation-setting process and inflation persistence in Belgium. Wage formation in Belgium is characterized by the desire to shield households from purchasing-power losses while protecting the competitiveness of a highly open economy. Despite successfully maintaining wage competitiveness in recent years, the current run-up in inflation is prone to put the wage-setting framework under additional strain.
This Note prepared for the G20 Infrastructure Working Group summarizes the main finding of the IMF flagships regarding the role of environmentally sustainable investment for the recovery. It emphasizes that environmentally sustainable investment is an important enabler for a resilient greener, and inclusive recovery—it creates jobs, spurs economic growth, addresses climate change, and improves the quality of life. It can also stimulate much needed private sector greener and resilient investment.