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Business and Economics > Finance: General

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Cover IMF Staff Country Reports
People’s Republic of China—Hong Kong Special Administrative Region: 2024 Article IV Consultation Discussions-Press Release; and Staff Report
International Monetary Fund. Asia and Pacific Dept
Hong Kong SAR’s economy is on a path of gradual but uneven recovery following a protracted period of shocks. While the unemployment rate has declined to historical lows, employment loss has been sizable and domestic demand has remained weak amid tight financial conditions and property market downturn, both locally and in Mainland China. The territory’s integration with Mainland China, including in the context of the Greater Bay Area (GBA) initiative, has significantly increased in recent years, but rising regional competition has put pressure on some of its traditional growth engines, prompting the authorities to pursue new sources of growth, including from innovative, technology-driven sectors.
Keywords:
consultation discussion; exchange regime; surveillance topic; rate of HK; surveillance effort; Housing; Housing prices; Climate finance; Global; Asia and Pacific
Cover IMF Staff Country Reports
Papua New Guinea: Third Reviews under Extended Arrangement under the Extended Fund Facility and an Arrangement under the Extended Credit Facility, Request for Extension, Rephasing of Access, and Modification of Quantitative Performance Criteria, and Request for an Arrangement under the Resilience and Sustainability Facility-Press Release; Staff Report; and Statement by the Executive Director for Papua New Guinea
International Monetary Fund. Asia and Pacific Dept
This paper presents Papua New Guinea’s Third Reviews under Extended Arrangement under the Extended Fund Facility (EFF) and an Arrangement under the Extended Credit Facility (ECF), Requests for Extension, Rephasing of Access, and Modification of Quantitative Performance Criteria, and Request for an Arrangement under the Resilience and Sustainability Facility (RSF). Papua New Guinea’s economic outlook remains positive, with growth expected to increase to 4.5 percent in 2024 and 4.6 percent in 2025 from 2.9 percent in 2023, supported by the resumption of activities at the Porgera gold mine and improvements in access to foreign exchange. Given the country’s high vulnerability to climate change, managing its impact is critical to the success of the authorities’ poverty reduction and sustainable growth agenda. The ECF/EFF and RSF programs will continue to support Papua New Guinea’s reform agenda, focusing on strengthening debt sustainability, alleviating foreign exchange shortages, fostering good governance and building climate resilience, while protecting the vulnerable and promoting inclusive and sustainable growth.
Keywords:
RSF reform agenda; PNG government; EFF arrangement; EFF program; RSF arrangement; government plan; PNG agriculture commercialization; Climate change; Climate finance; Global; Pacific Islands; Asia and Pacific
Cover Staff Climate Notes
Unlocking Adaptation Finance in Emerging Market and Developing Economies
Deepali Gautam
,
Ekaterina Gratcheva
,
Fabio M Natalucci
, and
Ananthakrishnan Prasad
Mitigation and decarbonization efforts are falling short of the 1.5°C goal, making adaptation critical. Developing economies are affected the most, despite having contributed the least to the problem. Nearly 98 percent of adaptation finance comes from public actors, with highly fragmented flows from the private sector. As financing needs increase, bringing private sector finance becomes critical and requires reframing adaptation investments from being seen not just as a risk exposure but also as an investment opportunity. This requires addressing real and perceived investment barriers, public-private collaboration and risk sharing, as well as financial incentives and innovation to unlock scalable, inclusive solutions. Adaptation is more complex than mitigation, with challenges in defining, evaluating, pricing, and scaling investments. Progress on adaptation requires policy reforms, incentives, and partnerships between governments, businesses, and communities and public-private risk sharing.
Keywords:
climate finance; climate adaptation; climate resilience; climate finance architecture; adaptation finance; emerging markets and developing countries; private finance mobilization; sustainability; IMF Resilience and Sustainability Trust.; IMF staff climate note; IMF resilience; IMF staff climate Note 2024/007; Climate change; Financial sector; Climate policy; Global
Cover IMF Working Papers
Public Perceptions of Canada’s Investment Climate: A Natural Language Processing-Based Approach
Flora Lutz
,
Yuanchen Yang
, and
Chengyu Huang
Canada’s muted productivity growth during recent years has sparked concerns about the country’s investment climate. In this study, we develop a new natural language processing (NPL) based indicator, mining the richness of Twitter (now X) accounts to measure trends in the public perceptions of Canada’s investment climate. We find that while the Canadian investment climate appears to be generally favorable, there are signs of slippage in some categories in recent periods, such as with respect to governance and infrastructure. This result is confirmed by both survey-based and NLP-based indicators. We also find that our NLP-based indicators would suggest that perceptions of Canada’s investment climate are similar to perceptions of U.S. investment climate, except with respect to governance, where views of U.S. governance are notably more negative. Comparing our novel indicator relative to traditional survey-based indicators, we find that the NLP-based indicators are statistically significant in helping to predict investment flows, similar to survey-based measures. Meanwhile, the new NLP-based indicator offers insights into the nuances of data, allowing us to identify specific grievances. Finally, we construct a similar indicator for the U.S. and compare trends across countries.
Keywords:
Investment Climate; Canada; Machine Learning; Sentiment Analysis; muted productivity growth; investmest climate; investment flow; NLP-based indicator; Climate finance; Competition; Infrastructure; Productivity; Mining sector; Global
Cover IMF Staff Country Reports
Kingdom of the Netherlands-The Netherlands: Financial Sector Assessment Program- Technical Note on Supervision and Disclosure of Climate-Related Risks
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on supervision and disclosure of climate-related risks in The Netherlands. Similar to other jurisdictions, the integration of climate-related risks into supervisory processes in the Netherlands faces various challenges. Supervision has been proactive in researching exposures to climate-related risks as well as designing tools to assess how financial institutions identify, monitor and manage these risks. Supervisors have been gradually developing approaches and methodologies to support the supervisory process. Many of these initiatives and projects have been influential in the international debate on climate risk supervision. The authorities need to translate strategic measures into a concrete roadmap to ensure that the process of setting up climate risk supervision is systematic and continues at a sufficiently ambitious pace. Going forward, climate risk supervision must strengthen quantitative tools and data sets. The note provides the main recommendations to enhance the supervision of banking and insurance activities conducted in the Netherlands with a direct bearing on its financial stability.
Keywords:
Rijksdienst voor Ondernemend Nederland; climate risk analysis; solvency ASSESSMENT; staff team of the International Monetary Fund; nitrogen in the Netherlands; Climate change; Natural disasters; Insurance companies; Climate finance; Global
Cover IMF Working Papers
Sovereign Green Bonds: A Catalyst for Sustainable Debt Market Development?
Gong Cheng
,
Torsten Ehlers
,
Frank Packer
, and
Yanzhe Xiao
In traditional bond markets, sovereign bonds provide benchmarks and serve as catalysts for the corporate bond market development. Contrary to the usual sequence of bond market development, sovereign issuers are latecomers to sustainable bond markets. Yet, our empirical study finds that sovereign green bond issuance can have quantitative and qualitative benefits for the development of private sustainable bond markets. Our results suggest that both the number and the size of corporate green bond issuance increase more in a jurisdiction after the sovereign debut. The results are more pronounced in countries with stronger climate policies. Sovereign green bond issuance also improves the quality of green verification standards in the corporate bond market more generally, consistent with the aim of fostering third-party reviews and promoting best practice in green reporting and verification. Finally, our work provides evidence that the sovereign debut increases liquidity and diminishes yield spreads of corporate green bonds in the same jurisdiction.
Keywords:
Green bonds; sustainable bonds; sovereign debt; taxonomies; green verification; bond market development; bond issuance; corporate bond bond market; issuance increase; sustainable bond markets; Climate finance; Corporate bonds; Sovereign bonds; Securities markets; Bond yields; Global; East Asia
Cover IMF Staff Country Reports
Japan: Financial Sector Assessment Program-Technical Note on Financial Supervision and Regulation of Climate Related Issues
International Monetary Fund. Monetary and Capital Markets Department
This paper presents a technical note on Financial Supervision and Regulation of Climate Related issues in Japan. Japan's transition to a net zero economy requires the decarbonization of high-greenhouse gas intensive industrial sectors such as steel. The Japanese authorities have been working on a number of climate-related activities relevant to banks and insurers. Banks and insurers have identified transition and physical risks as potential sources of increasing credit risk, market risk, liquidity risk, operational risk, and reputational risk. Discussions with Financial Services Agency (FSA) supervisory staff revealed that there is yet to be a systematic approach to addressing climate issues in regular supervisory interactions with banks and insurers. The Climate Guidance sets out the FSA’s expectations for financial institutions to support clients’ and investees’ responses to climate change in order to manage financial institutions’ climate-related risks. Japan is leading the way in the implementation of climate-related disclosures.
Keywords:
scenario analysis; Japan FSAP; BOJ initiative; TCFD disclosure; FSAP finding; Climate change; Insurance companies; Climate finance; Financial stability assessment; Global
Cover IMF Working Papers
Public Debt Dynamics During the Climate Transition
Daniel Garcia-Macia
,
Waikei R Lam
, and
Anh D. M. Nguyen
Managing the climate transition presents policymakers with a tradeoff between achieving climate goals, fiscal sustainability, and political feasibility, which calls for a fiscal balancing act with the right mix of policies. This paper develops a tractable dynamic general equilibrium model to quantify the fiscal impacts of various climate policy packages aimed at reaching net zero emissions by mid-century. Our simulations show that relying primarily on spending measures to deliver on climate ambitions will be costly, possibly raising debt by 45-50 percent of GDP by 2050. However, a balanced mix of carbon-pricing and spending-based policies can deliver on net zero with a much smaller fiscal cost, limiting the increase in public debt to 10-15 percent of GDP by 2050. Carbon pricing is central not only as an effective tool for emissions reduction but also as a revenue source. Delaying carbon pricing action could increase costs, especially if less effective measures are scaled up to meet climate targets. Technology spillovers can reduce the costs but bottlenecks in green investment could unwind the gains and slow the transition.
Keywords:
Climate change; mitigation; public debt; carbon pricing; subsidies; public investment; industrial policies; dynamic general equilibrium.; technology spillover; investment bottleneck; No. 2024/71; mix of carbon-pricing; adjustment cost parameter; Emerging and frontier financial markets; Climate finance; Climate policy; Global
Cover IMF Staff Country Reports
Rwanda: 2023 Article IV Consultation, Second Reviews Under the Policy Coordination Instrument and the Arrangement Under the Resilience and Sustainability Facility, Requests for the Modification of End December 2023 Quantitative Targets, Rephasing of Access Under the Resilience and Sustainability Facility, and Request for an Arrangement Under the Standby Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Rwanda
International Monetary Fund. African Dept.
This paper presents Rwanda’s 2023 Article IV Consultation, Second Reviews under the Policy Coordination Instrument and the Arrangement under the Resilience and Sustainability Facility, Requests for the Modification of End December 2023 Quantitative Targets, Rephasing of Access under the Resilience and Sustainability Facility (RSF), and Request for an Arrangement under the Standby Credit Facility. The Rwandan economy registered strong post-pandemic growth but compounding shocks in recent years resulted in emerging internal and external imbalances, while the country’s development needs remain large. Carefully calibrated fiscal consolidation, proactive and data-driven monetary policy, continued exchange rate flexibility, and sustained progress on development and climate-related reforms are necessary to rebuild buffers, curb inflation, improve debt sustainability, and enhance socioeconomic resilience. Progress on the climate agenda under the RSF remains strong. The agreed acceleration of RSF-supported climate reforms and the addition of new measures demonstrate Rwanda’s dedication to the climate reform agenda.
Keywords:
national bank of Rwanda; PCI reform target; RSF reform measure; IMF TA mission; Rwanda delegation; nationally determined contributions; RSF performance; climate commitment; Climate finance; Natural disasters; Debt sustainability analysis; Global; Africa
Cover Global Financial Stability Report, October 2023
Global Financial Stability Report, October 2023
Financial and Climate Policies for a High-Interest-Rate Era
International Monetary Fund. Monetary and Capital Markets Department

Abstract

Chapter 1 assesses that risks to global growth are skewed to the downside, similar to the assessment in the April 2023 Global Financial Stability Report. Cracks in the financial system may turn into worrisome fault lines should a soft landing of the global economy hoped for by market participants does not materialize. Chapter 2 homes in on the global banking system, providing a fresh assessment of vulnerabilities in a higher-for-longer environment, using an enhanced global stress test and a set of newly developed market-based indicators. In response to the vulnerabilities that are uncovered, enhancements to supervisory practices and tightening of regulatory standards are proposed. Chapter 3 notes that a broad mix of policies is required to unlock the private capital necessary to cover climate mitigation investment needs in emerging market and developing economies.

Keywords:
soft landing; downside risks; emerging market economies; bank supervision; global stress test; climate finance; IMF Resilience and Sustainability Trust