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Europe > Ukraine

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Cover Technical Notes and Manuals
Resolving Opaque Bank Ownership and Related-Party Exposures
Edda R Karlsdóttir
,
Rachid Awad
,
Ender Emre
,
Alessandro Gullo
,
Aldona Jociene
, and
Constant Verkoren
This note intends to provide advice to bank supervision and resolution authorities and policymakers seeking to deal with opaque bank ownership or significant overhang of related-party exposures.
Keywords:
bank Ownership structures; bank Ownership transparency; IMF Library; bank owner; related-party transaction; Basel Core Principles; Anti-money laundering and combating the financing of terrorism (AML/CFT); Bank resolution; State-owned banks; Global
Cover Staff Climate Notes
Energy Transition and Geoeconomic Fragmentation: Implications for Climate Scenario Design
Charlotte Gardes-Landolfini
,
Pierpaolo Grippa
,
William Oman
, and
Sha Yu
The transition to a low-carbon economy, which is needed to mitigate climate change and meet the Paris Agreement temperature goals, has been affected by the supply chain and energy supply disruptions that originated during the COVID-19 pandemic, the Russian invasion of Ukraine, and the subsequent energy crisis and exacerbation of geopolitical tensions. These developments, and the broader context of the ongoing “polycrisis,” can affect future decarbonization scenarios. This reflects three main factors: (1) pullbacks in climate mitigation policies and increased carbon lock-in in fossil fuel infrastructure and policymaking; (2) the decreasing likelihood of continuous cost reduction in renewable energy technologies; and (3) the likely intensification of macroeconomic shocks amid increasing geoeconomic fragmentation, and the associated policy responses. In this context, the note assesses the implications of the polycrisis for hypothetical scenarios used to assess climate-related financial risks. Following an analysis of the channels through which these effects are likely to materialize over short- and long-term horizons and some policy implications, the note proposes potential adjustments to the design of the climate scenarios used by financial institutions, central banks, and financial sector supervisors and regulators within their risk management frameworks.
Keywords:
Climate scenarios; polycrisis; climate risks; carbon lock-in; risk assessment; geoeconomic fragmentation; energy transition; energy security; disorderly transition; trade multilateralism; fossil fuel development; IMF staff climate note; IMF staff climate NOTE 2023/003; climate scenario; Renewable energy; Climate policy; Climate change; Non-renewable resources; Global; Central America; Caribbean
Cover Staff Discussion Notes
Structural Reforms to Accelerate Growth, Ease Policy Trade-offs, and Support the Green Transition in Emerging Market and Developing Economies
Mrs. Nina Budina
,
Mr. Christian H Ebeke
,
Ms. Florence Jaumotte
,
Andrea Medici
,
Augustus J Panton
,
Marina M. Tavares
, and
Bella Yao
In the aftermath of the COVID-19 pandemic, emerging market and developing economies are grappling with economic scarring, social tension, and reduced policy space. Policy actions are already urgently needed to boost growth in the near term and support the ongoing green transition. At the same time, high public debt and persistently high inflation have constrained policy space, posing difficult policy trade-offs. This Staff Discussion Note focuses on emerging market and developing economies and proposes a framework for prioritization, packaging, and sequencing of macrostructural reforms to accelerate growth, alleviate policy trade-offs, and support the green transition. The note shows that prioritizing the removal of the most binding constraints on economic activity, bundling reforms (governance, business deregulation, and external sector reforms), and appropriate sequencing of other reforms (such as labor market and credit sector reforms) can help front-load reform gains. In emerging market and developing economies with large initial structural gaps, the estimated output effects of such a major reform package are sizable—about 4 percent in two years and 8 percent in four years. Achieving higher growth and lower absolute carbon emissions over time requires a well-designed strategy that includes both macrostructural and green reforms.
Keywords:
policy trade-off; climate policy stringency; policy space; policy action; developing economy; Emerging and frontier financial markets; Structural reforms; Climate policy; Greenhouse gas emissions; Global; Caribbean
Cover Staff Discussion Notes
Geoeconomic Fragmentation and the Future of Multilateralism
Mr. Shekhar Aiyar
,
Mr. Jiaqian Chen
,
Mr. Christian H Ebeke
,
Mr. Roberto Garcia-Saltos
,
Tryggvi Gudmundsson
,
Ms. Anna Ilyina
,
Mr. Alvar Kangur
,
Tansaya Kunaratskul
,
Mr. Sergio L. Rodriguez
,
Michele Ruta
,
Tatjana Schulze
,
Gabriel Soderberg
, and
Mr. Juan P Trevino
After several decades of increasing global economic integration, the world is facing the risk of policy-driven geoeconomic fragmentation (GEF). This note explores the ramifications. It identifies multiple channels through which the benefits of globalization were earlier transmitted, and along which, conversely, the costs of GEF are likely to fall, including trade, migration, capital flows, technology diffusion and the provision of global public goods. It explores the consequences of GEF for the international monetary system and the global financial safety net. Finally, it suggests a pragmatic path forward for preserving the benefits of global integration and multilateralism
Keywords:
Geoeconomic fragmentation; globalization; global economic integration; geopolitical blocs; international monetary system; global financial safety net; multilateralism; costs of economic fragmentation; rules-based multilateral system.; IMF AREAER report; U.S. Dollar share; trade openness; trade agenda; share of Global Foreign Exchange; Capital flows; Trade barriers; Global
Cover Technical Notes and Manuals
IMF Engagement on Social Safety Net Issues in Surveillance and Program Work
International Monetary Fund. Fiscal Affairs Dept.
and
International Monetary Fund. Strategy, Policy, & Review Department
The International Monetary Fund’s engagement on social safety net (SSN) issues is likely to expand as member countries respond to growing challenges in the economic and fiscal landscape. SSNs play a crucial role in protecting households from poverty, promoting inclusive growth, and maintaining social stability. This technical note discusses (1) the different channels through which SSN spending may become macro-critical, (2) how to assess the importance of these channels, and (3) the types of policy responses that are appropriate and the trade-offs involved in choosing among them. To facilitate a more comprehensive assessment of SSN spending, the paper also examines the complementary role of labor market programs (for example, unemployment benefits and active labor market programs). The paper emphasizes the importance of early engagement and coordination with development partners with expertise on social safety nets and with different stakeholders when formulating policy advice.
Keywords:
Fiscal Policy; Social Protection; Social Safety Nets; Spending adequacy; Spending Efficiency; Fiscal Sustainability; SSN spending; labor market program; benefit incidence; SSN program; Benefit-cost ratio; Social assistance spending; Income; Labor markets; Poverty reduction; Sub-Saharan Africa; Global
Cover IMF How To Notes
How to Design and Institutionalize Spending Reviews
Laura Doherty
and
Amanda Sayegh
Spending reviews refer to the process of conducting in-depth assessments of existing public expenditure in order to identify opportunities to reduce or redirect spending from low-priority, inefficient, or ineffective spending. They offer a systemic approach to ensuring that spending is aligned with the government’s policy priorities, is effective in achieving its intended objectives and is deployed efficiently. This How to Note outlines the various objectives of spending reviews and provides guidance on designing a spending review process, including the organizational architecture and roles and responsibilities of various stakeholders. It also discusses the various stages of con¬ducting spending reviews and mechanisms for integrat¬ing their outcomes into the budget process. This note draws on lessons and experiences from countries that have established spending reviews, while recognizing that this is an emerging area for further reform.
Keywords:
• Spending reviews; public expenditure; public financial management; budget planning; program performance; efficiency and effectiveness; analyzing spending; A. spending review objective; IMF's Fiscal Affairs Department; spending review methodology; PFM reform; Public expenditure review; Budget planning and preparation; Expenditure efficiency; Europe; Global
Cover Technical Notes and Manuals
IMF Engagement on Pension Issues in Surveillance and Program Work
International Monetary Fund. Fiscal Affairs Dept.
and
International Monetary Fund. Strategy, Policy, & Review Department
The International Monetary Fund (IMF) is increasingly involved in offering policy advice on public pension issues to member countries. Public pension spending is important from both fiscal and welfare perspectives. Pension policy and its reforms can have significant fiscal and distribution implications, can influence labor supply and labor demand decisions, and may impact consumption and savings behavior. This technical note provides guidance on assessing public pension systems’ macrocriticality, i.e., sustainability, adequacy, and efficiency; it also discusses the issues and policy trade-offs to be considered when designing responses aiming to address these dimensions of the pension system. The paper emphasizes the importance of taking a long-term, comprehensive perspective when evaluating public pension spending and providing policy advice. Where feasible, reforms should be gradual and transparent to allow individuals ample time to adjust their work and savings decisions and to facilitate consumption smoothing over their lifecycle to avoid poverty in old age. It is also important to ensure that pension systems’ design and reforms do not lead to undesirable impacts in other policy areas including general tax compliance, health insurance coverage, labor force participation among older workers, or labor market informality. The paper emphasizes the importance country-specific social and economic objectives and constraints, as well as political economy realities – factors that can determine whether a pension reform is a success or failure.
Keywords:
Fiscal Policy; Social Protection; Pensions; Fiscal Sustainability; Defined Benefit; Defined Contribution; pension policy; policy engagement; Policy advice; General consideration; pension provision; C. IMF-supported program; Pension spending; Pension reform; Aging; Europe; Africa; Global; Southeast Asia; Eastern Europe
Cover Global Financial Stability Notes
Drivers of Emerging Market Bond Flows and Prices
Mr. Evan Papageorgiou
and
Rohit Goel
An interesting disconnect has taken shape between local currency- and hard currency-denominated bonds in emerging markets with respect to their portfolio flows and prices since the start of the recovery from the COVID-19 pandemic. Emerging market assets have recovered sharply from the COVID-19 sell-off in 2020, but the post-pandemic recovery in 2021 has been highly uneven. This note seeks to answer why. Yields of local currency-denominated bonds have risen faster and are approaching their pandemic highs, while hard currency bond yields are still near their post-pandemic lows. Portfolio flows to local currency debt have similarly lagged flows to hard currency bonds. This disconnect is closely linked to the external environment and fiscal and inflationary pressures. Its evolution remains a key consideration for policymakers and investors, since local markets are the main source of funding for emerging markets. This note draws from the methodology developed in earlier Global Financial Stability Reports on fundamentals-based asset valuation models for funding costs and forecasting models for capital flows (using the at-risk framework). The results are consistent across models, indicating that local currency assets are significantly more sensitive to domestic fundamentals while hard currency assets are dependent on the external risk sentiment to a greater extent. This suggests that the post-pandemic, stressed domestic fundamentals have weighed on local currency bonds, partially offsetting the boost from supportive global risk sentiment. The analysis also highlights the risks emerging markets face from an asynchronous recovery and weak domestic fundamentals.
Keywords:
emerging markets, bonds, COVID-19, at-risk framework; bond flow; hard currency assets; portfolio flow; emerging market assets; hard currency-denominated bond; hard currency bond; Emerging and frontier financial markets; Currencies; Bonds; Securities markets; Capital flows; Global
Cover Staff Discussion Notes
The Role of State-Contingent Debt Instruments in Sovereign Debt Restructurings
Charles Cohen
,
S. M. Ali Abbas
,
Anthony Myrvin
,
Tom Best
,
Mr. Peter Breuer
,
Hui Miao
,
Ms. Alla Myrvoda
, and
Eriko Togo
The COVID-19 crisis may lead to a series of costly and inefficient sovereign debt restructurings. Any such restructurings will likely take place during a period of great economic uncertainty, which may lead to protracted negotiations between creditors and debtors over recovery values, and potentially even relapses into default post-restructuring. State-contingent debt instruments (SCDIs) could play an important role in improving the outcomes of these restructurings.
Keywords:
Sovereign debt restructuring; Pandemic; COVID-19; Global financial crisis; Sovereign debt default; State-contingent debt instruments; GDP-linked debt; natural disasters clauses; debt sustainability; value recovery instruments; natural disaster clauses; reference variable; debt contract; investor preference; GLW payment; VRI payout; sector debt suspension; investor appetite; debt stock; Eurobond investor; trading partner; upside payout; investor participation; Natural disasters; Bonds; Debt restructuring; Securities; Global; Caribbean
Cover IMF How To Notes
How to Operationalize IMF Engagement on Social Spending during and in the aftermath of the COVID-19 Crisis
Irene Yackovlev
,
Ms. Zuzana Murgasova
,
Fei Liu
,
Gohar Minasyan
, and
Ke Wang
How to Operationalize IMF Engagement on Social Spending during and in the aftermath of the COVID-19 Crisis
Keywords:
FADHTN; HTN; spending; financing; COVID; country; policy measure; social spending; spending needs; IMF team; program document; COVID-19; Health care spending; Health care; Fiscal sustainability; Social assistance spending; Central Africa; Global