Post-pandemic debt crisis
With the 2020 onset of the COVID-19 pandemic came a drastic slow in economic activity and collapse in government revenue, prompting a widespread increase in both government and private debt levels. Currently, at the beginning of 2021, with no concrete prediction for the end of the COVID-19 pandemic, businesses and the private sector continue to accumulate great foreign currency debt. There is a steady increase in government loans for funding and there has been at least a 20% reduction in 2020 remittances from global citizens and diasporas. Developing nations report skyrocketing borrowing needs that are usually that advanced economies can usually only manage. Additionally, central bank purchases of corporate bonds to boost the money supply of local firms have stifled the debt ratings of local firms in emerging markets and developing economies. As a result, our world is facing rising budget pressures, which a wave of sovereign debt downgrades that are likely to lead to a post-pandemic debt crisis are accompanying.

Context and the Role of the IMF

In comparison to the end of 2019, in addition to already unusually elevated figures and debt distress, expectations have determined that 2021 debt ratios will increase by 20% GDP in advanced economies, 10% in emerging market economies and 7% in low-income economies. Unfortunately, the emerging and developing world have much smaller borrowing capacities, and so for some, a post-pandemic debt crisis appears imminent.

In the past, debt crises have set the global economy into long-lasting instability. In order to prevent such an economic downfall on top of a global health crisis, many of the leading international organizations such as the International Monetary Fund (IMF) have prepared to help keep nations afloat. While the IMF has provided over $30 billion in emergency funding to its member countries in a response to the pandemic, it has also given direct attention to implementing measures that contribute to debt-service relief. Here are some of these measures.

4 Measures to Contribute to Debt-Service Relief

  1. Catastrophe Containment and Relief Trust (CCRT): Undergoing establishment in 2015 as a response to the Ebola outbreak and receiving modification in March 2020 for the COVID-19 pandemic, CCRT allows the IMF to provide grant funding for debt relief to the poorest and most vulnerable nations that a natural disaster or public health crises have hit. The purpose of the CCRT is to aid eligible low-income member countries to meet the balance of payment needs that disasters create. This stops the reassigning of resources to debt service, preventing a post-pandemic debt crisis.
  2. Debt Service Suspension Initiative (DSSI): In a collaboration between the IMF Managing Director and the President of the World Bank, a call emerged for the bilateral creditors to suspend debt service payments from the poorest member countries until the end of 2020, extended to June 2021. Accepted in April 2020, this debt suspension allows 73 low and lower-middle-income countries to temporarily receive relief from their debt service payments. In addition to releasing the countries’ resources to COVID-19 relief, this initiative prompted the International Institute of Finance (IIF) to also call for private-sector creditors to grant debt payments forbearance to their debtors in a similar way. Many private firms have volunteered to aid in debt relief as a result.
  3. Short Term Liquidity Line (SLL): With the increase in global uncertainty, the IMF has established a short-term liquidity line (SLL) with the unique design of being a liquidity backstop for its member countries who have superior policy and fundamentals, but are in need of increased immediate liquidity needs as a result of the external shocks that came with this global pandemic. This liquidity line has a lower cost structure than other typical IMF lines of liquidity such as the Flexible Credit Line (FCL). This allows for a country to retain cost savings relative to reserves, and benefits related to lower yields on public debt.
  4. Capacity Development: In addition to its financial support, the IMF is also offering real-time policy guidance and capacity development to more than 160 of its 190 member countries. This advice is for specifically navigating debt management strategies, cash management, financial supervision, cybersecurity and economic governance through the pandemic. The IMF has collaborated with tax administrations and budget officers to restore and support halted or slowed business operations. It has also launched online learning platforms available to government officials, members and the general public for the widespread reach of solutions to aid in economic recovery during and post-pandemic.

Cause for Optimism

With the measures above, as well as the collaborative effort of the entire globe, according to the IMF Managing Director Kristalina Georgieva, “the global economy is beginning to climb back from the depths of the crisis, but this calamity is far from over.”

Thankfully, the IMF continues to show its commitment to providing financial support, capacity development and debt relief, especially for its poorest, most affected and vulnerable member countries in this unprecedented time, as the world works to stave off an impending debt crisis.

Rebecca Harris
Photo: Flickr

Distributing Foreign Aid
No unitary world body is responsible for coordinating and distributing foreign aid. Foreign aid efforts generally consist of bilateral or multilateral aid. One country directly grants bilateral aid to another, while several countries pool resources together before joint-delivering multilateral aid. The U.S. Agency for International Development (USAID) is an example of a bilateral aid organization because only the United States is part of its decision-making process. A strong example of a multilateral aid donor would be the United Nations or the World Bank, where the organizations themselves exercise a strong degree of autonomy over distributing foreign aid.

International Cooperation in Foreign Aid

The World Bank, United Nations and the Organisation for Economic Co-operation and Development (OECD) are some of the biggest agenda-setters in foreign aid. While they all operate independently, each contributes to a shared effort and common understanding in achieving their goals.

In 2012, the United Nations convened a large conference to set targets and an agenda for goals in sustainable development by 2030. Of its 17 development goals and 169 targets, poverty topped the list and contained seven targets. The conference determined the most significant and salient issues relating to sustainable development until 2030. In support of this common objective, OECD also incorporated a platform regarding the 2030 Agenda for Sustainable Development. This exemplifies how one organization’s agenda can cross over and influence agendas that others set.

The Coordination Efforts of the OECD

The OECD advises the distribution and implementation of effective foreign aid flow among the aid members of its Development Assistant Committee (DAC). Within many different frameworks and groups, OECD utilizes a “gold standard” for foreign aid called Official Development Assistance (ODA). Since 1969, the largest countries convened within the DAC have adopted ODA as their primary source of distributing foreign aid. The definition of ODA is a complicated matter, because, for instance, the countries that are eligible for ODA change over time. Regardless, distributing foreign aid undergoes careful optimization to promote and target economic development and welfare in developing countries. These repercussions are wide-ranging. International bodies from the World Bank to the U.N. respect the standards that the OECD sets.

The OECD utilizes a top-down approach to achieving broader development and aid objectives. The organization regularly measures and assesses its progress in implementing its objectives. This includes providing advice to member countries. In its report on “Measuring Distance to the SDG Targets,” it provided member countries with an assistive overview of strengths and weaknesses when it comes to achieving the Sustainable Development Goals (SDGs) that the U.N. set. Such feedback helps countries stay on track to best reach the goals. Overall, the study revealed uneven progress on the Sustainable Development Goals. Some targets, such as infrastructure experienced near achievement, but other targets rated medium to low progress.

The World Bank

The World Bank is something of a twin to the International Monetary Fund (IMF). However, instead of preventing and dealing with financial catastrophes like the IMF, “the [World] Bank is primarily a development institution.” One can see the international links when the World Bank discusses ODA while considering foreign aid flows.

In 2021, one of the World Bank’s primary objectives is to soften the economic blow of COVID-19. It plans to deploy up to $160 billion by June 2021 in support of countries’ responses to the virus. For example, the World Bank provided nearly 7,000 infection, prevention and control supplies and more than 31,000 personal protective equipment to Papua New Guinea. In Ghana, it supported the training of thousands of health professionals and technicians. Today, the World Bank is the largest external financier of education in developing countries. In its 2020 annual report, the World Bank estimated that the International Finance Corporation, a member of the World Bank Group, would contribute to the creation of at least 1.9 million jobs through the projects it financed in the fiscal year 2020.

Looking Forward

Thanks to organizations such as the World Bank, the U.N. and OECD, foreign aid benefits from higher levels of cooperation than ever. While no unitary body exists to overlook aid distribution, these organizations are filling the gap. Their efforts foster hope for even greater effectiveness in distributing foreign aid.

– Marshall Wu
Photo: Wikipedia Commons

Extreme Poverty in MoldovaFrom 1999 to 2015, Moldova went from a 36% extreme poverty rate to zero, effectively ending extreme poverty in Moldova. By analyzing Moldova’s poverty reduction strategies, organizations such as the International Monetary Fund (IMF) and the World Bank can form a blueprint to fight extreme poverty globally.

IMF Focus on Poverty Reduction

In 2000, the IMF instituted a three-pronged approach for ending extreme poverty in Moldova, which involved major reforms in governance and the public sector. Economic development, healthcare changes, educational developments and social safety nets were the primary focus to kickstart growth in the country.

  • The IMF’s focus on economic development revolved around public spending and lack of private business. Aside from ensuring fiscal responsibility from the government, government retirement plans and debt were swallowing the countries budgetary resources. The IMF advised Moldova to revise its tax system to be more equitable while strengthening its private sector by easing regulations and tax burdens on small and medium businesses.
  • Education was a foundational part of the reform process. The IMF ensured Moldova improved its education system through guidance from the World Bank. The primary focus was on improving education standards and increase the availability of secondary education to needy students.
  • The health sector developed more substantial healthcare access to reduce long-term expenses and to involve the private sector.
  • Developing better social safety nets was a key pillar for the IMF in Moldova. Most importantly, the goal of the program is to keep children out of poverty. This included food security and funding to access human development services. Also on the agenda was reforming the nation’s pension system to protect aging populations.

Impact of Changes in Moldova

These changes were to be implemented by no later than 2003 and most changes are ongoing. How well did the changes work? In 2000, Moldova’s GDP per capita was at $1,439 and by 2019 the GDP per capita rose to $3,715, doubling the nation’s economic growth. The secondary education enrollment rate was 48% in 1999 and grew to an 86% enrollment rate by 2019. Though absolute poverty remains high, these strategies were instrumental in ending extreme poverty in Moldova. Even by 2006, the extreme poverty rate was down to 4.5%.

The World Bank’s Evaluation

The World Bank processed an analysis from 2007 to 2014 using data to determine how ending extreme poverty in Moldova was effective. Compared to most of Europe, Moldova is still impoverished, but extreme poverty no longer plagued the country by 2014. There were four primary factors that the World Bank determined to be the cause of this success. Economic expansion, advanced opportunities for workers, better retirement fiscal responsibility for aging populations and international work being funneled back into Moldova’s economy, were the most effective tools for alleviating extreme poverty.

  • Despite a setback during the financial crisis in 2009, Moldova has seen steady GDP growth up until the COVID-19 pandemic. Of significant note is that Moldova showed continued growth rather than ups and downs experienced in most impoverished nations. Moldova’s commitment to attaining the United Nation’s Millennium Development Goals and effectively using guidance from the World Bank and IMF are reasons for this growth. Responsible governance and low corruption were instrumental in ending extreme poverty in Moldova.
  • Moldova’s workforce lowered from 2007 to 2014, primarily due to migration; however, wage growth was significant in jobs outside of the agricultural sector. Growth in food processing, manufacturing and ICT industry jobs increased wages exponentially, while the agricultural sector still struggled. These higher-skill jobs are attributable to the country’s focus on improving secondary education access, as outlined by the IMF, providing upward mobility.
  • Responsible pension disbursement was a chief agent for ending extreme poverty in Moldova. The significant increase in distributions to aging rural citizens living in extreme poverty was an essential investment by Moldova’s government.
  • The World Bank also found that after the economic crisis, remittances from Moldovan migrant workers sent back disposable income. Most of these migrants were from low-income rural areas of Moldova. From 2007 to 2014, rural households’ disposable income from migrant transfers rose from 16% to 23%. In Moldova, remittances played a considerable role in poverty reduction.

Using Moldova as a Blueprint Worldwide

Evaluating the success in ending extreme poverty in Moldova helps pave the way to implement similar strategies globally. So, what is the blueprint for ending extreme poverty?

  • The most crucial aspect is government accountability and a strong commitment to attain Millennium Development Goals. Strong oversight to prevent corruption and ensure fiscal responsibility to follow through with plans laid out by organizations like the United Nations, the World Bank and the IMF.
  • A commitment to make secondary education more accessible, especially in rural areas, advances what a nation’s workforce is capable of and helps create job and wage growth.
  • Protecting vulnerable populations by distributing funds where they are most needed reduces extreme poverty.
  • The success of remittances in Moldova is a necessary imperative. An analysis across countries worldwide shows the significant poverty reduction effects of remittances

Ending Extreme Poverty by 2030

The U.N. aims to end extreme poverty by 2030, and when looking at Moldova’s success, it is not an outrageously unrealistic goal. With fiscal oversight, dedication to protecting the impoverished and the world’s willingness to engage, extreme poverty can be eradicated.

– Zachary Kunze
Photo: pxfuel

IMF in JordanJordan, bordered by Saudi Arabia, Iraq, Syria and Israel, is an Arab country in the Middle East. The country is on the East Bank of the Jordan River yet relatively landlocked. It has accordingly received a massive influx of Palestinian and Syrian refugees. Recently, the International Monetary Fund (IMF) in Jordan provided two different forms of economic relief to people in light of the ratio of debt to its gross domestic product (GDP) and the current pandemic. Read more about the IMF in Jordan below.

The Effects of the Pandemic on Jordan

Jordan’s economy will experience contraction in 2020 due to the effects of COVID-19. The pandemic-induced lockdown significantly impacted 250,000 daily-wage workers and businesses facing a liquidity crisis. It also delayed foreign investment, trade and tourism. The latter industry generates $5 billion annually for Jordan.

Only 11.3% of respondents in a UNDP survey claimed that their income was unaffected by the pandemic, which has significantly impacted young adults. In the survey, 38.3% of respondents experienced challenges getting clean drinking water, and 69.3% struggled with accessing basic healthcare.

Countries in the Middle East and Central Asia, including Jordan, will experience a 4.7% drop in its constant-price GDP, adjusted for the effects of inflation, in 2020. Additionally, the average size of economic relief programs in the Middle East was smaller than in other regions in the world. The Middle East and North Africa (MENA) oil-importing countries’ ratio of debt to income will reach 95% in 2020. Thankfully, the IMF provided $17 billion in aid to the area since the beginning of 2020. It also helped catalyze $5 billion from creditors.

The IMF in Jordan

Jordan’s four-year Extended Fund Facility (EFF) is a partnership between the Jordanian government and IMF staff, which focuses its $1.3 billion on growth, jobs and social safety nets. The loan program, approved on March 25, 2020, will create more jobs for women and young people. EFF funds finance the general budget, including health, education and social support, while also providing support to Jordan’s Syrian refugees.

Although the IMF in Jordan created the EFF funds before the pandemic, it changed the program to support spending on emergency outlays and medical equipment. The IMF in Jordan also helped secure congressional grants to ease annual debt, as public debt increased in the past decade to an amount equivalent to 97% of its GDP.

In addition, the IMF in Jordan approved $400 million in emergency assistance under the Rapid Financing Instrument (RFI) to fight the COVID-19 pandemic in May 2020. Due to the fall of domestic consumption during the outbreak, these funds answer companies’ and consumers’ borrowing needs. The government will spend the RFI funds through the national treasury account, where specific budget lines track and report crisis-related expenditures.

The emergency economic assistance allows for higher healthcare budgets, containment and support to vulnerable households and businesses. Moreover, it will ease external financing constraints and avoid loss in official reserves. The $1.5 billion balance of payment gaps, however, will emerge with increased public debt and a widened fiscal deficit.

Moving Forward

Despite the challenges presented by the pandemic, Jordan’s tech start-ups, global supply chains and exporting masks have helped its economy. Tech literacy, in particular, has been especially vital for Jordanian youth to find remote jobs. Moreover, the EFF program can ensure support for the people in Jordan by easing access to basic needs. The program will also help reduce the impacts of poverty by increasing social protection coverage on poor families.

Monetary and fiscal authorities in Jordan have reduced interest rates and delayed bank loan installments and tax payments due to the outbreak, injecting over $700 million in liquidity. Additionally, the country implemented a cash-flow relief program for companies. It also activated the National Aid Fund cash transfer program for daily wage workers.

Jordan has prioritized human safety for its citizens and refugees in the fight against COVID-19. So far, it has only had low to moderate numbers of per capita COVID-19 cases. Thanks to the help of the IMF in Jordan, the country seems to be on track to recover from pandemic.

Isabella Thorpe
Photo: Flickr

The Fall of Venezuela’s Oil-Based Economy
Currently, Venezuela is in an economic crisis. According to the International Monetary Fund (IMF), Venezuela’s inflation rate will exceed 10 million percent by the end of 2019. This high inflation has destroyed Venezuela’s economy, causing poverty and unemployment rates to rise. In turn, it has also created mass food and medical supply shortages across the nation. Venezuela was not always in a state of crisis; it was once a thriving country backed by a booming oil-based economy. If one understands the fall of Venezuela’s oil-based economy, they will know how Venezuela’s current crisis came to be.

Fruitful Origins

Back in the 1920s, people found some of the world’s largest deposits of oil in Venezuela. Upon this discovery, Venezuela embarked on the path of a petrostate. As a petrostate, Venezuela’s economy relies almost entirely on oil exports. The government overlooked domestic manufacturing and agriculture, choosing to import basic goods instead of producing them within Venezuela. With strong support for an oil-based economy, Venezuela rode on its economic boom until the end of the worldwide energy crisis of the 1970s.

The 1970s energy crisis involved international oil shortages due to interrupted supplies from the Middle East. In place of the Middle East, Venezuela became one of the top oil suppliers worldwide. Oil prices thus skyrocketed due to limited suppliers and oil production in Venezuela increased to meet rising demand. Venezuela added about $10 billion to its economy during the energy crisis, providing enough wealth to cover the importation of basic goods. It was even able to begin more social welfare programs.

The Fall

Once the energy crisis ended in the early 1980s and oil prices stabilized again, Venezuela’s economy saw its first notable decline. Oil production did not decrease in spite of lowered oil prices and demand, resulting in a capital loss for Venezuela’s economy. The production of oil is an expensive endeavor which requires high capital investment in the hopes of that even higher sales can offset the investment. Therefore, while oil production remained high, Venezuela failed to build off of the investment, losing capital immediately.

This loss of capital marked Venezuela’s oil-based economy’s initial fall, as Venezuela risked its well-being on the unstable oil market. Just prior to the drop in oil prices, Venezuela went into debt from purchasing foreign oil refineries. Without investing in domestic agriculture or manufacturing, the Venezuelan government became economically strapped; it could no longer pay for its imports and programs, and especially not its new refineries.

In order to pay for its expenses, Venezuela had to rely on foreign investors and remaining national bank reserves. Inflation soared as the country drilled itself further into debt. It was not until the early 2000s that oil prices began to rise again and Venezuela could once more become a profitable petrostate — in theory. Under the regime of Hugo Chávez, social welfare programs and suspected embezzlement negated the billions of dollars in revenue from peaked oil exports.

By 2014, when oil prices took another harsh drop worldwide, Venezuela did not reserve enough funds from its brief resurgence of prosperity. Ultimately, the country fell back into a spiral of debt and inflation.

Lasting Effects

The fall of Venezuela’s oil-based economy sent shockwaves throughout its population, affecting poverty and unemployment rates and causing mass food and medical shortages. Estimates determined that in April 2019, Venezuela’s poverty rate reached nearly 90 percent nationwide. A notable factor of its widespread poverty, some suggest that Venezuela’s unemployment rate was 44.3 percent at the start of 2019.

Unemployment is rapidly increasing in Venezuela as both domestic and foreign companies lay off workers — with some companies offering buyouts or pension packages, and others just firing workers without warning. As Venezuela falls further into debt and its inflation rises, there is not enough demand within the country for foreign companies to stay there.

As previously mentioned, the earlier Venezuelan government chose to rely on imports rather than domestic production for its basic goods. Now, in 2019, the country suffers from its past mistakes. Unable to afford its imports, food and medical supply shortages are rampant across Venezuela. According to recent United Nations reports, over a 10th of the nation’s population is suffering from malnourishment. In addition, malaria — which the country virtually eliminated several decades prior — is reappearing as there are more than 400,000 cases nationwide.

A Way Out

While the fall of Venezuela’s oil-based economy may be detrimental to the nation’s overall stability, there is a way out of ruin: the International Monetary Fund, an international agency that exists to financially aid countries in crisis. In the fight against global poverty, the IMF is a vital tool that can prevent countries from reaching an irreparable state.

If Venezuela defaults on its debt and seeks funding from the IMF, Venezuela would be able to invest in domestic agriculture and other infrastructure. Therefore, if the oil industry continues to decline, there will be a fallback for supplies and potential exports. While this is not a panacea to the fall of Venezuela’s oil-based economy, it is a way for the nation to prepare for any future declines in oil prices and begin to work toward prosperity.

– Suzette Shultz
Photo: Flickr

10 Facts About the Recession in Iran

Iran, a southwest Asian nation of over 81 million people, currently struggles with a dire recession. Iranians face a combination of inflationary pressures and economic stagnation, known as stagflation. Listed below are 10 facts about the recession in Iran:

10 Facts About the Recession in Iran

  1. Sanctions – The recent resumption of U.S. sanctions has taken a large toll on Iran’s economy. Sanctions contributed to a gross domestic product contraction of 3.93 percent in 2018 after a GDP growth of 3.73 percent the previous year. The sanctions particularly target oil exports, Iran’s primary revenue stream. A BBC report states that Iran’s oil trade has lost $10 billion in the past six months because of sanctions.
  2. Oil Dependency – Iran contains the fourth most crude oil reserves in the world, which has led to a volatile economy based on petroleum. Oil was a boon to Iran’s economy in 2016, a year in which the country witnessed a 12.52 percent GDP growth. However, as the World Bank notes, this success rapidly diminished to approximately 3.8 percent growth in 2017 as petrodollars became rarer.
  3. Ambiguous Poverty Line – Poverty is difficult to fight because Iran’s government cannot decide on a poverty line. The Iran Observer stated in 2017 that various government representatives define absolute poverty differently. Iranian Vice President of Economic Affairs Mohammad Nahavandian estimated 10 million Iranians live in poverty while, Parviz Fattah, head of the Khomeini Relief Foundation, claims the number is closer to 20 million.
  4. High Unemployment Iran currently suffers from an unemployment epidemic, particularly among the educated youth. A mere 14,000 new jobs appeared yearly for the 700,000 youth entering the market between 2006 and 2011. Now, the Brookings Institution reports that college-educated men aged 25 to 29 years have a 34.6 percent unemployment rate, and women of the same group have a 45.7 percent rate.
  5. Emigration – One result of Iran’s employment dilemma is the mass emigration of skilled labor from the country. There is a surplus of skilled labor without the necessary demand, so educated Iranians flee the country for new opportunities. CNN Business reports that Iran’s Science Minister, Reza Faraji Dana, admitted 150,000 skilled Iranians had fled the nation in 2014 for this reason.
  6. High Cost of Living – The cost of living in Iran between 2018 and 2019 has skyrocketed alongside rapid inflation. According to the BBC, the Iranian rial has lost 60 percent of its value in the past year. Housing costs and medical attention have risen by 20 percent and especially harm the poorest individuals.  In March 2019, a Statistical Centre of Iran report also showed a 57 percent increase in white meat prices and a 37 percent uptick in dairy costs for average citizens.
  7. Increasing Poverty – As employment and affordable goods become scarcer, more Iranians fall into poverty. The Brookings Institution estimates that poverty remained at roughly 10 percent nationally in 2011, but it has risen since then. Research by the Foundation for Defense of Democracies found that it rose as high as 38 percent in the Sistan and Balouchistan provinces between 2016 and 2017. The threat of insulated urban areas succumbing to poverty displays the problem’s magnitude. Qom, the renowned traditional center of Islamic clerical training, suffered from a 30 percent poverty rate in 2017.
  8. Relief International Helps – Relief International is one nongovernmental organization mitigating the recession’s effects and preventing the economic crisis from deepening. Originally founded by Iranian-Americans in 1990 as “The Iran Earthquake Relief Fund,” RI focuses on cash assistance for flood victims and training local NGOs. The floods in the Golestan province have exacerbated hard times, and RI’s instant cash assistance will help 2,000 families from slipping into poverty. RI also hopes to have an indirect effect on poverty reduction by training 20 Iranian NGOs in efficient service to the poor.
  9. Amenities Expanded – Despite the recession, most Iranians have access to basic amenities due to government efforts post-1984. The Brookings Institution charts that in 1984, below 80 percent of citizens had electricity or plumbing. The government realized the issue stemmed from underdeveloped rural areas and immediately provided funding. It was an incredibly successful campaign that brought Iranians universal electricity and plumbing by 2000. These efforts continue today, spawning progress in the midst of recession and delivering baths to nearly 100 percent of Iranians by 2017.
  10. Improving Efficiency – Iran’s government is acting to make the economy more efficient, and there are many recommendations available for enhancing fiscal stability. An International Monetary Fund consultation with Iran in 2015 congratulated the government on widening the revenue stream by implementing simple direct taxation. Recommendations included expanding employment for women and increasing privatization, both of which should unlock new productivity for the economy.

The above 10 facts about the recession in Iran show that many hurdles still block the country’s growth. However, the steady increase in access to amenities displays economic progress within the recession and the IMF’s recommendations provide viable solutions to stagflation. Continued improvements will service the poor and provide a path to Iran’s economic stability.

Sean Galli
Photo: Flickr

gender barriers
Equality between men and women still remains a struggle in the majority of countries around the world, but the fact that removing gender barriers fuels economic growth is becoming more evident in the world’s fastest-growing economies. In addition to fueling the principle of equality, women’s economic participation is a vital, often overlooked, piece to the labor force.

Female Economic Participation

According to the International Monetary Fund, the importance of female economic participation mitigates the shrinking labor force in developing countries. The more opportunities women have increases the likelihood of the gender contributing to broader economic development. Such outcomes are often seen through higher enrollment numbers for education.

Currently, in the Middle East and Northern Africa, women account for 21 percent of the labor force. Often these gaps lead to significant GDP losses. Countries that have acquired such losses include Qatar, Oman and Iran, and all three nations have a projected GDP loss estimated at 30 percent or higher.

Many of these countries pose a legal threat to women — women signing contracts, traveling abroad and negotiating finances are not common. However large the losses, there are significant macroeconomic benefits to eliminating gender barriers. Some of these benefits include:

  • Improvements in financial analytics
  • Economic inclusion and data collection
  • Reformative fiscal policies that integrate equality into law

One U.N. study claims that removing gender barriers fuels economic growth by fostering an additional $89 billion into the Asian Pacific economy per year.

A Rwandan Success Story

Some countries have fought hard to relinquish the negative stigma associated with women in their economies. From innovative coffee plantations in Rwanda to legislative change, alleviation of bias is slowly filtering its way through exclusive boundaries.

For instance, Rwanda has recently become a powerful leader in the gender equality sphere. Policies regarding gender empowerment and budgeting of public services are setting precedents for many Sub-Saharan African countries. In addition, the Ministry for Gender and Family Promotion is the largest gender equality organization in the country. Its commitment is centered on gender-based budgeting and fighting gender-based violence.

Rwanda and Gender

Post-Rwandan Genocide culture opened many doors for women just as World War II did for Americans. President Paul Kagame recognized the need for women’s labor and in 2003 passed legislation requiring 30 percent of parliamentary seats to be reserved for women. Kagame battled to revitalize the torn country with a labor force that was unheard of for many Eastern African countries.

As of January 2018 and thanks to President Kagame, 64 percent of seats in Rwandan legislature were held by women. This is a feat highly praised by most Rwandan women, but still remains a slight issue with Rwandan males and traditional females who choose to ignore the fact that removing gender barriers fuels economic growth.

Though Rwandan history has uniquely paved the way for female empowerment, many countries still lag behind the concept of gender equality. If barriers continue to be eliminated, economic success is sure to follow. Perhaps global powerhouses, like the U.S., can learn from Rwandan history, gender equality and culture, and bring gender equality to the forefront.

– Logan Moore
Photo: Flickr

Poverty Rate in Jamaica
The poverty rate in Jamaica is decreasing due to economic growth. The government wants this trend to continue. It is stated in the December 2016 National Poverty Eradication Programme (NPEP) that its vision for every Jamaican is to consume goods and services above minimum acceptable national standards. The government envisions a state where everyone has equal opportunities and support to achieve and maintain income security and improved quality of life.

As with any dream, there are several obstacles to attaining this vision. There are also successes that signal the vision is possible. Here are eight facts about efforts to further reduce the poverty rate in Jamaica.

  1. According to the government’s NPEP, in 2012, 19.9% of the population was living at or below the poverty line.
  2. Unemployment rates have fallen in the country. According to the Statistical Institute of Jamaica, the unemployment rate in Jamaica in January 2017 was 12.7%, compared to 13.3% in January 2016.
  3. While unemployment rates have gone down for the population as a whole, unemployment rates remain high for youth. According to the World Bank, the unemployment rate for youth is 28.6%. This is leading to high levels of crime and violence.
  4. According to the World Bank, Jamaica is considered to be an upper-middle-income country. The United Nations Development Programme states that Jamaica received this classification in 2010 due to being on track to eradicating extreme hunger and ensuring environmental sustainability.
  5. Even though Jamaica is viewed as an upper-middle-income country, it faces many obstacles in economic growth. The World Factbook reports that Jamaica’s economy has grown on average less than one percent per year for the last three decades. Economic growth has been slow due to a high debt-to-GDP ratio and high rates of crime and corruption.
  6. Focus Economics highlights that tourism is helping the Jamaican economy. The island welcomed its one-millionth tourist in mid-June 2017, two weeks before receiving a private investment of $1 billion for a chain of hotels and resorts.
  7. According to the World Factbook, Jamaica has made progress in reducing its high debt-to-GDP ratio. In 2012 it was at 150%. It is now at 115%. Collaboration with the International Monetary Fund made this achievement possible.
  8. Poverty programs are being instituted in Jamaica. Most of these are state-led. In its NPEP, Jamaica outlines its goals for eradicating poverty. Its first goal is to eliminate extreme food poverty by 2022. Its second goal is to get the national poverty line reduced significantly below 10 percent by 2030.

There are several poverty reduction programs currently in place in Jamaica. Further reducing the poverty rate in Jamaica is feasible due to the government’s thorough NPEP. If the government reaches the goals outlined in the policy, poverty reduction will be systemic and all Jamaicans will be able to realize the dream of equitable opportunities. While there are significant challenges, Jamaica’s economic future is promising.

Jeanine Thomas

Photo: Flickr

International Monetary Fund Facts
The International Monetary Fund (IMF), in combination with the World Bank, is the world’s largest public lender today.

Key Facts About the International Monetary Fund

 

  1. In the 1930’s the world was overtaken with financial turmoil from the Great Depression. Markets all over the world collapsed and countries closed their doors to foreign imports. The IMF was conceived in July 1944 at the United Nations Bretton Woods Conference in New Hampshire, to protect the world from a similar blow and hasten financial recovery in war-torn nations.
  2. The Fund was created to act as a credit union and watch over the values of the world’s currency, while facilitating International Trade, promote employment and sustainable growth and help to reduce global poverty. Its main aim is to maintain economic stability and help countries complete financial transactions.
  3. The three main responsibilities of the IMF are: Surveillance — specifically to monitor the economic and financial policies of its members; financial assistance through loans to its members experiencing balance of payments issues; and technical assistance to help members design and implement economic policies that foster stability and growth.
  4. Primary aims of the IMF: Promote international monetary cooperation, facilitate the expansion and balanced growth of international trade, promote exchange stability, assist in the establishment of a multilateral system of payments and make resources available to members experiencing balance of payment difficulties.
  5. The IMF is accountable to 189 member countries. Its Headquarters is located in Washington D.C.
  6. A country’s voting power is based on the size of its economy and the amount of the quota it pays when it joins the IMF. The U.S. has the largest share of votes (approximately 17 percent). Decisions require a supermajority– 85 percent of votes.
  7. The IMF advocates currency devaluation for governments of poor nations with struggling economies.
  8.  The largest borrowers of the IMF are Portugal, Greece, Ukraine, and Pakistan. The largest number of IMF loans have gone to the African Continent.
  9. The U.S. contributes about 20 percent of the total annual IMF Budget. The largest member of the IMF is the U.S. while the smallest member is Tuvalu.
  10. The fiscal year for the IMF begins on May 1 and ends on April 30.
  11. The head of the IMF staff is the Managing Director. The Managing Director also acts as Chairman of the Executive Board and serves a five-year term. The present Managing Director is Christine Lagarde of France. The Executive Board Members monitor the day to day work with the guidance of the International Monetary and Financial Committee.

Studies show that contrary to the criticism of the IMF, it fulfills its functions of promoting exchange rate stability and helping its members correct macroeconomic imbalances.

Aishwarya Bansal

Photo: Flickr


According to The Organization for Economic Co-operation and Development (OECD), in 2015, Japan spent 0.22 percent of its budget, about $9 billion, on development assistance. While developed countries spend an average of less than one percent of their budget on foreign aid, Japan’s generosity made it the fourth most generous nation of 2015.

A 2010 agreement with the International Monetary Fund (IMF), a Trustee of the Poverty Reduction and Growth Trust (PRGT), assures that Japan will lend $2.7 billion to secure a total of $8 billion gathered from other nations in new loan resources for low-income countries. The loan agreement was effective in April of 2017. This will allow the IMF to increase aid to low-income countries hit particularly hard in the current global economic crisis by providing more loans for recently reformed concessional lending facilities.

The PRGT has three facilities that work on the concessional financing framework. There are the Extended Credit Facility to provide flexible longer term support; the Standby Credit Facility to address short-term needs; and the Rapid Credit Facility to provide immediate emergency support. These facilities are in place to help countries with governments with low financial stability and a “protracted balance of payment problems.”

Additionally, a 2017 IMF press release reveals that Japan “agrees to provide additional $2.5 billion to International Monetary Fund’s Trust benefitting low-income member countries, bringing [its] total contribution to $5.2 billion.” This would be Japan’s fourth contribution to the PRGT. This makes Japan one of the first 10 countries to respond with an additional loan under the current campaign.

The money that countries like Japan lend ensures that receiving countries can be financed to fix struggling institutions. The loans enable rebuilding international reserves, stabilizing currency, paying for imports and overall economic growth. What makes the IMF different from other international lending or donating organizations is the fact that it does not lend money for specific projects.

Since 2005, the IMF’s goal has been to re-stabilize the world’s economy, which is in a a state of crisis unseen since the Great Depression. As a result, the IMF has created a flexible credit line for countries that show potential to put their economies back on track and implement strong policies to keep it that way. Countries like Japan can see a return on their investments while developing nations can continue to develop.

Vicente Vera

Photo: Flickr