## Annual Review of the MRLIC programme (DFID-IMF), June 2020

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### Output 1 — Research production, quality and influence
- Indicators and targets (By March 2020):
  - Indicator 1.1: Number of priority research papers produced
    - H (128 papers)
    - M (124 papers)
    - L (120 papers)
    - Actual: 129 cumulative (16 in 2019/20)
    - Assessment: Met high target
  - Indicator 1.2: Number of research papers accepted for publication in appropriate high-quality peer-reviewed journals
    - By March 2020:
      - H (65 papers)
      - M (63 papers)
      - L (61 paper)
    - Actual cumulative: 70 (12 in 2019/20)
    - Assessment: Exceeded high target
  - Indicator 1.3: Number of freely available books
    - By March 2020:
      - Target: 3 books
      - Actual: 2 (0 in 2019/20)
      - Assessment: Missed target

- Key substantive findings (selected):
  - Public investment efficiency
    - Unit costs begin to increase once public investment is close to 10% of GDP; the threshold is lower for countries with low investment efficiency. (Gurara et al.)
  - Debt-Investment-Growth modelling
    - DIG model extended to incorporate segmented labour markets, efficiency wages, involuntary unemployment, and an informal sector typical of LICs. (Buffie et al.)
  - Informality and gender (Senegalese data)
    - In urban areas, being female increases the probability of being an informal worker by 8.5%.
    - Education is usually more relevant for women.
    - Having children reduces men’s probability of being informal but increases the probability for women. (Malta et al.)
  - Anti-corruption reforms (Republic of the Congo)
    - Potential additional growth of 0.8% – 1.8% p.a.
    - Reduced debt falls of 2.25% – 3% of GDP p.a. over the next decade. (Melina, Selim, Verdugo-Yepes)
  - Twin deficits (Furceri, Zdzienicka)
    - A 1 % of GDP unanticipated increase in the government budget balance improves the current account balance by 0.8 percentage points of GDP; effect larger during recessions and when trade openness is higher, exchange rates less flexible, and public debt lower.
  - Capital flow liberalisation (Furceri, Loungani, Ostry)
    - Limited output gains, significant increases in inequality; liberalisation reduces the share of labour income, particularly in industries with higher external financial dependence.

- Peer-reviewed publication coverage (examples):
  - Journals include European Economic Review, World Development, Journal of Monetary Economics, Journal of International Money and Finance, The World Bank Economic Review, Economic Inquiry.
  - 12 papers accepted for publication in peer-reviewed journals in the year; cumulative total 70.

- Research uptake, citations, and downloads:
  - From 175 products there are more than 1,400 citations (up from 800 last year).
  - 80% of publications have been cited.
  - Average citation of cited articles: 11 per article cited.
  - Three-quarters of the citations are non-self.
  - MRLIC working papers have been downloaded over 110,000 times (up from 75,000 last year), approximately 900 downloads per paper.

- Value-for-Money metrics (costs and unit costs):
  - Total Staff/Contractual/VS Costs: $14,221,507
    - Research Paper Costs: $10,666,130
    - Country Applications Costs: $3,555,377
  - Working Papers:
    - Working Papers produced: 129
    - Working Papers commissioned: 26
    - Working Papers reported in table: 155
    - Cost Per Working Paper: $68,814
  - Published Papers:
    - Published Papers produced: 70
    - Published Papers commissioned: 7
    - Published Papers reported in table: 77
    - Cost per Published Paper: $138,521
  - Benchmarks and comparisons:
    - The average cost per paper is lower than the DFID benchmark of $190,000 (£156,000) per paper.
    - Cost per working paper for the eight years is approximately $69,000 (£56,000).
    - Cost per published paper is $138,000 (£119,000), down from around $158,000 (£130,000) reported last year.
  - Time allocation assumption:
    - Staff, contractual employees, and visiting scholars estimated to spend 75% of their time on research papers and 25% on country applications.
  - Note on estimation:
    - “HQ led missions” includes both IMF staff salary and travel expenses; estimates likely overestimate the true cost of research time.
    - Currency conversion is based on exchange rate as of May 15, 2020.

- Changes and planning:
  - No changes to outputs or indicators in the past year; targets for 1.1 and 1.2 were revised upwards in the previous Annual Review.
  - A logframe for phase 4 is in development and to be finalised soon after the Annual Review (end August 2020).

- Recommendations and next steps:
  - Track quality of published outputs (possibly proxied by journal quality) as well as quantity.
  - Turn recent important (but mainly internal) covid-19 work into high-quality papers and publications where possible.
  - Publish and publicise synthesis products produced in phase 3 but delayed by covid-19.
  - Examine how books can be made more accessible.

### Output 2 — Applications by IMF country teams and partner authorities
- Output Score: A+
- Indicator 2.1: Applications by country teams
  - By March 2020 targets:
    - H (107)
    - M (104)
    - L (102)
  - Actual cumulative: 115 (17 in 2019/20)
  - Assessment: Exceeded high target

- Country applications and examples:
  - Diversification toolkit used in Article IV consultations in Nigeria and Uganda:
    - Policy implications for Nigeria: strengthen business environment, increase public investment efficiency, accelerate Power Sector Recovery Plan, implement financial inclusion strategy, improve education and health outcomes.
    - Uganda: focus on trade diversification and export product quality.
  - DIG and DIGNAR models adapted and used in Guyana, Madagascar, Mozambique, Gabon, Republic of Congo, Cameroon, and others.
  - Inequality toolkit operationalised:
    - Laos: quantified effects of girls’ education and reducing gender barriers on wages and participation.
    - Senegal: Free Quality Education for All programme—providing each child with at least lower secondary education could boost GDP by 40% in the long-term; closing gender gaps in education across income groups or increasing education quality could yield gains of 8% and 27% of GDP, respectively.
    - Moldova: replacing tax expenditures with efficient public investment would yield large growth dividends.

- Training, uptake and monitoring:
  - By March 2020 evidence of country authorities applying policy tools and frameworks:
    - H (46)
    - M (43)
    - L (40)
    - Cumulative achievements: 46 cumulative (8 in 2019/20) — Met high target
  - By March 2020 evidence of courses offered to country authorities:
    - H (20)
    - M (18)
    - L (17)
    - Cumulative: 20 (4 in 2019/20) — Met high target
  - ICD evaluation of ICD-delivered training found average rating of 4.7 (out of 5) on topics covered, effectiveness of presenters and overall usefulness.
  - ICD system not used for customised in-country training; no standardised feedback collected for that training; anecdotal feedback indicates demand and positive reception.

- Monetary policy capacity-building:
  - FPAS further developed in Central Banks in Uganda, Ghana, Zambia, Honduras, Malawi and Vietnam.
  - Training courses on monetary policy analysis and forecasting delivered in-person and online.
  - MPAF.x launched on edX.

- VfM, equity and efficiency assessment:
  - No specific VfM metrics for this output in the Business Case.
  - Efficiency: use of research products critical to improving macro advice.
  - Equity: MRLIC work focused on gender inequality, income inequality and distributional analysis.

- Recommendations:
  - Develop methods to assess usefulness of in-country training (ongoing to be explored in phase 4).

### Output 3 — Engagement by senior IMF policymakers and high-level dissemination
- Output Score: A+
- Indicator 3.1 — Conferences:
  - By March 2020:
    - H (40)
    - M (39)
    - L (38)
  - Achievement: 40 (4 in 2019/20) — Met high target
- Indicator 3.2 — IMF Board discussions:
  - By March 2020:
    - H (20)
    - M (19)
    - L (18)
  - Achievement: 20 (2 in 2019/20) — Met high target
- Indicator 3.3 — IMF policy papers:
  - By March 2020:
    - H (40)
    - M (39)
    - L (38)
  - Achievement: 41 (5 in 2019/20) — Met high target

- Examples of high-level impact:
  - MRLIC research reflected in a May 2019 Board paper reviewing IMF commitments in support of the SDGs and a November 2019 Board paper on macroeconomic developments and prospects in LIDCs.
  - Chapter in the World Economic Outlook, October 2019, used MRLIC structural reforms database to argue structural reforms could deliver sizable output gains and potentially double the speed of convergence for the average emerging market and developing economy under a comprehensive reform package.
  - High-level conferences included panels with Kristalina Georgieva, Joseph Stiglitz, and senior IMF leadership.

### Output 4 — Research capacity, networks, dissemination and management
- Output Score: A+
- Indicator 4.1 — Commissioned papers from new researchers:
  - By March 2020 targets:
    - H (32)
    - M (29)
    - L (26)
  - Achievement: 30 cumulative (4 in 2019/20) — Met medium target
- Indicator 4.1.1 — Data toolkits produced:
  - By March 2020 targets:
    - H (8)
    - M (7)
    - L (6)
  - Achievement: 9 (0 in 2019/20)
- Indicator 4.2 — Attendance of external researchers at high-level policy conferences:
  - By March 2020 targets:
    - H (118)
    - M (115)
    - L (112)
  - Achievement: 124 (16 in 2019/20) — Exceeded high target

- Indicator 4.3 — Project outputs disseminated (e-newsletter and web updates):
  - Four quarterly newsletters met the high target (cumulatively 30).
  - Newsletters distributed to a network of over 1500 academics, policymakers, central bank staff, and government representatives.
  - Blogs and articles used additional dissemination channels (e.g., VoxEU).

- Project expenditures, Years 1-8 (Totals):
  - HQ led missions including entire mission team — $6,801,645
  - Short-term Advisors - CD delivery — $525,562
  - Research HQ based/Visiting Scholars — $6,894,300
  - Seminars & Study Tours — $1,671,151
  - Project Backstopping — $2,966,278
  - Project Management — $226,595
  - Exceptional Expenses — $335,282
  - Language Services — $1,348
  - Trust Fund Fee — $1,359,551
  - Total — $20,781,712

- VfM and management adjustments:
  - Use external researchers more selectively; shift to research assistants to reduce salary costs; increase cost sharing on travel and conferences.
  - Direct project management costs represent approximately one percent of the total budget; including the Trust Fund management fee, program management costs are around eight percent.
  - As of April 2020, $20.8 million drawn down from the subaccount.
  - Date of last narrative financial report: May 2020.
  - Date of last audited annual statement: October 2019.

- Risk overview:
  - Overall risk rating: Minor; each risk category rated Minor.
  - Covid-19 residual risks include inability to publish covid-19 work, prolonged suspension of IMF missions, countries focusing on health responses, and challenges incorporating new research topics into MRLIC.

### Work plan and forward priorities (selected)
- COVID-19 pillars and modelling:
  - Investigate medium- to long-term impacts of COVID-19 on LIDCs; build database of epidemics since 1900; develop Extended Multigroup SEIR model and integrate COVID-19 shocks into DIGNAR and DIG labour toolkits.
  - Produce policy notes on central bank communication during COVID-19, on inflation and expectations in EMDEs, and on integrating crisis response into monetary policy frameworks while considering inequality impacts.
- Ongoing modelling and toolkits:
  - Prepare IMF-WB board paper on joint multipronged approach for debt vulnerabilities.
  - Develop toolkit to assess soundness of monetary policy frameworks and convene practitioner roundtables on monetary policy, inequality and macro-prudential policy.
  - Deploy Financial programming 2.0 environment, produce DIG/DIGNAR online training modules, and expand FPAS technical assistance.
- Building resilience and climate:
  - Simulate disaster impacts (e.g., Maldives), apply growth-at-risk approach to natural disasters, prepare chapters on climate adaptation for regional outlooks.
- Structural change and inclusion:
  - Prepare IMF board paper on structural reforms; continue capacity building on gender equality and income inequality; update databases on fuel pump prices; study links between climate shocks and income inequality.

- Monitoring and evaluation:
  - IMF reports annually to DFID on log-frame outputs; quarterly updates and e-newsletters to >1500 stakeholders; upload working and published papers to R4D portal; provide “gold access” to journal publications produced through the grant.
  - No budget allocated for an external evaluation.

### Quantitative program outputs and targets — highlights
- Year 8: completed 16 working papers; eight-year total 129 working papers.
- Papers accepted in peer-reviewed journals in Year 8: 12; cumulative total 70.
- Number of freely available books by March 2020: 2 (target was 3).
- Project timeline:
  - Phase I: March 2012 to March 2015
  - Phase II: April 2015 to March 2017
  - Phase III: April 2017 to March 2020
  - Phase IV: April 2020 to March 2023
- Approved project budget: US$23.3 million.
- Contributions and cash flow (as of Apr 30, 2020):
  - Contributions total: 23,681,362
  - Interest Earned total: 162,918
  - Total Cash Available: 23,844,280
  - Expenses Paid total: 20,781,711
  - Final reported cash balance: 3,062,569

- Selected log-frame achievements (By March 2020 — Achieved):
  - Application and use of tools/frameworks by country teams: 115 (target H 107)
  - Application and use of tools/frameworks by country authorities: 46 (target H 46)
  - Courses offered to country authorities: 20 (target H 20)
  - Policy conferences drawing on project outputs: 40 (target H 40)
  - Data toolkits produced: 9 (target H 8)
  - Attendance of external researchers at high-level policy conferences: 124 (target H 118)
  - Project outputs disseminated via e-newsletter and updated web-page: 30 (target H 30)

*Annual Review of the MRLIC programme (DFID-IMF), June 2020.*

### 1.1 Number of priority research papers

### 1.1 Number of priority research papers

### Indicators and targets (By March 2020)
- Indicator 1.1: Number of priority research papers produced on designated research topics (Monetary and exchange rate policies; Public investment, growth, and debt sustainability; Macroeconomic management of natural resources; Macroeconomic policies and income distribution; Financial deepening for macroeconomic stability and sustained growth; Growth through diversification; Gender and macroeconomics; Capital flows)
  - H (128 papers)
  - M (124 papers)
  - L (120 papers)
  - Actual: 129 cumulative (16 in 2019/20)
  - Assessment: Met high target
- Indicator 1.2: Number of research papers accepted for publication in appropriate high-quality peer-reviewed journals
  - By March 2020:
    - H (65 papers)
    - M (63 papers)
    - L (61 paper)
  - Actual cumulative: 70 (12 in 2019/20)
  - Assessment: Exceeded high target
- Indicator 1.3: Number of freely available books
  - By March 2020:
    - Target: 3 books
    - Actual: 2 (0 in 2019/20)
    - Assessment: Missed target

### Key substantive findings from working papers (examples)
- Public investment efficiency:
  - Unit costs begin to increase once public investment is close to 10% of GDP; the threshold is lower for countries with low investment efficiency. (Gurara et al.)
- Debt-Investment-Growth modelling:
  - DIG model extended to incorporate segmented labour markets, efficiency wages, involuntary unemployment, and an informal sector typical of LICs. (Buffie et al.)
- Informality and gender (Senegalese data):
  - In urban areas, being female increases the probability of being an informal worker by 8.5%.
  - Education is usually more relevant for women.
  - Having children reduces men’s probability of being informal but increases the probability for women. (Malta et al.)
- Anti-corruption reforms (Republic of the Congo):
  - Potential additional growth of 0.8% – 1.8% p.a.
  - Reduced debt falls of 2.25% – 3% of GDP p.a. over the next decade. (Melina, Selim, Verdugo-Yepes)

### Peer-reviewed publications (indicator 1.2) — examples and coverage
- This year: 12 papers accepted for publication in peer-reviewed journals, bringing cumulative total to 70.
- Coverage:
  - Papers published in journals including European Economic Review, World Development, Journal of Monetary Economics, Journal of International Money and Finance, The World Bank Economic Review, Economic Inquiry.
- Example findings:
  - Twin deficits in developing economies: 1% of GDP unanticipated increase in the government budget balance improves the current account balance by 0.8 percentage points of GDP; effect larger during recessions, with more openness to trade, less flexible exchange rates, and at lower levels of public debt. (Furceri, Zdzienicka)
  - Liberalisation of international capital flows: Limited output gains, significant increases in inequality; liberalisation episodes reduce the share of labour income, particularly in industries with higher external financial dependence, higher propensity to lay off workers, and higher elasticity of substitution between capital and labour. (Furceri, Loungani, Ostry)

### Book publications (indicator 1.3)
- One book completed this year: Macroeconomic Policy in Fragile States.
  - Status: Completed but not published; planned launch postponed from March 2020 due to covid-19; publication planned to shift to December 2020/January 2021 with a conference to launch the book.
  - Access: Will not (initially) be open access; content largely available as working papers and therefore does not count toward the freely available books indicator.
  - Content: 20 chapters by experts from academia, international organisations (e.g. IMF and World Bank), and thinktanks; aimed at practitioners, policymakers, and programmes working on macroeconomic policy in fragile situations; to be used to develop training modules for IMF economists and inform IMF capacity development activities.

### Research uptake, citations, and downloads
- From 175 products there are more than 1,400 citations (up from 800 last year).
- 80% of publications have been cited.
- Average citation of cited articles: 11 per article cited.
- Three-quarters of the citations are non-self (i.e., no connection to the IMF or MRLIC programme).
- MRLIC working papers have been downloaded over 110,000 times (up from 75,000 last year), approximately 900 downloads per paper.

### Value-for-Money metrics (costs and unit costs)
- Total Staff/Contractual/VS Costs: $14,221,507
  - Research Paper Costs: $10,666,130
  - Country Applications Costs: $3,555,377
- Working Papers:
  - Working Papers produced: 129
  - Working Papers commissioned: 26
  - Working Papers reported in table: 155
  - Cost Per Working Paper: $68,814
- Published Papers:
  - Published Papers produced: 70
  - Published Papers commissioned: 7
  - Published Papers reported in table: 77
  - Cost per Published Paper: $138,521
- Benchmarks and comparisons:
  - The average cost per paper is lower than the DFID benchmark of $190,000 (£156,000) per paper.
  - Cost per working paper for the eight years is approximately $69,000 (£56,000).
  - Cost per published paper is $138,000 (£119,000), down from around $158,000 (£130,000) reported last year.
- Time allocation assumption:
  - Staff, contractual employees, and visiting scholars estimated to spend 75% of their time on research papers and 25% on country applications; total research staff costs estimated as sum of “HQ led missions”, “Short-term Advisors”, and “Research HQ based/Visiting Scholars”.
- Note on estimation:
  - The category “HQ led missions” includes both IMF staff salary and travel expenses; estimates likely overestimate the true cost of research time.
  - Currency conversion is based on exchange rate as of May 15, 2020.

### Changes, progress, and planned adjustments
- No changes to the output or indicators in the past year.
- Targets for 1.1 and 1.2 were revised upwards in the previous Annual Review to remain stretching for the final year of phase 3.
- A logframe for phase 4 is in development and will be finalised soon after the Annual Review is complete (end August 2020).

### Recommendations, lessons learned and next steps
- Recommendations:
  - Discuss how to track the quality of published outputs (possibly proxied by the quality of journals) as well as the quantity.
  - Ensure that recent important (but mainly internal) work on covid-19 is turned into useful, high-quality papers and publications where possible.
  - Ensure that synthesis products produced in phase 3 but delayed by covid-19 are published and publicised.
  - Examine how books (in particular) can be made more accessible.
- Progress against prior recommendations:
  - Synthesis products produced on Debt-Investment-Growth Nexus; Income Inequality; Gender Equality; and Economic Diversification. Dissemination and the stocktaking conference were disrupted by covid-19.
  - Plan to establish a programme advisory committee in phase 4 (IMF, DFID, and senior external advisors) to advise on policy relevance and future research priorities.
  - IMF and DFID agreed format and dissemination plan activities; targets for 1.1 and 1.2 were reviewed and revised; books indicator to be reconsidered for phase 4. Low/medium/high targets were changed for 1.3.

### Output 2 (brief summary of related application indicator)
- Output 2: IMF research products used by IMF country teams and partner authorities.
  - Output Score: A+
  - Indicator 2.1: Applications by country teams
    - By March 2020 targets:
      - H (107)
      - M (104)
      - L (102)
    - Actual cumulative: 115 (17 in 2019/20)
    - Assessment: Exceeded high target
  - Application areas and examples:
    - Diversification toolkit used as analytical input to Article IV consultations in Nigeria and Uganda; policy implications identified for Nigeria included strengthening business environment, increasing public investment efficiency, accelerating Power Sector Recovery Plan, implementing financial inclusion strategy, and improving education and health outcomes; Uganda analysis focused on trade diversification and export product quality.
    - DIG and DIGNAR models adapted and used to inform Article IV consultations in Guyana (efficiency gains from structural reforms) and to reviews of IMF programmes.

*Annual Review of the MRLIC programme (DFID-IMF), June 2020.*

### 2.2 Application and use of tools and

### 2.2 Application and use of tools and frameworks by country authorities

### Courses offered to country authorities and uptake of toolkits
- By March 2020, evidence of number of country authorities applying policy tools and frameworks:
  - H (46)
  - M (43)
  - L (40)
- By March 2020, evidence of courses offered to country authorities:
  - H (20)
  - M (18)
  - L (17)
- Cumulative achievements reported:
  - 46 cumulative (8 in 2019/20) — Met high target
  - 20 (4 in 2019/20) — Met high target
  - 13 (contextual figure present in source)
- The ICD evaluation of ICD-delivered training from the MRLIC programme found an average rating of 4.7 (out of 5) on questions relating to topics covered, effectiveness of presenters and overall usefulness of the training.
- The ICD system is not used for evaluating more customised in-country training; no standardised feedback is collected for that training. Anecdotal feedback indicates training is well-received and there is consistent demand from country authorities.

### Country applications and examples of analytical work
- Fiscal, governance and public investment modelling applications:
  - Models used in the Republic of the Congo (assessing macroeconomic gains from anti-corruption reforms) and Cameroon (measuring gains from public investment reforms).
  - Models used to produce “selected issues” papers on Mozambique (macro effects of alternative scenarios of scaling-up public investment), Gabon (macro and fiscal effects of governance reforms) and Madagascar (growth and other macroeconomic impacts of a planned public investment scale-up).
- MRLIC work on inequality operationalised in country settings:
  - Laos (Article IV discussions): Labour force participation rates relatively equitable, yet gender gaps persist in formal employment and hourly wages. The 20% gender wage gap is partly associated with females’ lower educational attainment. The study quantified effects of policies promoting girls’ education and reducing gender barriers in the labour market.
  - Senegal (selected issues paper on Free Quality Education for All programme): Findings include that providing each child with at least lower secondary education could, in the long-term, boost GDP by 40%, substantially lower income inequality, and generate additional fiscal revenues through higher individual incomes. Closing gender gaps in education across income groups or increasing the quality of education could yield gains of 8% and 27% of GDP, respectively.
  - Moldova (Article IV discussions): Using the inequality toolkit, replacing tax expenditures with efficient public investment would yield large growth dividends; tax expenditures result in significant revenue losses and are an inefficient and distortive way to provide support.
- Monetary policy capacity-building:
  - The FPAS has been further developed in Central Banks in Uganda (including development of a FPAS manual for internal Bank of Uganda use), Ghana, Zambia, Honduras, Malawi and Vietnam.
  - Training courses on monetary policy analysis and forecasting were delivered both in-person and online.

### Training strategy, monitoring, and planned logframe
- Training is identified as a key channel to induce uptake of MRLIC products by IMF country teams and country authorities, with most interaction focused on Central Banks, Ministries of Finance and other economic policymaking institutions.
- There were no changes to the output or indicators in the past year. Following the previous Annual Review, all targets were revised upwards for the final year of phase 3.
- A logframe for phase 4 is in development and was planned to be finalised soon after the Annual Review (end August 2020).

### Value for Money (VfM), equity and efficiency assessment
- There are no VfM metrics specifically relating to this output in the Business Case. Nonetheless:
  - Efficiency: Use of research products (policy analysis, tools and frameworks) by IMF country teams and partner authorities is critical to improving macro advice to LICs and macro policymaking by country governments.
  - Equity: MRLIC work with traction has focused on gender inequality, income inequality and distributional analysis of policy changes, enhancing the IMF’s ability to assess differential impacts on different groups (women, income groups).

### Recommendations and actions for the year ahead
- Recommendation recorded:
  - Work out how to assess (either through ongoing monitoring or through the Annual Reporting process) the usefulness of training delivered in-country.
- Progress on prior recommendations (extracts):
  - Establish a systematic plan for training topics, targeted audiences, and impact assessment: Ongoing.
  - Establish a plan to assess usefulness and quality of customised in-country training: IMF systems make this difficult to assess uniformly; to be explored further in phase 4.
  - IMF-DFID logframe discussion actions (done): Review targets for 2.2 and 2.2.1 and revise targets upwards; consider adding a sub-indicator for the phase 4 logframe and consider adding a sub-indicator for 2.1 to capture training as a rollout mechanism.

---

### Related MRLIC outputs referenced (selected indicators and achievements)
- Output 3 (Engagement by senior IMF policymakers): All three indicators met the high target; Output Score: A+.
  - Indicator 3.1 — Conferences:
    - By March 2020, number of policy conferences drawing on outputs from the project:
      - H (40)
      - M (39)
      - L (38)
    - Achievement: 40 (4 in 2019/20) — Met high target
  - Indicator 3.2 — IMF Board discussions:
    - By March 2020:
      - H (20)
      - M (19)
      - L (18)
    - Achievement: 20 (2 in 2019/20) — Met high target
  - Indicator 3.3 — IMF policy papers:
    - By March 2020:
      - H (40)
      - M (39)
      - L (38)
    - Achievement: 41 (5 in 2019/20) — Met high target
  - Examples: MRLIC research reflected in a May 2019 Board paper reviewing IMF commitments in support of the SDGs and in a November 2019 Board paper on macroeconomic developments and prospects in low-income developing countries (LIDCs), including use of distributional impact of value-added taxes analysis.
  - Notable publication link: Chapter in the World Economic Outlook, October 2019, using a new database on reforms produced by MRLIC, arguing structural reforms could deliver sizable output gains and potentially double the speed of convergence of the average emerging market and developing economy under a comprehensive reform package.

- Output 4 (Research capacity and network expansion): Output Score: A+.
  - Indicator 4.1 — Commissioned papers from new researchers:
    - By March 2020, number of commissioned research papers produced:
      - H (32)
      - M (29)
      - L (26)
    - Achievement: 30 cumulative (4 in 2019/20) — Met medium target (only four papers met the programme’s definition of “new” researchers)
  - Indicator 4.1.1 — Data toolkit produced:
    - By March 2020, number of data toolkits produced:
      - H (8)
      - M (7)
      - L (6)
    - Achievement: 9 (0 in 2019/20)
  - Indicator 4.2 — Attendance of external researchers and policy makers at high-level policy conferences:
    - By March 2020, number of high-level policy conferences attended by external researchers:
      - H (118)
      - M (115)
      - L (112)
    - Achievement: 124 (16 in 2019/20) — Exceeded high target
  - Notes: Seven papers were commissioned and delivered in the past year; two published in the Open Economies Review and five commissioned as part of the “Macroeconomic Policy in Fragile States” book. The programme shifted the model for engaging external researchers toward contributions at conferences and events rather than commissioning papers.

*Source: MRLIC programme annual review and supporting ICD evaluations as reported by the MRLIC programme and the ICD.*

### 4.3 Project Outputs disseminated in e-

### 4.3 Project Outputs disseminated in e-newsletter and up-dated public web-page and R4D (DFID web portal)

### Indicator performance: dissemination and events
- Indicator 4.3: Project outputs disseminated
  - Four quarterly newsletters from the programme met the high target (cumulatively 30).
  - Newsletters are distributed to a broad network of over 1500 academics, policymakers, central bank staff, and government representatives.
  - Newsletters highlight working papers, conferences, and other activities completed over the previous quarter.
  - A forward look of upcoming outputs, events and presentations is provided to DFID quarterly for targeted dissemination to DFID policy teams and the UK delegation at the IMF.
  - Further dissemination channels used:
    - Blogs this year on education in Nigeria, economic reform and elections, and structural reforms.
    - Articles on specialised websites such as VoxEU.

- Indicator 4.2: Attendance at conferences
  - MRLIC team presented at 16 conferences in the past year.
  - Cumulative total presentations for the programme: 124, exceeding the high target.
  - Notable presentation venues: ASSA Annual Meeting (American Economic Association), Northwestern University Conference, World Bank Spring and Annual Meetings, IMF Spring and Annual Meetings.
  - A full list of conferences attended this year is provided in Annex A.

- Indicator 4.1.1: Data and toolkits
  - The MRLIC programme released no further toolkits this year.
  - Toolkits developed in previous years have been extensively used across IMF activities.
  - The target for toolkits should have been revised after the previous Annual Review.

### Value for Money (VfM) assessment and economy of inputs
- There are no VfM metrics specifically relating to this output in the Business Case.
- Over phase 3 the VfM of using commissioned authors to produce papers has been variable; incentivising original, relevant outputs from commissioned authors proved challenging.
- Programme adjustments to improve VfM:
  - Use external researchers more selectively: commission few papers where they can add most value (e.g., for a book) and involve external researchers at events, conferences and seminars.
  - Shift attention to use of research assistants (RAs) rather than costly visiting academics, which cut salary costs substantially.
  - Cost sharing with other IMF departments on travel and conference costs has increased.
  - Efficient use of internal economists.
- Management and cost ratios:
  - Direct project management costs represent approximately one percent of the total budget.
  - Including the Trust Fund management fee, program management costs are around eight percent.
  - As of April 2020, $20.8 million has been drawn down from the subaccount.
  - Date of last narrative financial report: May 2020.
  - Date of last audited annual statement: October 2019.

- Project expenditures, Years 1-8 (Activity — Total, Years 1-8)
  - HQ led missions including entire mission team — $6,801,645
  - Short-term Advisors - CD delivery — $525,562
  - Research HQ based/Visiting Scholars — $6,894,300
  - Seminars & Study Tours — $1,671,151
  - Project Backstopping — $2,966,278
  - Project Management — $226,595
  - Exceptional Expenses — $335,282
  - Language Services — $1,348
  - Trust Fund Fee — $1,359,551
  - Total — $20,781,712

### Changes to outputs and indicators
- No changes to the output or indicators in the past year.
- Following the previous Annual Review, the target for 4.2 was revised upwards to remain sufficiently stretching in the final year of phase 3.
- A logframe for phase 4 is in development and will be finalised soon after this Annual Review is complete (end August 2020).

### Recommendations and progress against prior recommendations
- Recommendation for the year ahead:
  - Continue to refine the process for engaging and commissioning work from external researchers to meet the programme target of expanding the field of economists working on macro in LICs.
- Progress on last year’s recommendations (summary):
  - IMF and MRLIC teams discussed and agreed best ways to engage external researchers: use external researchers as (i) part of the advisory committee and (ii) in discussions and presentations at events, conferences and seminars.
  - MRLIC will continue to work with new, early-career researchers where opportunities arise, and commission work from established researchers where they can add most value (e.g., for the macro policy in fragile states book).
  - IMF-DFID logframe discussion (by end July 2019) actions:
    - Review indicator 4.1 — Decided to defer changing 4.1 to a new logframe for phase four.
    - Review indicator 4.1.1 wording to consider whether all toolkits need to be “new” — Decided to defer changing 4.1.1 to a new logframe for phase four.
    - Review targets for 4.2 — Revised target for 4.2 upwards.
  - Overall status: Done or deferred to phase four as noted above.

### Risk overview and assurance
- Overall risk rating for the project: Minor; each risk category also rated Minor.
  - External context: limited exposure to LIC contexts because most research is HQ-based using secondary datasets.
  - Delivery: Established delivery systems with demonstrated high delivery; demand for MRLIC outputs remains high.
  - Operational: Experienced management teams at DFID and IMF.
  - Fiduciary: All funds spent directly by the IMF and subject to extensive IMF financial management controls.
  - Reputational: Little or no reputational risk from research topics.
  - Innovation: Research activities not subject to substantial innovation risks.
  - Safeguarding: Programme activities rarely involve contact with vulnerable persons; external researchers managed per IMF procedures.
- Assurance and due diligence:
  - A Central Assurance Assessment (CAA) of the IMF as a whole was conducted by DFID in March 2019 and confirmed the IMF’s position as a low risk partner for DFID; the CAA covered enhanced due diligence including safeguarding.
  - A light touch due diligence was conducted in November 2019 ahead of commencement of Phase 4, largely drawn from the CAA.
  - The risk register has been updated as part of the response to covid-19.
- Covid-19 related residual risks include:
  - Inability to publish work already done on covid-19.
  - IMF missions remaining suspended for a long time and research not being able to influence operations.
  - Country authorities focusing on public health crisis management rather than macroeconomic implications.
  - Challenges incorporating new, important research topics into MRLIC.
- Previous DFID Annual Review raised a new risk around changing accounting processes within the IMF budget office; MRLIC investigated and found a negligible change to per-unit staffing costs.

### Programme management, delivery and commercial performance
- The programme continues to be highly cost effective and adheres to solid procurement governance and IMF guidelines for hiring, travel, and conferences.
- Contractual employees undergo a competitive process before hiring; outputs are produced under firm timeframes and meet Fund publication requirements.
- The quality of papers is further evaluated through submissions to peer-reviewed publications.
- The programme director has continuity: involved since project inception and remains the main point of contact between the IMF and DFID.
- As of April 2020, $20.8 million drawn down from the subaccount; figures reflect a lag of approximately two to three months for verification of expenses.

### Annex A — selected outputs and conferences (highlights)
- Output Indicator 1.1 – Working Papers: selected titles include WP 19/151; WP 20/48; WP 19/232; WP 19/126; WP 19/217; WP 19/105; WP 19/112; WP 19/241; WP 19/121; WP 20/66; WP 20/23; and several forthcoming items.
- Output Indicator 1.2 – Peer-reviewed published papers: selected items include publications in The European Journal of Finance, Open Economies Review, Macroeconomic Dynamics, European Economic Review, Journal of International Money and Finance, The World Bank Economic Review, Economic Inquiry, World Development, Journal of Money, Credit and Banking, Journal of Monetary Economics, Applied Economics Letters, and IMF Economic Review.
- Output Indicator 4.1 – Commissioned papers: selected commissioned works include pieces in Open Economies Review and forthcoming books from Oxford University Press.
- Output Indicator 4.2 – Conferences: MRLIC presented at IMF Spring Meetings 2019 (April 10, 2019), IMF Annual Meetings 2019 (October 17, 2019), a range of central bank and policy conferences, AEA meetings (January 3-5, 2020), NEUDC (October 5-6, 2019), and academic presentations (Graduate Institute of Geneva, Africa Training Institute in Mauritius).

*DFID Annual Review of the MRLIC programme (June 2020), International Monetary Fund.*

### 13. North   American   Summer   Meeting   of   the   Econometric   Society   2019   (Seattle,

### 13. North American Summer Meeting of the Econometric Society 2019 (Seattle, Washington)

### Presentations and outreach activities
- Xin Tang presented “The Welfare Implications of Fiscal Consolidations in Low-income Countries.”
- Marina Mendes Tavares presented “The Welfare Implications of Fiscal Consolidations in Low-income Countries” at the 2019 Quantitative Society for Pensions and Saving Workshop (Logan, Utah).
- Xin Tang taught a one-day course at a departmental seminar at Gettysburg College attended by faculty members and undergraduate students; the course covered the IMF’s efforts to inclusive growth, the toolkit’s analytical framework and some practical applications.
- "Boosting Human Capital, Accelerating Development, and Lowering Inequality in Sierra Leone" was presented to the authorities during the Article IV and Second ECF Review Mission to Sierra Leone, in November 2019.

### Selected findings from working papers (Output Indicator 1.1)
- Crises are not associated with changes to structural reforms and, in autocracies, liberalisation is reduced. (Alesina et al.)
- Investigating the impact of narrowing gender education gaps on gender gaps in employment in Senegal:
  - The increase in years of education explains up to 44% of the increased female-to-male employment ratio.
  - The remainder is explained by falling discrimination against women in the labour market. (Malta, Leyva, Tavares)
- U-shaped relationship between remittance flows and financial inclusion:
  - At low levels of remittances, they substitute for formal channels and reduce financial inclusion.
  - When remittances are high (remittances-to-GDP ratio above 13%) they tend to complement formal channels and enhance financial inclusion. (Naceur, Chami, Trabelsi)

### Selected findings from peer-reviewed published papers (Output indicator 1.2)
- Using a newly developed dataset to show that private and public investments in capital are not perfect substitutes, especially in LICs. (An, Kangur, Papageorgiou)
- Studying the mobilising effects of loans from Multilateral Development Banks (MDBs):
  - Evidence of positive and significant effects of multilateral lending on the size of bank inflows (i.e. there is crowding-in of private capital).
  - The effects last for up to three years and are not offset by a fall in bond financing.
  - Results indicate that MDBs mobilise about seven dollars in bank credit (over three years) for each dollar invested. (Broccolini et al.)

### High-level conferences (Output indicator 3.1)
- Macroeconomics & Labour in the Age of Artificial Intelligence:
  - Jointly organised with the Institute of New Economic Thinking, this workshop brought together leading academics and policymakers.
  - A panel with Kristalina Georgieva (Managing Director, IMF), Joseph Stiglitz (Columbia University), and Deborah Greenfield (Deputy Director, International Labour Organization) discussed the impact of artificial intelligence on jobs, employment and distribution.
- Fostering Diversification to Escape the Middle-Income Trap:
  - Held in Kasane, Botswana in February 2020.
  - Jointly organised by AFRITAC South, Bank of Botswana, Delegation of the European Union to Botswana, the Southern African Development Community (SADC) and the IMF.
  - Brought together senior Botswana government officials with representatives from countries that have successfully diversified their economies (Chile, Costa Rica, Estonia, South Korea and Mauritius), academia, regional institutions and senior IMF staff (Deputy Managing Director, Deputy Director).
  - Discussions focused on country experiences in advancing diversification.

### Program description highlights
- “Macroeconomic Research in Low-Income Countries” is a strategic research partnership between DFID and the IMF with objectives to:
  - enhance generation of high-quality research on key macroeconomic issues in low-income countries (LICs);
  - ensure uptake through design and execution in close collaboration with policymakers within and outside the IMF;
  - expand the network of macroeconomic researchers working on LICs using the IMF’s pulling power;
  - achieve these goals cost-effectively.
- Project timeline:
  - Phase I: March 2012 to March 2015
  - Phase II: April 2015 to March 2017
  - Phase III: April 2017 to March 2020
  - Phase IV: April 2020 to March 2023
- Research focus areas:
  1. Modelling and understanding policy choices (e.g., monetary, exchange rate, fiscal and structural policies)
  2. Understanding macro-financial linkages (e.g., capital flows, financial deepening and inclusion, macro-prudential policies, and transmission of macro-financial shocks)
  3. Building resilience (e.g., issues related to natural disaster, climate change, migration, and conflict)
  4. Promoting structural change and institutional development (e.g., public investment, growth, and debt sustainability, macroeconomic management of natural resource wealth, growth through diversification, structural reforms)
  5. Enhancing inclusion (e.g., income inequality, macroeconomic policy and income distribution, gender and macroeconomics)
- Outputs and dissemination:
  - IMF staff members and project-funded researchers collaborate to produce high-quality research papers aimed at high-level policymakers in LICs and at the IMF.
  - All papers are freely shared with DFID and external policy makers through DFID’s research portal and a dedicated project website maintained by the IMF.
  - Additional components include designing frameworks to support IMF policy for LICs, presentations at high-level policy conferences, commissioned papers, quarterly e-newsletters to a broad network of LIC researchers and policy makers, and project-financed conferences.

*Prepared by the Staff of the Research and Strategy, Policy and Review Departments; Eighth Year Annual Report to DFID (for period April 2019—March 2020), June 30, 2020.*

### 2.  OVERVIEW OF THE YEAR

### 2. OVERVIEW OF THE YEAR

### Progress and achievements — summary
- The project kept up "very strong performance" in the eighth year—the concluding year of Phase 3—and met or exceeded the “high” thresholds for all log-frame targets.
- Research advanced across all five core research areas and influenced senior IMF staff, IMF Executive Board members, LIC policymakers, and external researchers.
- Several research outcomes have been integrated into the Fund’s structural curriculum and published in leading peer‑reviewed academic journals.
- Phase IV of the project was approved as a three-year extension.

### Senior management and leadership endorsements
- Tao Zhang (Deputy Managing Director overseeing LICs): emphasized the project’s critical role in providing timely analysis during the Covid-19 crisis.
- Antoinette Sayeh (Deputy Managing Director overseeing area departments): highlighted the project’s instrumental support to country teams in formulating sound policy advice and its importance given the Covid-19 threat to development gains in LICs.
- Gita Gopinath (IMF Chief Economist): expressed excitement about the three-year extension of the DFID‑IMF research partnership on LICs.
- Martin Mühleisen (Director, SPR Department): acknowledged the project’s strong analytical underpinning for Fund policy advice in key areas including inequality, gender, climate change, fiscal and monetary policy.

### Modeling and understanding policy choices
- High-level conference: The team, with the Government of Senegal and the United Nations, contributed to a conference on Sustainable Development, Sustainable Debt: Finding the Right Balance, featuring Kristalina Georgieva, Amina Mohammed, Presidents of the Eight WAEMU countries (Benin, Burkina Faso, Côte D'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo), and the President of the Republic of Congo.
- DIG model family:
  - DIG used in Article IV analysis for Madagascar and Cameroon.
  - DIGNAR (version with natural resources) applied to Mozambique, Gabon, Guyana and Republic of Congo on issues from liquid natural gas management to macro-fiscal impacts of weak governance.
  - DIG-Labor introduced in an IMF working paper with richer labor-market structure.
- FPAS (Forecasting and Policy Analysis System) continued to influence surveillance work in Honduras, Malawi and Zambia.
- New training: online course Model-based Monetary Policy Analysis and Forecasting (MPAF.x) launched to introduce FPAS concepts to country authorities, researchers, and others.

### Macro-financial linkages
- Three papers on interactions between multilateral development banks and LIC finance architectures were published in:
  - Journal of International Money and Finance
  - The World Bank Economic Review
  - Economic Inquiry

### Structural change, institutional development, and diversification
- Political economy of structural reforms featured in a high-profile panel Making the Case for Reform at the 2019 IMF‑World Bank Annual Meetings (opening remarks by David Lipton; panelists included Paschal Donohoe, Felipe Larraín, Alberto Alesina, Martin Wolf).
- Staff Discussion Note: The Political Costs of Reforms: Fear or Reality? published.
- Findings on medium-term growth gains from structural reforms were incorporated in the analytical chapter of the October 2019—World Economic Outlook.
- Diversification:
  - February 2020 conference in Botswana on Fostering Diversification to Escape the Middle-Income Trap (partners included AFRITAC South, Bank of Botswana, Delegation of the European Union to Botswana, SADC); opening remarks by Tao Zhang and Moses Pelaelo.
  - Research on Understanding Export Diversification: Key Drivers and Policy Implications presented at the 2019 Spring Meetings analytical corner.
  - Diversification toolkit supported Article IV consultations for Nigeria and Uganda.

### Inclusion and gender
- Five years since IMF commitment to supporting the 2030 agenda: the team prepared a policy paper reviewing implementation of initiatives and presented it extensively to the IMF Executive Board and during outreach missions.
- LIDC report featured a chapter drawing heavily on the team’s work on distributional impact of value-added taxes.
- Updated inequality toolkit finalized, distributed internally and externally, and integrated into the Fund’s structural curriculum for macro-structural training.
- Work on financial inclusion published in the Journal of Monetary Economics.
- Gender work consolidated in SDN: Women in the Labor Force: The Role of Fiscal Policies; SDN launched by the IMF Managing Director at the Global Women’s Forum on February 16th in Dubai.
- Gender-related findings were used in Article IV consultations (Laos, Nigeria, Sierra Leone, Kenya) and several working papers underpin the analytical framework.

### Building resilience and disasters
- Working paper Macroeconomic Outcomes in Disaster-Prone Countries set an analytical framework to evaluate macroeconomic and welfare consequences of natural disaster shocks in disaster-prone countries.

### Digital era engagement and dissemination
- High‑level workshop on Macroeconomics in the Age of Artificial Intelligence organized with the Institute of New Economic Thinking, featuring Kristalina Georgieva, Deborah Greenfield, Joseph Stiglitz, and Martin Sandbu.
- Team’s work on using Google search data to study LIC issues was featured at the 2020 Annual Meeting of the Allied Social Science Associations.
- Collaboration with IMF Library on bibliometric analysis to gauge research impact.

### Research impact and metrics (bibliometrics and dissemination)
- Citations compiled from Microsoft Academic, Lens.org and RePEc’s CitEc.
- Out of 175 intellectual entities there is a total of more than 1,403 citations (up from 800 citations reported last year).
- 80% of publications have been cited.
- Average citation of 11 per article cited.
- The Quarterly Journal of Economics 5-year impact factor reported as 14 (benchmark).
- Three quarters of citations are non-self with no IMF or DFID affiliation.
- Social media example: The Aggregate and Distributional Effects of Financial Globalization tweet praised by Dani Rodrik was retweeted by 154 users with an upper bound of 1,769,461 followers.
- Total downloads of IMF working papers produced by the project exceeded 110,000 (up from 75,000 reported last year) — roughly speaking, 900+ downloads per paper.

### Training and capacity building
- Pilot structural curriculum on macro-structural reforms (begun in 2018) included three clinics: labor and product market reforms; distributional impacts of policies and reforms; diversification and structural transformation in developing countries. All three clinics offered in first two years and planned for continued systematic delivery.
- MPAF.x made freely available on edX for external audiences.
- Plan to convert more core research areas into training courses and workshops.

### Transition to Phase IV
- Phase IV will leverage momentum in the five existing areas, deepen understanding of macro-critical LIC issues, integrate new findings into surveillance and program work, and expand to emerging critical issues such as the COVID-19 pandemic.

### Quantitative program outputs and targets
- Year 8: completed 16 working papers, bringing the eight‑year total to 129 working papers.
- The targets for Year 8 were revised upward while funding for Phase 3 decreased; despite this, the team met or surpassed the “high” standards in most areas.

### Challenges and disappointments (COVID-19 impacts)
- Since mid‑February 2020 several output targets were affected as the COVID‑19 crisis spread.
  - Non‑COVID-19 related publications were frozen by the IMF’s Communication Department, directly impacting working papers.
  - High-level conference Hidden Dimensions of Poverty: Description, Measurement, and Action scheduled for March 19, 2020 was cancelled.
  - Release of a book on fragile states was delayed.
- Pandemic-induced operational disruptions:
  - Suspension of IMF missions and countries’ shift to public health crisis management.
  - Staff refocusing on emergent COVID‑19 requests interrupted ongoing and concluding projects.
  - Country authorities shifting focus to manage the public health crisis generated new research requests not envisioned in the initial DFID IV proposal, requiring alignment with DFID area work.
- Short-term transitional costs expected despite increased importance of LIC engagement during the crisis.

### Log-frame outputs — Output 1 snapshot
- Output 1.1 — Working papers: 16 completed in Year 8; total of 129 working papers over eight years.

*Overview provided by the DFID-IMF research project on low-income countries (Phase 3 concluding year).*

### 1.   Public Investment in Bolivia: Prospects and Implications

### 1.   Public Investment in Bolivia: Prospects and Implications

### Published research outputs and peer-reviewed papers
- Published 12 papers in peer-reviewed journals this year.
- Topic highlights and journal outlets:
  - "Macroprudential policy under incomplete information" — The European Journal of Finance.
  - "Twin Deficits in Developing Economies" — Open Economies Review.
  - "Investing in public infrastructure: roads or schools?" — Macroeconomic Dynamics.
  - "On the substitution of private and public capital in production" — European Economic Review.
  - "Borrowing costs and the role of multilateral development banks: Evidence from cross-border syndicated bank lending" — Journal of International Money and Finance.
  - "Mobilization Effects of Multilateral Development Banks" — The World Bank Economic Review.
  - "Commodity prices and bank lending" — Economic Inquiry.
  - "Rethinking development policy: What remains of structural transformation?" — World Development.
  - "The Aggregate and Distributional Effects of Financial Globalization: Evidence from Macro and Sectoral Data" — Journal of Money, Credit and Banking.
  - "Distinguishing constraints on financial inclusion and their impact on GDP, TFP, and the distribution of income" — Journal of Monetary Economics.
  - "Macroeconomic impacts of non-resource revenue mobilization in CEMAC" — Applied Economics Letter, forthcoming.
  - "Export Quality in Advanced and Developing Economies: Evidence from a New Dataset" — IMF Economic Review, forthcoming.
- One book: "Macroeconomy Policy in Fragile States" — Oxford University Press, forthcoming.

### Country applications, capacity building, and uptake by authorities
- Completed 18 applications with IMF country teams.
- Examples of applications and uses:
  - Use of diversification toolkit in Nigeria’s Article IV and Uganda’s Article IV.
  - Application of DIGNAR model to Mozambique (Selected Issues), Gabon (Selected Issues), Guyana (Article IV), Republic of Congo (Article IV), Madagascar (Selected Issues).
  - Cameroon: 4th Review Under the ECF.
  - FPAS-related support: Rwanda Article IV; customized FPAS training and remote assistance for Bank of Ghana and State Bank of Vietnam.
- Coordinated with country authorities on 8 projects:
  - Forecasting and Policy Analysis System (FPAS) Manual.
  - Presentations and Article IV engagements in Kenya, Zambia, Honduras, Malawi, Ghana, Vietnam.
  - Course on model-based Monetary Policy Analysis and Forecasting (MPAF) in Vienna.
- Courses and workshops offered (4):
  - Model-based Monetary Policy Analysis and Forecasting (MPAF.x) online course for country authorities.
  - Ghana: Customized FPAS training mission at the Bank of Ghana.
  - Vietnam: Remote FPAS assistance to the State Bank of Vietnam.
  - MPAF course in Vienna.

### Outreach, conferences, and dissemination
- Held 4 high-level conferences attended by senior IMF staff:
  - Making the Case for Reform.
  - Macroeconomics in the Age of Artificial Intelligence.
  - Sustainable Development, Sustainable Debt: Finding the Right Balance.
  - Fostering Diversification to Escape the Middle-Income Trap.
- Research inputs reflected in IMF Board papers/meetings:
  - "Review of Implementation of IMF Commitments in Support of the 2030 Agenda for Sustainable Development."
  - "Macroeconomic Developments and Prospects in Low-Income Developing Countries—2019 (LIDC report)."
- Other IMF policy papers incorporating team results:
  - "SDN: The Political Costs of Reforms: Fear or Reality?"
  - "WEO Chapter: Reigniting Growth in Low-income and Emerging Market Economies: What Role Can Structural Reforms Play?"
  - "SDN: Women in the Labor Force: The Role of Fiscal Policies."
- External dissemination and public engagement:
  - 16 presentations by external researchers at high-level policy conferences.
  - Quarterly e-newsletters showcasing working papers, conferences, and activities.
  - Blog and media outreach including VoxEU, IMF Blog entries, and a video/poster presented at the 2020 AEA Annual Conference.

### Outcomes, impact on policy, and operational tools
- Research influenced policy dialogue and decisions on SDGs, structural reforms, gender and income inequality; findings included in Staff Discussion Notes, World Economic Outlook, and LIDC report.
- Conferences provided peer learning and policy dialogue on debt sustainability and diversification with high-level officials from multiple African countries and other partners.
- Structural reform database and analysis provided inputs to the October WEO chapter showing that a comprehensive reform package could deliver sizable output gains in the medium term.
- FPAS manual consolidated following joint workshop with the Bank of Uganda; MPAF.x launched over edX to support FPAS training and technical assistance.
- Structural curriculum clinics and an inequality toolkit (hosted on GitHub) used in internal training and peer learning workshops; uptakes reported from Kenya, Laos, Moldova, Nigeria, Sierra Leone, Uganda, and others.

### Project costs, value for money, and management
- Approved project budget: US$23.3 million.
- Drawn down from the subaccount as of April 2020: $20.8 million.
- Indicative breakdown of spending Years 1-8 (Table 4 totals):
  - HQ led missions including entire mission: $6,801,645
  - Short-term Advisors - CD delivery: $525,562
  - Research HQ based/Visiting Scholars: $6,894,300
  - Seminars & Study Tours: $1,671,151
  - Project Backstopping: $2,966,278
  - Project Management: $226,595
  - Exceptional Expenses: $335,282
  - Language Services: $1,348
  - Trust Fund Fee: $1,359,551
  - Total: $20,781,712
- Efficiency and cost metrics (Table 5):
  - Total Staff/Contractual/VS Costs: $14,221,507
  - Research Paper Costs: $10,666,130
  - Country Applications Costs: $3,555,377
  - Working Papers produced: 129 (Produced) + 26 (Commissioned) = 155 total working papers.
  - Cost Per Working Paper: $68,814
  - Published Papers produced: 70 (Produced) + 7 (Commissioned) = 77 total published papers.
  - Cost per Published Paper: $138,521
- Additional management and performance notes:
  - Average cost per paper reported lower than the DFID benchmark of $190,000 (£156,000) per paper.
  - Cost per working paper approximately $69,000 (£56,000) reported; cost per published paper $138,000 (£119,000) reported.
  - Staff, contractual employees, and visiting scholars estimated to spend 75 percent of their time on research papers and 25 percent on country applications.
  - Direct project management costs represent approximately one percent of total budget; including Trust Fund fee, program management costs are around eight percent.
  - No anticipated changes in cost structures due to exchange rates.

### Impact indicators and scholarly recognition
- Total number of publications over eight years: 70.
- Citation metrics:
  - 80% of publications have been cited.
  - Average citation of 11 per article cited.
  - Reference benchmark: The Quarterly Journal of Economics 5-year impact factor of 14.
- Academic visibility:
  - Papers accepted at journals including Journal of International Money and Finance, The World Bank Economic Review, Economic Inquiry, Journal of Monetary Economics.
  - Inclusion in programs of top academic conferences (e.g., ASSA, Econometric Society meetings).
- Project perceived as highly cost effective with strong uptake by country authorities and IMF country teams.

*DFID-IMF partnership annual report (June 2020), IMF.*

### 8. WORK PLAN AND TIMETABLE

### 8. WORK PLAN AND TIMETABLE

### (1) COVID-19 — modeling policy choices and analytical tools
- Priority: COVID-19 and LICs as a new area of work given the unprecedented nature of the current crisis (COVID-19). Major interruptions on travel/mission expected.
- Team activities:
  - Investigate medium- to long-term impacts of COVID-19 on LIDCs across key macroeconomic dimensions.
  - Build a comprehensive database of epidemics since 1900 and analyze responses of growth, debt or debt restructuring, and domestic conflicts to severe epidemics.
  - Study economic recovery paths from epidemics and compare with recovery from financial crises, natural disasters, and civil wars.
  - Develop an Extended Multigroup SEIR model to understand transmission of Covid-19 and evaluate scenarios and exit strategies for LIDCs; assess healthcare system requirements and effects on labor supply.
- Monetary policy frameworks during COVID-19:
  - Produce a policy note on central bank communication during COVID-19 arguing that central banks can flexibly adopt crisis responses (interest-rate adjustments, foreign exchange intervention, debt monetization) without necessarily compromising existing frameworks or credibility; communication is key.
  - Prepare a policy note summarizing the impact of the COVID-19 shock on inflation, inflation expectations, and associated risks in EMDEs, proposing responses that maintain longer-term focus on price stability.
  - Produce a policy note on integrating crisis response measures into monetary policy frameworks and considerations for authorities.
  - Prepare a policy note on designing central bank measures with consideration for inequality and impacts on lower income groups.
- Public investment and labor modeling:
  - Simulate COVID-19 impacts and policy responses using the DIGNAR model.
  - Produce a toolkit on DIGNAR model with COVID-19 shocks for LICs.
  - Produce a toolkit for the DIG labor model.

### (2) Modelling policy choices — ongoing programs and deliverables
- Public debt vulnerabilities in LICs:
  - Prepare a board paper on “The Joint IMF-WB Multipronged Approach for Addressing Emerging Debt Vulnerabilities”.
- Monetary policy frameworks in LICs:
  - Develop a comprehensive toolkit to assess soundness of monetary policy (MP) frameworks; feature results in working papers and a high-level conference.
  - Use the IASOC toolkit to generate diagnostics of strengths and weaknesses of monetary policy frameworks for Article IV mission country teams upon request.
  - Convene a high-level roundtable of practitioners and academics to review central bank practice and policy options to address increasing inequality through monetary policy, prudential regulation, and financial market infrastructure policy.
  - Build a micro-founded general equilibrium framework to quantify aggregate and distributional effects of combined monetary, macro-prudential, and exchange rate policies for LICs in Asia.
  - Prepare a working paper assessing drivers of pass-through of international oil price changes to domestic fuel prices in developing countries.
  - Construct policy traction indices from Article IV Staff Reports and examine correlates of policy traction in LIDCs.
  - Develop a quarterly projection model for the National Bank of Rwanda extending Berg et al (2006) to reflect: interest-rate-based policy framework with managed exchange rate, agricultural sector and harvest effects on prices, and role of fiscal policies and aid flows.
  - Conduct an FPAS mission to the Bank of Ghana to develop a medium-term modelling framework and FPAS-consistent organization/processes; invite a target staff group to attend the MPAF.x online course and provide feedback.
  - Prepare a stock-taking paper on IMF Capacity Development on Monetary Policy Forecasting and Policy Analysis to share lessons learned and recommendations.
  - Deploy the new Financial programming 2.0 environment to modernize teaching and capacity development for MP and financial programming; replace outdated Excel-based frameworks for face-to-face IMF training and macro-fiscal TA to LICs.
- Public investment trade-offs:
  - Contribute a chapter on public investment during fiscal cycles to the book on Infrastructure Governance, providing guidance on reorienting government expenditure during fiscal consolidations.
  - Continue technical assistance on public investment to country teams.
  - Produce online training modules on the DIG and DIGNAR models.

### (3) Understanding macro-financial linkages
- Cost of remittances:
  - Investigate drivers of high remittance costs and their slow decline using stylized facts, country cases, and empirical estimations to inform policy options for reducing remittance cost.

### (4) Building resilience — climate and disaster risks
- Macro criticality of climate-change-related natural disaster shocks:
  - Conduct simulations of the impact of natural disasters and policies in Maldives.
  - Use the growth-at-risk approach to analyze growth and fiscal impacts of large natural disasters.
  - Prepare a chapter on adapting to climate change in Sub-Saharan Africa for an upcoming Regional Economic Outlook report for Africa.
- Industry diversification and sector vulnerability:
  - Contribute a chapter to the book on Infrastructure Governance on building resilience to natural disasters in vulnerable states; explore economic benefits of ex-ante intervention and mobilizing resources for resilience.
- Integrated assessment on long-run impacts of climate change in LICs:
  - Build a version of the Integrated Assessment Model tailored to low-income economies allowing weather shocks to affect the real economy; use the framework to gauge long-run growth prospects and design adequate policies.

### (5) Promoting structural change and institutional development
- Diversification and development policy:
  - Prepare an IMF board paper on structural reforms.

### (6) Enhancing inclusion
- Gender equality:
  - Continue capacity building on gender equality issues for country teams and authorities.
- Income inequality and distributional analysis:
  - Prepare a revision of a working paper analyzing the inequality toolkit requested by The Economic Journal; commission a Vox article.
  - Continue technical assistance on the inequality toolkit to country teams and authorities.
  - Study the impact of ICT on structural change.
  - Launch an updated database on fuel pump prices around the world and conduct a study on the distributional impact of fuel prices on inflation.
  - Study how food price shocks would affect the macroeconomy of LIDCs.
  - Develop an analytical framework to build resilience in small states sustainably with several country applications.
  - Launch a project to provide evidence on the link between climate shocks and income inequality in low income developing countries prone to frequent and severe climatic shocks.

### Risk
- The overall risk for this project remains low.

### Monitoring and evaluation
- Monitoring arrangements:
  - IMF reports to DFID annually on outputs included in the log-frame.
  - Provide quarterly updates to the website and send quarterly e-newsletters reaching an audience of more than 1500 academics, policymakers, central bank staff, and government representatives; e-newsletters are posted on the project website.
  - Upload all publicly available working and published papers to the R4D portal on the DFID website.
  - Provide “gold access” to journal publications produced through the grant.
  - Convene video conference calls when deemed necessary by IMF and DFID project members.
- Evaluation:
  - No budget for an external evaluation was included in the project budget.

### Selected log-frame targets and baseline indicators (as stated)
- Impact indicators:
  - Proportion of people living in extreme poverty in LICS — Planned (2017): Sub-Saharan Africa: 56%; Developing regions: 24%.
  - Increase in employment to population ratio in LICs — Planned (2017): Sub-Saharan Africa: 70%; Developing regions: 68%.
- Outcome and output targets (Planned March 2017 and targets by March 2020):
  - Evidence of improved IMF policymaking integration — Target (March 2020): H (12), M (11), L (10).
  - High quality, policy relevant research on macroeconomic issues:
    - Papers planned March 2017 (75); By March 2020: H (128 papers), M (124 papers), L (120 papers). Achieved: 94, 113, 129.
  - Number of research papers accepted in peer-reviewed journals:
    - Planned March 2017 (37); By March 2020: H (65 papers), M (63 papers), L (61 paper). Achieved: 48, 58, 70.
  - Number of freely available books:
    - Planned March 2017 (2); By March 2020: 3 books. Achieved: 2, 2, 2.
  - Application and use of tools/frameworks by country teams:
    - Planned March 2017 (64); By March 2020: H (107), M (104), L (102). Achieved: 85, 98, 116.
  - Application and use of tools/frameworks by country authorities:
    - Planned March 2017 (16); By March 2020: H (46), M (43), L (40). Achieved: 29, 38, 46.
  - Courses offered to country authorities:
    - Planned March 2017 (1); By March 2020: H (20), M (18), L (17). Achieved: 9, 16.
  - Number of policy conferences drawing on project outputs:
    - Planned March 2017 (22); By March 2020: H (40), M (39), L (38). Achieved: 30, 36, 41.
  - Number of commissioned research papers from new researchers:
    - Planned March 2017 (20); By March 2020: H (32), M (29), L (26). Achieved: 25, 26, 32.
  - Number of data toolkits produced:
    - Planned March 2017 (5); By March 2020: H (8), M (7), L (6). Achieved: 7, 8, 9.
  - Attendance of external researchers at high-level policy conferences:
    - Planned March 2017 (51); By March 2020: H (118), M (115), L (112). Achieved: 86, 108, 124.
  - Project outputs disseminated in e-newsletter and updated web-page:
    - Planned March 2017 (18 updates); By March 2020: H (30), M (27), L (24). Achieved: 22, 26, 30.

*Source: IMF — Macroeconomic Research in Low-Income Countries (LICs) work plan and timetable.*

### APPENDIX 2. FINANCIAL REPORTS

### APPENDIX 2. FINANCIAL REPORTS

### Bilateral - Cash Flow Statement (United Kingdom - Project on Macroeconomic Research in LICs)
- Reporting date: As of Apr 30, 2020
- Contributions (per fiscal year and total):
  - FY 2015: 10,462,830
  - FY 2016: 2,254,739
  - FY 2017: 4,537,586
  - FY 2018: 2,368,482
  - FY 2019: 1,968,935
  - FY 2020: 2,088,790
  - Total: 23,681,362
- Interest Earned (per fiscal year and total):
  - FY 2015: 2,964
  - FY 2016: 7,369
  - FY 2017: 19,702
  - FY 2018: 35,135
  - FY 2019: 56,743
  - FY 2020: 41,005
  - Total: 162,918
- Total Cash Available (per fiscal year and total):
  - FY 2015: 10,465,794
  - FY 2016: 2,262,108
  - FY 2017: 4,557,288
  - FY 2018: 2,403,617
  - FY 2019: 2,025,678
  - FY 2020: 2,129,795
  - Total: 23,844,280
- Expenses Paid (per fiscal year and total):
  - FY 2015: 6,156,537
  - FY 2016: 3,536,000
  - FY 2017: 3,768,706
  - FY 2018: 2,937,652
  - FY 2019: 2,490,122
  - FY 2020: 1,892,694
  - Total: 20,781,711
- Cash Balance (per fiscal year and final balance):
  - FY 2015: 4,309,257
  - FY 2016: 3,035,365
  - FY 2017: 3,823,947
  - FY 2018: 3,289,912
  - FY 2019: 2,825,468
  - FY 2020: 3,062,569
  - Final reported cash balance: 3,062,569
- Notes:
  - 1/ Contributions are net of transfers and return of funds.
  - 2/ Expenses paid include the 7% TFM.

### Project Budgets, Execution and Progress (selected aggregates)
- SPR_IMF_2017_04 (DFID Macro Research 3)
  - Status: Approved
  - Start Date: 4/1/2017
  - End Date: 3/31/2020
  - Latest Approved/Proposed Budget: 7,636,626
  - Expenses: 6,970,751
  - Remaining Balance: 665,875
  - Execution (%): 91%
  - Subcomponents and execution (selected):
    - HQ led missions including entire mission team: Budget 556,596; Expenses 389,849; Remaining 166,747; Execution 70%
    - Short-term Advisors - CD delivery: Budget 90,000; Expenses 48,460; Remaining 41,540; Execution 54%
    - Research HQ based / Visiting Scholars: Budget 4,716,521; Expenses 4,658,535; Remaining 57,986; Execution 99%
    - Seminars & Study Tours: Budget 609,290; Expenses 397,767; Remaining 211,523; Execution 65%
    - Project Backstopping: Budget 1,092,201; Expenses 1,054,899; Remaining 37,302; Execution 97%
    - Project Management: Budget 122,494; Expenses 84,611; Remaining 37,883; Execution 69%
    - Exceptional Expenses: Budget 446,523; Expenses 335,282; Remaining 111,241; Execution 75%
    - Language Services: Budget 3,000; Expenses 1,348; Remaining 1,652; Execution 45%
- IMF_IMF_2012_01 (DFID Macro Research 1&2)
  - Status: Closed
  - Start Date: 5/1/2012
  - End Date: 3/31/2017
  - Latest Approved/Proposed Budget: 12,451,409
  - Expenses: 12,451,410
  - Remaining Balance: 0 (closed projects: remaining balance zeroed out upon project completion)
  - Subcomponents listed with full expenditure (e.g., HQ led missions, Short-term Advisors, Research HQ based / Visiting Scholars, Seminars & Study Tours, Project Backstopping, Project Management)

- Subtotals and fees:
  - Sub Total (projects): 20,088,035 (Budget) / 19,422,161 (Expenses) / 665,875 (Remaining)
  - Trust Fund Management Fee: 1,406,162 (Budget) / 1,359,551 (Expenses) / 46,611 (Remaining)
  - Grand Total: 21,494,198 (Budget) / 20,781,712 (Expenses) / 712,487 (Remaining)

### Agreement Summary and Availability of Funds
- Contributions to date: 23,681,361
- Net Transfers: -
- Interest Earned: 162,918
- Total Inflows (A): 23,844,279
- Expenses: 20,781,712
- Remaining Budget (including projects pending approval): 712,487
- Total Outflows (B): 21,494,199
- Future Contributions (based on signed agreements) (C): 4,171,779
- Total Available & Future Contributions (A-B+C): 6,521,859
- Notes:
  - 1/ The remaining balance for closed projects is zeroed out upon project completion for reallocation of resources or return to donor.
  - 2/ For active projects only.

---

### APPENDIX 3. RESEARCH OUTPUTS — OUTPUT 1.1 WORKING PAPERS (selected findings)

### Topic 1. Modelling and understanding policy choices
- Public Investment in Bolivia: Prospects and Implications (Yehenew Endegnanew and Dawit Tessema)
  - Large-scale public investment aimed to fill infrastructure gaps under “Patriotic Agenda 2025” (2016–2020).
  - If public investment is sustained at current levels as a share of GDP while hydrocarbon revenues decline, public debt sustainability could be called into question.

- On the Capacity to Absorb Public Investment: How Much is Too Much? (Daniel Gurara, Kangni Kpodar, Andrea F. Presbitero and Dawit Tessema)
  - Empirical finding: non-linear U-shaped relationship between public investment and project costs.
  - Unit costs increase once public investment is close to 10% of GDP.
  - Threshold lower (about 7% of GDP) in countries with low investment efficiency.
  - Effect of investment scaling up on costs is especially strong during investment booms.

- On the Substitution of Private and Public Capital in Production (Zidong An, Alvar Kangur, and Chris Papageorgiou)
  - Using a nested-CES production function estimated on a dataset for 151 countries (1960-2014) consistent with Penn World Table version 9.
  - Evidence against perfect substitutability between public and private capital, especially for emerging and LIDCs.
  - Point estimate of the elasticity of substitution estimated closely around 3.

- Optimal Fiscal Spending and Reserve Accumulation Policies Under Volatile Aid (Ioana R. Moldovan, Shu-Chun Susan Yang, and Luis-Felipe Zanna)
  - Optimal policy: adjust government spending gradually to unpredictable fluctuations in aid and partially accumulate foreign exchange reserves to offset Dutch disease effects.
  - Allocating relatively more government spending to productive public investment and less to government consumption is welfare improving.

- Debt Sustainability, Investment, and Growth with Segmented Labor Markets (Edward F. Buffie et al.)
  - New DIG-Labor models introduce segmented labour markets, efficiency wages, open unemployment, and informal non-agricultural sector.
  - Investment in human capital is much more effective than infrastructure investment in promoting long-run development when investments earn average estimated returns.
  - Because education affects productivity with long lags, it can take 15+ years before net national income, private capital stock, real wages for the poor and formal sector employment surpass counterparts in an infrastructure-focused program.
  - Ranking of investment programs depends on social discount rate and weight of distributional objectives.

### Topic 2. Understanding macro-financial linkages
- Opening Up: Capital Flows and Financial Sector Dynamics in Low-Income Developing Countries (Sebastian Horn and Futoshi Narita)
  - Capital inflows associated with financial deepening via increases in loans, deposits and wholesale funding.
  - Second-round effects: domestic banks increase loans in response to higher deposits.
  - Only modest signs of built-up financial vulnerabilities, but caution warranted.
  - Suggestive evidence that global push factors, rather than domestic pull factors, drive the observed financial sector dynamics (using IV approach and AIPW estimator).

### Topic 3. Building resilience
- Macroeconomic Outcomes in Disaster-Prone Countries (Alessandro Cantelmo, Giovanni Melina and Chris Papageorgiou)
  - Using a dynamic stochastic general equilibrium model solved with Taylor projection.
  - Weather shocks cause large and persistent effects that significantly impact income convergence.
  - On average, shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.6 percent.
  - Welfare gains from self-financing resilient public infrastructure are negligible; international aid must be sizable to achieve significant welfare gains.
  - Donor financing of resilience before disasters is more cost-effective than disbursing aid after realization.

### Topic 4. Promoting structural change and institutional development
- Structural Reforms and Elections (Alberto F. Alesina et al.)
  - Two unique databases on reforms (1973–2014) and elections.
  - Liberalizing reforms engender economic benefits that materialize gradually; reforms implemented close to elections are costly to incumbents.
  - Electoral effects depend on economic state: reforms penalized during contractions; reforms in expansions often rewarded.

- Policies in Hard Times: Assessing the Impact of Financial Crises on Structural Reforms (Gunes Gokmen et al.)
  - Evidence casts doubt on the crises-reforms hypothesis; crises are associated with slowing structural reforms depending on institutional environment.
  - After financial crisis, democracies neither open nor close economy; autocracies reduce liberalizations in multiple sectors.

- Understanding Export Diversification (Rahul Giri, Saad Quayyum and Rujun Yin)
  - Using Bayesian Model Averaging to rank determinants.
  - Policy priorities for diversification: human capital accumulation and reducing barriers to trade.
  - For commodity exporters: most important driver is reducing barriers to trade, followed by improving secondary education outcomes and financial sector development.

- Sustainable Development, Sustainable Debt (Gomez Gbedia Agou et al.)
  - SSA countries face large development needs while financing space has narrowed.
  - Public debt increased rapidly between 2011 and 2016, stabilizing thereafter.
  - ODA has stagnated or declined; SSA countries are about half-way to achieving the SDGs.

### Topic 5. Enhancing inclusion
- Informality and Gender Gaps Going Hand in Hand (Vivian Malta et al.)
  - In sub-Saharan Africa women work relatively more in the informal sector than men.
  - Using microdata from Senegal, main findings:
    - In urban areas, being a woman increases the probability of being informal by 8.5 percent.
    - Education is usually more relevant for women.
    - Having kids reduces men’s probability of being informal but increases women’s.

- A Quantitative Analysis of Female Employment in Senegal (Vivian Malta et al.)
  - Female-to-male employment in Senegal increased by 14 percentage points between 2006 and 2011.
  - Years of education of working age population increased 27 percent for females and 13 percent for males over the same period.
  - Improvements in education can explain up to 44 percent of the observed increase in female-to-male employment ratio; the remainder can be explained by a decline in discrimination against women in the labor market.

- Macro-Fiscal Gains from Anti-Corruption Reforms in the Republic of Congo (Giovanni Melina et al.)
  - Corruption has contributed to poor macro-fiscal outcomes in Congo via vulnerabilities in oil revenue management and public investment.
  - Dynamic stochastic general equilibrium model results: potential additional growth ranging between 0.8 to 1.8 percent per year over the next 10 years depending on reforms.
  - Debt can decline by 2.25 to 3 percent of GDP per year over the same period under proposed reforms.

- Do Remittances Enhance Financial Inclusion? (Sami Ben Naceur et al.)
  - Sample of 187 countries (2004-2015); cross-country and dynamic panel GMM regressions.
  - Relationship is U-shaped: at low remittances-to-GDP, remittances substitute for formal channels and reduce financial inclusion; at remittance-to-GDP ratios above 13% on average, remittances complement formal channels and enhance financial inclusion.

- The Minimum Wage Puzzle in Less Developed Countries (Christopher Adam and Edward Buffie)
  - A dynamic general equilibrium model with efficiency wages and endogenous capital accumulation in formal and informal sectors can explain observed stylized facts associated with minimum wage laws in less developed countries.

*International Monetary Fund — United Kingdom - Project on Macroeconomic Research in LICs. As of Apr 30, 2020.*

### 2.   Twin Deficits in Developing Economies

### 2.   Twin Deficits in Developing Economies

### Core findings
- A 1 % of GDP unanticipated increase in the government budget balance improves, on average, the current account balance by 0.8 percentage point of GDP.
- This effect is substantially larger than that obtained using standard measures of fiscal impulse, such as the cyclically-adjusted budget balance.

### Heterogeneity and conditional effects
- There is suggestive evidence that the fiscal-to-current-account effect tends to be larger:
  - (i) during recessions;
  - (ii) in countries that are more open to trade;
  - (iii) in countries that have less flexible exchange rate regimes;
  - (iv) in countries with lower initial public debt-to-GDP ratios.

### Implications for analysis and policy
- Unanticipated fiscal improvements have sizable external balance effects in developing economies, larger than those implied by cyclically-adjusted measures of fiscal stance.
- Cross-country and temporal heterogeneity imply that macroeconomic responses to fiscal shocks depend on recessionary conditions, trade openness, exchange rate flexibility, and initial debt burdens — factors that should inform country-specific fiscal and external adjustment strategies.

*Davide Furceri and Aleksandra Zdzienicka, Open Economies Review.*

### 10. IMF African Department Inclusive Growth Network’s peer learning workshops

### 10. IMF African Department Inclusive Growth Network’s peer learning workshops

### Peer learning workshop presentation
- Stefania Fabrizio and Xin Tang presented SPR’s engagement in the inequality implications of fiscal policy under the DFID project at the IMF African Department Inclusive Growth Network’s peer learning workshops.
- After giving an overview of SPR’s analytical and operational work so far on the role of fiscal policy in enhancing inclusion, they covered the inequality toolkit developed under the DFID project.
- The inequality toolkit has been applied to more than 10 country applications so far.
- The presentation was joined by several IMF’ mission chiefs and desk economists.

### 11. Nigeria: Selected Issues
- Education and health outcomes in Nigeria are among the weakest worldwide and are deteriorating in some parts of the country.
- Access to education is highly unequal across states and individuals’ income and gender.
- Regional differences in health outcomes are vast.
- Estimations from a micro-founded general equilibrium model suggest that narrowing gaps in education between boys and girls and between individuals at different parts of the income distribution would:
  - boost productivity;
  - decrease income inequality;
  - narrow gender gaps in labor force participation rates and earnings.
- Closing the gender gap in years of schooling in each income quintile alone would boost long-term GDP by 5 percent, with much higher effects for more ambitious scenarios that also include anti-discrimination policies.
- Improving health outcomes, in particular for children, will support education outcomes and boost productivity of the labor force.
- Increased and regular funding for the education and health sector will be critical for supporting a range of reforms that includes all tiers of government.

### 12. Sierra Leone: Selected Issues
- Indicators of human capital in Sierra Leone have generally improved over the past two decades, despite major setbacks during the Ebola health crisis.
- Education and health outcomes continue to lag behind most other countries.
- The Government’s National Development Plan 2019-23 targets substantially boosting human capital, including through their Free Quality Education for All program—the focus of this paper.
- Findings:
  - Providing each child with at least lower secondary education could, in the long-term, boost GDP by 40 percent.
  - This policy could substantially lower income inequality and generate additional revenues through higher individual incomes.
  - Closing gender gaps in education across income groups could yield gains of 8 percent of GDP.
  - Increasing the quality of education could yield gains of 27 percent of GDP.
- With limited fiscal space, evidence-based prioritizing, sequencing and targeting of policies—coordinated across sectors—is critical for sustained improvements to human capital outcomes.

### 13. Moldova: Article IV
- Republic of Moldova’s Article IV Staff Report estimates the medium- to long-term macroeconomic impact of replacing tax expenditure with public investment.
- Observations:
  - Tax expenditures result in significant revenue losses and are an inefficient way to extend support compared to better-targeted spending programs.
  - Tax expenditures are distortive, impairing the level playing field for businesses.
- Simulation results show that replacing tax expenditures with public investment would yield large growth dividends.

### 14. Course: Macroeconomic Policies, Structural Reforms, and Income Distribution
- Introduces participants to modern tools for quantitative macro, distributional and welfare analyses.
- Studies a recent DSGE framework developed at the IMF for studying welfare implications of fiscal reforms.
- Covers key features of the framework and discusses operationalization in surveillance and program countries.
- Main focus: hands-on workshop using the user-friendly toolkit in an actual economy; participants obtain the toolkit for model calibration and simulations and learn to assess how alternative policy packages influence the economy.

### 15. Course: Macro-Structural Training, Clinic 3 — Diversification, Structural Transformation and Reforms
- Part of a series of training courses on macro-critical structural issues.
- Provides an overview of IMF analytical and policy work on diversification, structural transformation, and reforms and their operationalization in country work.
- Considers diversification in trade and in the broader domestic economy (type and quality of goods produced and exported).
- Discusses approach and priorities to guide Fund support for countries’ macrostructural policy needs and presents country cases.

### 16. Course: Macro-Structural Training, Clinic 4 — Distributional Impact of Policies and Reforms
- Overview of:
  - potential impact of a range of structural reforms on inequality (drawing on the SDN macro-structural policies and income inequality and other pilot countries not included in the SDN);
  - in-house and outside tools for distributional analysis available to country teams and data requirements;
  - training available to teams.

### 17. Course: Macro-Structural Training, Clinic 7 — Labor and Product Markets Reforms
- Provides an overview on labor and product market regulations, macroeconomic effects and available approaches to quantify them.
- Reviews approaches to quantify the impact of reforms: models, macro- and sector-level panel analysis, micro-level analysis, quantitative case studies.
- For each approach, pros and cons and examples are discussed.

### 19. Rwanda: Article IV
- Provided inputs to IMF’s team for Rwanda regarding monetary policy frameworks in preparation for IMF Article IV consultation.
- The IASOC toolkit—an output of the project on Monetary Policy Frameworks—was used to generate diagnostics of the key strengths and weaknesses of monetary policy frameworks.

### OUTPUT 2.2 — Uptake by Country Authorities (selected items)
- Bank of Uganda:
  - BoU team visited IMF headquarters in July 2019 to collaborate with ICD on the Forecasting and Policy Analysis System (FPAS) Manual.
  - ICD provided feedback to ensure the manual covers organizational details, modeling apparatus (including Quarterly Projection Model), and codes infrastructure.
  - The manual is intended as a user guide for BoU management and economists.
- Kenya:
  - During the 2020 Article IV Consultation mission, IMF staff with UN Women presented preliminary results of a forthcoming Selected Issues Paper on gender inclusion in Kenya.
  - Kenya closed gender gaps in access to primary and secondary education, but gaps remain in tertiary education and the labor market (including earnings).
  - The paper finds important GDP and income equality gains from policies such as reducing gender disparities in the informal sector, closing education gaps between boys and girls, and reducing time spent on fetching water.
- Zambia:
  - Bank of Zambia is developing, with Fund TA, a FPAS to be used as a key input in monetary policy decision making.
- Honduras:
  - Authorities plan to build on progress toward inflation targeting.
  - Central Bank of Honduras introduced collateralized securities transactions in the interbank market, reduced FX surrender requirements by 30 percent, and strengthened technical capacity to prepare an FPAS.
- Malawi:
  - Authorities continue to expand capacity in high frequency data, liquidity forecasting, and FPAS modeling to support eventual transition toward inflation targeting.
- Ghana:
  - ICD-led FPAS customized training mission to Bank of Ghana (October 28 – November 8, 2019) improved analytical and forecasting capacity and integration of FPAS into monetary policy processes.
  - Mission activities included hands-on training on QPM and NTF tools, working on current forecasting round projections, improving MPC presentations, and providing an Executive Summary with recommendations framed within a two-year workplan.
- Vietnam:
  - ICD TA delivered remote assistance on FPAS to the State Bank of Vietnam (SBV).
  - Mission synchronized with inaugural MPAFx on-line course; weekly videoconference calls supported course absorption.
  - Combined online course and remote support prepared for a future mission (planned for May 2020) to develop and calibrate the initial Vietnam QPM.
- MPAF course in Vienna:
  - ICD teams delivered three classroom courses on model-based Monetary Policy Analysis and Forecasting (MPAF) including participants from central banks in LICs.
  - Course covers organization and processes of FPAS and intensive hands-on training on applying the QPM for policy analysis and forecasting.

### OUTPUT 2.2.1 — Courses and workshops offered to country authorities (selected items)
- MPAF.x online course:
  - Introduces quarterly projection macroeconomic models (QPM) as core of FPAS in central banks.
  - Reviews a simple canonical QPM and demonstrates implementation in macroeconomic modelling software, including filtration and calibration exercises.
  - Serves as preparatory material and potential prerequisite for face-to-face IMF training and TA on FPAS for central banks in low income countries.
- Ghana and Vietnam:
  - Summaries of the Ghana FPAS CT mission (October 28 – November 8, 2019) and the Vietnam remote assistance repeat the activities and objectives noted under OUTPUT 2.2.
- MPAF classroom course in Vienna:
  - Presents FPAS organization and processes and provides intensive hands-on QPM training.

### OUTPUT 3.1 — High-level policy conferences attended by IMF senior staff (selected items)
- Making the Case for Reform (2019 IMF-World Bank Annual Meetings panel):
  - Discussed political economy of reform and challenges implementing structural reforms.
  - Key takeaways:
    - Reform priorities: differing views despite shared goal of sustainable growth.
    - Reform implementation: timing, allocation of benefits, and public narrative are important.
    - Political economy challenges: electoral costs and approval processes can hinder reforms.
- The Macroeconomics of Artificial Intelligence:
  - A 2-day workshop (March 6 and 7) in Washington DC bringing leading academics and policymakers.
  - Panel included Kristalina Georgieva, Joseph Stiglitz, Deborah Greenfield, and Juliana Rotich; moderated by Martin Sandbu.
- Sustainable Development, Sustainable Debt: Finding the Right Balance:
  - Sub-Saharan Africa faces a dilemma between financing development needs and addressing debt vulnerabilities.
  - Decline in Official Development Aid to SSA by half (from 4 percent of GDP in the 2000s to 2 percent of GDP in 2010s) added to financing challenges.
  - Achieving SDGs by 2030 would require additional financing of some 20 percent of GDP annually at a time when public debt remains elevated at 55 percent of GDP.
  - Conference (jointly organized by IMF and the Government of Senegal) identified obstacles to sustainable development and proposed solutions.
- Fostering Diversification to Escape the Middle-Income Trap (Kasane, Botswana, February 6–7):
  - Jointly with AFRITAC South, Bank of Botswana, EU Delegation, SADC and IMF, DFID organized a high-level conference.
  - Brought senior Botswana officials, representatives from five economies that diversified (Chile, Costa Rica, Estonia, South Korea, Mauritius), regional institutions, and senior IMF staff including Deputy Managing Director Tao Zhang and Deputy Director David Robinson.

### OUTPUT 3.2 — Results of papers reflected in IMF Board discussions and papers
- Review of Implementation of IMF Commitments in Support of the 2030 Agenda for Sustainable Development:
  - Reviews IMF initiatives committed in 2015 to support the 2030 agenda, including:
    - strengthening national tax systems;
    - tackling large infrastructure gaps;
    - promoting economic inclusion;
    - development of domestic financial markets;
    - intensifying engagement in fragile and conflict-affected states;
    - improving economic statistics;
    - expanding the financial safety net for developing countries;
    - addressing macroeconomic aspects of climate change.
  - Implementation record shows a large scaling up of IMF support for the 2030 development agenda.
  - IMF also engaged in initiatives such as adopting a framework to assess corruption vulnerabilities and developing a framework for assessing spending levels needed to reach key SDGs.
  - The paper draws lessons learned from implementation to inform future IMF engagements.

*Source: IMF African Department Inclusive Growth Network; IMF SPR and ICD summaries.*

### 2.   Macroeconomic Developments and Prospects in Low-Income Developing Countries—2019

### 2.   Macroeconomic Developments and Prospects in Low-Income Developing Countries—2019

### Overview and key facts
- The paper is the fifth in a series examining macroeconomic developments and prospects in low-income developing countries (LIDCs).
- LIDCs are a group of 59 IMF member countries primarily defined by income per capita below a threshold level.
- LIDCs contain one fifth of the world’s population—1.5 billion people—but account for only 4 percent of global output.

### Recent macroeconomic developments and growth drivers
- The first chapter discusses recent macroeconomic developments and trends across LIDCs.
- Growth decompositions are used to explore key drivers of growth performance in LIDCs.

### Tax policy: value-added tax (VAT) implementation
- A chapter examines challenges faced by LIDCs in implementing a value-added tax system, noting VAT is generally seen as a key component of a strong national tax system.
- The analysis focuses on implementation constraints specific to LIDCs (institutional and administrative capacity considerations are central to the discussion).

### Financial sector: tailoring financial safety nets
- A chapter discusses how financial safety nets can be appropriately tailored to the specific needs of LIDCs.
- Emphasis is placed on the role of effective safety nets in ensuring financial stability, underpinning public confidence in the financial system, and promoting financial intermediation.

### Findings from related IMF Staff Discussion Notes and WEO chapter summaries
- SDN: The Political Costs of Reforms: Fear or Reality?
  - Many countries experience persistent, weak medium-term growth and limited fiscal space.
  - Structural reforms can yield long-term economic benefits but may have sizable short-term distributional costs that create political resistance.
  - The SDN examines whether fear of electoral punishment for reforms is supported by evidence and looks for lessons to design reform strategies that mitigate political costs.
- WEO Chapter: Reigniting Growth in Low-income and Emerging Market Economies: What Role Can Structural Reforms Play?
  - Using a newly constructed database on structural reforms, a reform push in governance, domestic and external finance, trade, and labor and product markets could deliver sizable output gains in the medium term.
  - A comprehensive reform package might double the speed of convergence of the average emerging market and developing economy.
  - Reforms take several years to deliver and can entail greater short-term costs when carried out in bad times; they are best implemented under favorable economic conditions.
  - Reform gains tend to be larger when governance and access to credit are strong, and where labor market informality is higher.

### Gender and labor market findings
- SDN: Women in the Labor Force: The Role of Fiscal Policies
  - Female labor force participation has increased over the past three decades but remains substantially lower than male participation.
  - The average female labor force participation rate across countries is still 20 percentage points lower than the male rate.
  - Gender gaps in wages and access to education persist.
  - Prior IMF work shows greater gender equality boosts economic growth and leads to better development and social outcomes.
  - Gender equality is one of the 17 United Nations Sustainable Development Goals that 193 countries committed to achieve by 2030.

### Selected commissioned-research findings relevant to LIDCs
- International Capital Flows, Land Conversion and Wage Inequality in Poor Countries (Sugata Marjit and Saibal Kar)
  - In a multiple-commodity world with land as a crucial input for both agriculture and industry, an influx of capital supporting industrial production must widen the skilled-to-unskilled wage gap.
  - If the rate of conversion of land exceeds a critical value in the short-run, the wage gap rises; full conversion can raise the wage gap in the long run if agriculture is labor-intensive.
- Examining Structural Unemployment in Sub-Saharan Africa: Empirical Evidence from Unobserved Components (Ashwin Madhou and Tayushma Sewak)
  - Multivariate filtering techniques are applied to quantify NAIRU, potential output, output gap, and unemployment gap for South Africa, Kenya, Mauritius and Ghana.
  - Findings suggest increased government spending on education, a competitive exchange rate, and boosting financial development (measured as market capitalization of listed companies) can help lower NAIRU in these Sub-Saharan African countries.
- Building Inclusive States: A Simple Framework (Daron Acemoglu and James A. Robinson)
  - State fragility arises when states are ineffective at raising revenues and providing public goods and when they are illegitimate and unaccountable.
  - Exiting fragility requires balancing state capacity development with society’s ability to discipline the state; positive feedback between state and society organization (the “Red Queen effect”) can reduce fragility.
- Transition Programs: A Theory of the Scaffolding Needed to Build out of Fragility (Paul Collier)
  - Fragile countries can be trapped in locally stable dysfunctional equilibria; change is most achievable during episodic “pivotal moments.”
  - Effective IFI support during pivotal moments requires simple, government-led programs that allow cumulative success; state-building must be approached as scaffolding.
- Building Governance Capacity in Areas of Limited Statehood (Thomas Risse)
  - Areas of limited statehood vary widely; effective governance depends on legitimacy of governors, social trust, and adequate institutional design and financial resources.
  - IFIs should focus on building governance capacity in areas of limited statehood rather than pursuing state-building that can worsen outcomes when central governments are autocratic or predatory.
- Monetary and Exchange Rate Policy in Fragile States (Christopher Adam and James Wilson)
  - Monetary and exchange rate choices rarely are fundamental drivers of deep structural fragility but affect movements into fragility and potential exit paths.
  - Policy choices influence the distribution of rents and balance of power, affecting the incentives and influence of domestic and external actors.

### Key statistics and numeric facts preserved exactly
- Number of LIDCs: 59 IMF member countries.
- Population share in LIDCs: one fifth of the world’s population—1.5 billion people.
- Output share of LIDCs: 4 percent of global output.
- Gender labor force gap: the average female labor force participation rate across countries is still 20 percentage points lower than the male rate.
- Number of United Nations countries that committed to the SDG gender goal: 193 countries.
- The paper is described as the fifth in a series.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/annual-reports/dfid-ar-june2020.pdf_