## fcdo-ar-june2023

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---

### Indicator results and research outputs
- Indicator 1.1: Priority research outputs by topic
  - Topics covered: 1) Monetary and exchange rate policies; 2) Public investment, growth, and debt sustainability; 3) Macroeconomic management of natural resources; 4) Macroeconomic policies and income distribution; 5) Financial deepening for macroeconomic stability and sustained growth; 6) Growth through diversification; 7) Gender and macroeconomics; 8) Capital flows.
  - By March 2023 milestone targets: H (176 papers), M (172 papers), L (168 papers).
  - Achieved: 178 cumulative (13 in past year).
  - Assessment: Exceeded high target.

- Indicator 1.2: Peer‑reviewed publications accepted
  - By March 2023 milestone targets: H (105 papers), M (103 papers), L (101 paper).
  - Achieved: 105 cumulative (7 in past year).
  - Assessment: Met high target.
  - Seven accepted papers (titles and journals preserved):
    1. How large and persistent is the response of inflation to changes in retail energy prices? — Chadi Abdallah and Kangni Kpodar, Journal of International Money and Finance
    2. Defying the Odds: Remittances during the COVID-19 Pandemic — Kangni Kpodar, Montfort Mlachila, Saad Quayyum and Vigninou Gammadigbe, The Journal of Development Studies
    3. Macroeconomic Outcomes in Disaster-Prone Countries — Alessandro Cantelmo, Giovanni Melina, and Chris Papageorgiou, Journal of Development Economics
    4. Do Monetary Policy Outcomes Promote Stability in Fragile Settings? — Oumar Diallo, Steve, Loris Gui-Diby and Patrick A. Imam, Applied Economics
    5. Public Investment and Human Capital with Segmented Labour Markets — Edward F Buffie, Christopher Adam, Luis-Felipe Zanna, Lacina Balma, Dawit Tessema and Kangni Kpodar, Oxford Economic Papers
    6. Loss-of-learning and the Post-Covid Recovery in Low-income Countries — Edward F. Buffie, Christopher Adam, Luis-Felipe Zanna and Kangni Kpodar, Journal of Macroeconomics
    7. Tax Revenues in Low-income Countries — Adrian Peralta-Alva, Xuan Tam, Xin Tang and Marina Tavares, The Economic Journal

### MRLIC research on food insecurity and policy uptake
- Key outputs and empirical findings
  - IMF Departmental Paper on Climate Change and Food Insecurity in Sub-Saharan Africa (September 2022) and related blog offering macroeconomic policy advice.
  - Working paper (July 2022) on external and domestic drivers of staple food prices in Sub-Saharan African countries: SSA countries are highly vulnerable to global price shocks because the pass-through from global to local prices is close to one for many staples.
  - Paper (Jan 2021) examining the role of fiscal policy in mitigating the impacts of food price shocks.
  - Empirical quantification: successive shocks raised the number of people unable to meet basic food consumption needs by at least 30 percent to 123 million in 2022 (12 percent of SSA’s population).

- Policy recommendations and channels of impact
  - Fiscal policy: focus on social assistance.
  - Public investment: prioritize efficient public infrastructure investment.
  - Finance: improve access to finance to catalyze private investment in agricultural resilience and productivity.
  - Trade and transport: promote greater regional trade integration complemented with resilient transport infrastructure.
  - International support: financial assistance for social assistance and key infrastructure, capacity development, and technology transfer.

- Uptake and influence
  - Food insecurity was the top issue raised by LIC governors during the IMF‑WB Annual Meetings.
  - MRLIC analysis featured in the IMF Managing Director’s keynote speech and in analytical presentations summarizing the Departmental Paper.
  - MRLIC frameworks used in country work (examples include Niger).

### Progress, constraints, and governance recommendations
- Progress and mainstreaming
  - MRLIC continues to produce research addressing rising energy prices and inflation, rising debt, loss of human capital, and structural transformation.
  - MRLIC tools and models (including DIGNAD) have been mainstreamed in IMF country team practice.

- Constraints
  - Uncertainty in FCDO funding affected MRLIC’s ability to attract contractual researchers and retain staff.
  - A third of staff working on the programme left in the last year; recruitment and retention difficulties noted.

- Recommendations
  - Maintain a clear focus on low-income countries, including Sub-Saharan Africa, amid pressures to expand geographic breadth.
  - Hold an FCDO–IMF workshop given clarity on 24/25 budget to discuss MRLIC lessons learnt and future macroeconomic research avenues.
  - Advisory committee membership and terms of reference confirmed; first meeting delayed until greater budget clarity.

### Output 2: Applications by IMF country teams and courses (impact weighting: 35%)
- Output scoring: Output number 2; Output Score: A; Impact weighting: 35%.

- Indicator 2.1: Applications by IMF country teams and country authorities
  - By March 2023 milestone targets: H (214), M (211), L (208).
  - Achieved: 213 cumulative (10 in 2022/23).
  - Assessment: Met medium target.
  - Nine documented applications during reporting period (preserving exact list):
    1. Madagascar: Technical Assistance Report—Climate Macroeconomic Assessment Program (CMAP)
    2. Application of DIGNAD model to Madagascar (Article IV)
    3. Policy Lessons from DIGNAD Simulations in Rwanda — evidence supporting Rwanda’s request for support under the IMF’s Resilience and Sustainability Trust
    4. Macro‑Fiscal Implications of Climate Change Policies in Bangladesh
    5. Application of DIGNAD model to Timor‑Leste (Selected Issues)
    6. Selected Issues Paper: Macroeconomic Gains from Closing Gender Educational Gaps in Niger
    7. Mining Revenues to Strengthen Guinea’s Development
    8. Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)
    9. Economic Effects of Climate Change and Food Insecurity in Niger: Niger (Selected Issues Paper)
  - Country-level technical assistance example: Bank of Ghana FPAS support in context of inflation rates close to 30 percent.

- Indicator 2.2: Courses offered to IMF staff and/or country authorities
  - By March 2023 milestone targets: H (44), M (42), L (40).
  - Achieved: 43 (5 in 2022/23).
  - Assessment: Met medium target.
  - Five courses delivered (titles and focus preserved):
    1. Course on Macroeconomics of Gender Equality — designing fiscal policies to address gender inequality.
    2. Course on Distributional Impact of Policies and Reforms — presentation of the MIMMI toolkit.
    3. Online Course Delivery: Training Course on Macroeconomics of Climate — overview of the DIGNAD model; attended by officials from Sub-Saharan African countries, including 20 LICs.
    4. Africa Training Institute/AFE Workshop on Climate Change and Macro‑Financial Policies — practical sessions at Kenya School of Monetary Studies requested by Ethiopia, Kenya, Rwanda, Tanzania, and Uganda.
    5. Helsinki Principle 4 Workshop — presentation of the DIGNAD model to many Ministries of Finance officials during the Coalition of Finance Ministers for Climate Action HP4 Workshop.

### Output 3: Engagement by senior IMF policymakers and policy influence (impact weighting: 30%)
- Output scoring: Output number 3; Output Score: A+; Impact weighting: 30%.

- Indicator 3.1: High level policy conferences
  - By March 2023 milestone targets: H (54), M (53), L (52).
  - Achieved: 53 cumulative (3 in 22/23).
  - Assessment: Met medium target.
  - Conferences featuring MRLIC research attended by senior IMF staff (preserved list):
    1. Conference on Fragile States (June 2022) — launched IMF Fragile and Conflict Affected States Strategy and IMF book Macroeconomic Policy in Fragile States (Oxford University Press, 2021).
    2. Conference on Monetary Policy Frameworks - An Index and New Evidence — launch/dissemination of the IAPOC toolkit; opened by the IMF Chief Economist.
    3. MRLIC research featured during the WB‑IMF Annual Meetings (food insecurity), including MD’s keynote speech.

- Indicator 3.2: Research reflected in IMF Board discussion and policy papers
  - By March 2023 milestone targets: H (59), M (57), L (55).
  - Achieved: 59 cumulative (5 in 22/23).
  - Assessment: Met high target.
  - Examples of MRLIC influence on high‑profile policy papers:
    1. IMF Strategy Toward Mainstreaming Gender (July 2022) — builds on MRLIC research.
    2. Macroeconomic Developments and Prospects in Low‑income Countries (2022) — MRLIC contribution; discussed and approved by the IMF Executive Board in December 2022.
    3. G‑20 Background Note on the Macroeconomic Impact of Food and Energy Insecurity — MRLIC contribution.

### Value for Money, costs, and financial status
- Economy, efficiency, effectiveness, equity (preserving exact figures)
  - Total Staff/Contractual/Visiting Scholars: $17,468,382.
  - Research Paper Costs: $13,101,287.
  - Country Applications Costs: $4,367,096.
  - Working Papers: 180.
  - Cost Per Working Paper: $72,785.
  - Published Papers: 105.
  - Cost per Published Paper: $124,774.
  - The cost per working paper is approximately $72,000. The average cost per published paper is approximately $124,000. This is lower than the FCDO benchmark of $215,000 (£156,000) per paper.
- Approved project budget and draws
  - Approved project budget: US$29.5 million.
  - As of April 2023, $24.9 million has been drawn from the subaccount.
  - Project expenditures, Years 1-11 cumulative (indicative breakdown):
    - HQ led missions including entire mission team: $6,823,847
    - Research HQ based / Visiting Scholars; Short-term Advisors; Development of CD tools; Development of general CD technical materials; Development of training courses or other learning materials: $10,644,535
    - Seminars & Study Tours; Interactive learning and workshops: $1,772,410
    - Project Backstopping: $3,173,599
    - Project Management: $344,669
    - Exceptional Expenses: $550,638
    - Language Services: $2,170
    - Trust Fund Fee: $1,631,131
    - Total: $24,932,999
- Financial changes and complementary funding
  - Annual FCDO funding reduced from £1.7m to £0.8m in 2021.
  - MRLIC secured complementary funding from CCCDI for 21/22 and a bilateral donor in 22/23.
  - CCCDI funding for FY2022 amounts to USD 1.2 million.

### Working papers and selected empirical findings (key quantitative results)
- Staple food prices in SSA (Cedric Okou, John A Spray, Filiz D Unsal)
  - Uses domestic market prices of five most consumed staple foods from 15 countries.
  - Pass-through from global to local food prices estimated close to unity for highly imported staples.
  - Adverse shocks: natural disasters bring 1.8 percent staple food price surges beyond generalized price increases; wars bring 4 percent surges.

- Remittances and transaction costs
  - What Explains Remittance Fees? uses data across 365 corridors; many corridors have not met the goal of fees below 3 percent.
  - How Do Transaction Costs Influence Remittances uses quarterly panel covering 71 countries over 2011Q1-2020Q4.
    - Reducing transaction costs to the Sustainable Development Goal target of 3 percent could generate an additional US$32bn in remittances.
    - Cost reductions have a short-term positive impact that dissipates beyond one quarter.

- Banking sector ownership (Ugo Panizza)
  - Dataset: more than 6,500 banks in 181 countries (including 59 low-income economies) over 1995-2020.
  - Findings: state-owned banks are less profitable and have higher non-performing loans; state-owned and foreign-owned banks in developing economies pay and charge lower interest rates than domestic private counterparts.
  - State-owned banks stabilize credit under domestic shocks; foreign banks amplify external shocks.

- Natural disasters and monetary policy
  - Review of IMF reports for 34 disaster-years in 16 disaster-prone countries (1999–2017) reveals lack of systematic monetary policy responses.
  - Model result: inflation targeting remains the welfare-optimal regime; central banks should resist accommodating impulses after catastrophic disasters and focus on price stability.

- Disaster-prone country welfare loss
  - Journal of Development Economics paper: on average, shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.24 percent relative to non-disaster-prone countries.

### DIGNAD applications and Rwanda policy lessons
- Key DIGNAD findings (IMF Country Report No 22/381 for Rwanda)
  - Investing in more robust infrastructure initially raises public debt but:
    - Improves resilience by reducing output impact from natural disasters.
    - Lowers damages to physical assets.
    - Reduces post-disaster fiscal reconstruction and lifeline support costs.
  - Reforms improving public investment management boost resilience payoffs.
  - Financing strategies to limit fiscal burden:
    - Mobilize private financing.
    - Secure more concessional financing.

### Climate change and chronic food insecurity in Sub‑Saharan Africa (summary and policy implications)
- Summary findings
  - Climate change intensifies food insecurity across SSA with lasting adverse macroeconomic effects on growth and poverty.
  - Successive shocks (war in Ukraine and COVID-19) increased food prices and depressed incomes, raising severe food insecurity to 123 million in 2022 (12 percent of SSA’s population).
  - Addressing low resilience requires policy prioritization amid financing and capacity constraints.

- Policy implications (preserved recommendations)
  - Prioritize fiscal support for social assistance while investing in efficient public infrastructure.
  - Scale up finance access for farmers and agribusinesses to spur private resilience investment.
  - Advance regional trade integration and invest in resilient transport infrastructure.
  - Leverage international financial assistance, concessional financing, capacity development, and technology transfer.

### Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)
- Objective and scope
  - Analyze role for income taxes in a new revenue strategy for Vanuatu, considering aggregate and distributional effects and the 2017 proposal to introduce a personal income tax.
  - Uses a heterogeneous agents general equilibrium model for low-income countries (Peralta-Alva, Tam, Tang, Tavares; 2019, 2022).

- Modeling framework and scenarios
  - Model abstracts from external sector dynamics, and debt and investment decisions to remain tractable.
  - Exercises:
    - (i) introduction of a personal income tax without changing VAT rates;
    - (ii) alternative combinations of VAT and income taxes to increase tax-to-GDP by 2 percentage points;
    - (iii) introduction of income taxes in an economy with a smaller informal sector.
  - Analytical focus: aggregate effects, distributional effects across heterogeneous agents, and efficiency vs. equity trade-offs.

### Work plan, timetables, and future planning
- Workplan highlights (preserving specific items and numbers)
  - Individual work plans include papers and toolkits on COVID-19 telework (teleworking increase ranges from 0.7 to 17.6 percentage points across 10 developing countries; sample about 500 respondents per country).
  - Development and external release plans for the DIGNAD Toolkit User Manual and external publication.
  - Online course: Macroeconomics of Climate Change - Economics of Adaptation; DIGNAD courses and workshops planned.
  - Planned MIMMI App extension to include gender differences.
  - Tools: user-friendly Excel nowcast interface for quarterly GDP growth for 200 economies.

- Phase V planning
  - Brainstorming on a Phase V proposal to improve analytical and policy tools to bolster LIC resilience amid increasingly frequent and large shocks.

### Risks, monitoring, and evaluation
- Risk profile
  - Overall risk level reported as minor.
  - Risk register last updated: April 2023.
  - Main program risk: continued budget cuts and funding uncertainty compromising output delivery and staff retention.
  - Staffing impact: 7 out of 15 FCDO team members who left RES and SPR since last year are contractuals, accounting for about a third of RES and SPR staff working the program.

- Monitoring and evaluation practices
  - IMF reports to FCDO annually on log-frame outputs; quarterly updates and quarterly e-newsletters reach more than 1,500 academics, policymakers, central bank staff, and government representatives.
  - FCDO conducts a yearly evaluation; no budget for an external evaluation included in project budget.

### Communication, dissemination, and engagement metrics
- Bibliometric and outreach metrics (preserved numbers)
  - 241 research products compiled by IMF Library.
  - 241 research products cited at least 4,054 times.
  - 83 percent of publications have been cited.
  - Average of 17 citations per article.
  - 85 percent of citations by authors with no IMF or FCDO affiliation.
  - IMF Working Papers account for 1,336 citations.
  - IMF publications cited by over 137 organizations in 44 countries.
  - Social media: over 1,500 social media posts from 78 different countries.
  - Downloads of IMF Working Papers increased to around 155,000 from 140,000 last year, with an average of 885 per paper.

*Eleventh Year Annual Report to FCDO (for period April 2022—March 2023), Macroeconomic Research in Low-Income Countries — An FCDO/IMF Research Partnership.*

### 1.1 Number of priority research papers or book chapters

### 1.1 Number of priority research papers or book chapters

### Indicator 1.1: Priority research outputs by topic
- Topics covered: 1) Monetary and exchange rate policies, 2) Public investment, growth, and debt sustainability, 3) Macroeconomic management of natural resources, 4) Macroeconomic policies and income distribution, 5) Financial deepening for macroeconomic stability and sustained growth, 6) Growth through diversification, 7) Gender and macroeconomics, 8) Capital flows.
- By March 2023:
  - H (176 papers)
  - M (172 papers)
  - L (168 papers)
- Achieved: 178 cumulative (13 in past year)
- Assessment: Exceeded high target

### Indicator 1.2: Peer‑reviewed publications accepted
- By March 2023:
  - H (105 papers)
  - M (103 papers)
  - L (101 paper)
- Achieved: 105 cumulative (7 in past year)
- Assessment: Met high target
- Seven papers accepted for publication (listed with exact titles and journals):
  1. How large and persistent is the response of inflation to changes in retail energy prices? — Chadi Abdallah and Kangni Kpodar, Journal of International Money and Finance
  2. Defying the Odds: Remittances during the COVID-19 Pandemic — Kangni Kpodar, Montfort Mlachila, Saad Quayyum and Vigninou Gammadigbe, The Journal of Development Studies
  3. Macroeconomic Outcomes in Disaster-Prone Countries — Alessandro Cantelmo, Giovanni Melina, and Chris Papageorgiou, Journal of Development Economics
  4. Do Monetary Policy Outcomes Promote Stability in Fragile Settings? — Oumar Diallo, Steve, Loris Gui-Diby and Patrick A. Imam, Applied Economics
  5. Public Investment and Human Capital with Segmented Labour Markets — Edward F Buffie, Christopher Adam, Luis-Felipe Zanna, Lacina Balma, Dawit Tessema and Kangni Kpodar, Oxford Economic Papers
  6. Loss-of-learning and the Post-Covid Recovery in Low-income Countries — Edward F. Buffie, Christopher Adam, Luis-Felipe Zanna and Kangni Kpodar, Journal of Macroeconomics
  7. Tax Revenues in Low-income Countries — Adrian Peralta-Alva, Xuan Tam, Xin Tang and Marina Tavares, The Economic Journal

### MRLIC research on food insecurity and related applications
- Key outputs:
  - IMF Departmental Paper on Climate Change and Food Insecurity in Sub-Saharan Africa (September 2022) and related blog providing macroeconomic policy advice for mitigating food insecurity.
  - Working paper on external and domestic drivers of staple food prices in Sub-Saharan African countries (July 2022) finding SSA countries are highly vulnerable to global price shocks because the pass-through from global to local prices is close to one for many staples.
  - Paper examining the role of fiscal policy in mitigating the impacts of food price shocks (Jan 2021).
- Policy recommendations highlighted:
  - Focus fiscal policies on social assistance.
  - Prioritize efficient public infrastructure investment.
  - Improve access to finance.
  - Promote greater regional trade integration.
  - Complement policies with resilient transport infrastructure.
- Uptake and influence:
  - Food insecurity was the top issue raised by LIC governors during the IMF‑WB Annual Meetings.
  - MRLIC analysis featured in the IMF Managing Director’s keynote speech and an analytical presentation summarizing the Departmental Paper.
  - MRLIC frameworks used to support country work (examples: support on food security issues in Niger; Selected Issues Paper on the Economic Effects of Climate Change and Food Insecurity in Niger).

### Progress, constraints, and recommendations
- Progress:
  - MRLIC continues to produce high-quality, relevant research addressing challenges such as rising energy prices and inflation, rising debt, loss of human capital, and structural transformation.
  - MRLIC tools and models (including DIGNAD) have been mainstreamed in IMF country team practice.
- Constraints:
  - Uncertainty in funding from FCDO affected MRLIC’s ability to attract contractual researchers, which may reduce the pipeline of future research.
- Recommendations:
  - Maintain a clear focus on low-income countries, including those in Sub-Saharan Africa, amidst pressures to expand MRLIC’s geographic breadth.
  - Given clarity on 24/25 budget, FCDO and IMF to hold a workshop to discuss MRLIC lessons learnt and future avenues for macroeconomic research.
  - Advisory committee membership and terms of reference confirmed; first meeting delayed until greater budget clarity.

### Output 2: Applications by IMF country teams and courses for staff/authorities
- Output scoring and weighting:
  - Output number: 2
  - Output Score: A
  - Impact weighting (%): 35%
- Indicator 2.1: Applications by IMF country teams and country authorities
  - By March 2023 milestone targets:
    - H (214)
    - M (211)
    - L (208)
  - Achieved: 213 cumulative (10 in 2022/23)
  - Assessment: Met medium target
  - Nine instances of applications by IMF country teams during the reporting period (listed):
    1. Madagascar: Technical Assistance Report—Climate Macroeconomic Assessment Program (CMAP)
    2. Application of DIGNAD model to Madagascar (Article IV)
    3. Policy Lessons from DIGNAD Simulations in Rwanda — evidence supporting Rwanda’s request for support under the IMF’s Resilience and Sustainability Trust
    4. Macro‑Fiscal Implications of Climate Change Policies in Bangladesh
    5. Application of DIGNAD model to Timor‑Leste (Selected Issues)
    6. Selected Issues Paper: Macroeconomic Gains from Closing Gender Educational Gaps in Niger
    7. Mining Revenues to Strengthen Guinea’s Development
    8. Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)
    9. Economic Effects of Climate Change and Food Insecurity in Niger: Niger (Selected Issues Paper)
  - Country-level technical assistance example: Bank of Ghana Forecasting and Policy Analysis System (FPAS) support; context of inflation rates close to 30%.
- Indicator 2.2: Courses offered to IMF staff and/or country authorities
  - By March 2023 milestone targets:
    - H (44)
    - M (42)
    - L (40)
  - Achieved: 43 (5 in 2022/23)
  - Assessment: Met medium target
  - Five courses delivered (titles and focus):
    1. Course on Macroeconomics of Gender Equality — designing fiscal policies to address gender inequality.
    2. Course on Distributional Impact of Policies and Reforms — presentation of the Multi‑sector Incomplete Markets Macro Inequality (MIMMI) toolkit.
    3. Online Course Delivery: Training Course on Macroeconomics of Climate — overview of the DIGNAD model; attended by officials from Sub-Saharan African countries, including 20 LICs.
    4. Africa Training Institute/AFE Workshop on Climate Change and Macro‑Financial Policies — practical sessions at Kenya School of Monetary Studies requested by Ethiopia, Kenya, Rwanda, Tanzania, and Uganda.
    5. Helsinki Principle 4 Workshop — presentation of the DIGNAD model to many Ministries of Finance officials during the Coalition of Finance Ministers for Climate Action HP4 Workshop.

### Output 3: Engagement by senior IMF policymakers and policy influence
- Output scoring and weighting:
  - Output number: 3
  - Output Score: A+
  - Impact weighting (%): 30%
- Indicator 3.1: High level policy conferences
  - By March 2023 milestone targets:
    - H (54)
    - M (53)
    - L (52)
  - Achieved: 53 cumulative (3 in 22/23)
  - Assessment: Met medium target
  - Conferences featuring MRLIC research attended by senior IMF staff:
    1. Conference on Fragile States (June 2022) — launched IMF Fragile and Conflict Affected States Strategy and IMF book Macroeconomic Policy in Fragile States (Oxford University Press, 2021); speakers included senior IMF officials and government officials including FCDO’s then Director General for Development & Humanitarian, Nick Dyer.
    2. Conference on Monetary Policy Frameworks - An Index and New Evidence — launch/dissemination of the IAPOC toolkit; opened by the IMF Chief Economist.
    3. MRLIC research featured during the WB‑IMF Annual Meetings (food insecurity), including in the IMF Managing Director’s keynote speech and an analytical presentation summarizing the Departmental Paper.
  - Additional engagement: MRLIC organised and contributed research to the 2022 International Conference on Development Economics (CERDI); supported attendance of government officials from LICs.
- Indicator 3.2: Research reflected in IMF Board discussion and policy papers
  - By March 2023 milestone targets:
    - H (59)
    - M (57)
    - L (55)
  - Achieved: 59 cumulative (5 in 22/23)
  - Assessment: Met high target
  - Examples of MRLIC influence on high‑profile policy papers and papers discussed by IMF leadership:
    1. IMF Strategy Toward Mainstreaming Gender (July 2022) — builds on MRLIC research on macroeconomics and gender.
    2. Macroeconomic Developments and Prospects in Low‑income Countries (2022) — MRLIC contribution; discussed and approved by the IMF Executive Board in December 2022; widely disseminated and chaired at an in‑person seminar at FCDO.
    3. G‑20 Background Note on the Macroeconomic Impact of Food and Energy Insecurity — MRLIC contribution emphasizing rising food and energy insecurity and policy responses.

*FCDO Annual Review (June 2023) — IMF MRLIC section*

### 4.    April 2022 Fiscal Monitor Box 1.1: Social Protection and Poverty during the Pandemic. This analysis

### April 2022 Fiscal Monitor Box 1.1: Social Protection and Poverty during the Pandemic — Analysis Overview

### Major findings on poverty and external shocks
- The analysis highlighted that 70 million more people fell into extreme poverty in 2021, relative to pre-pandemic trends.
- The 2022 External Sector Report — Box 1.3 quantified the impact of natural disasters on the external sector for shock-prone economies and emphasized that the adverse effects of natural disasters can be mitigated through investment in adaptation.

### Recommendations on indicators and policy influence
- Indicators should be revised to focus more clearly on exposure and engagement of senior IMF officials to MRLIC research and on capturing how much the research influences IMF policy.
- Build on existing efforts in FCDO’s Research & Evidence Directorate to better monitor the policy influence of research.

### Value for Money (VfM): economy, efficiency, effectiveness, equity
- Economy
  - Total Staff/Contractual/Visiting Scholars: $17,468,382
  - Research Paper Costs: $13,101,287
  - Country Applications Costs: $4,367,096
- Efficiency
  - Working Papers: 180
  - Cost Per Working Paper: $72,785
  - Published Papers: 105
  - Cost per Published Paper: $124,774
  - The cost per working paper is approximately $72,000. The average cost per published paper is approximately $124,000. This is lower than the FCDO benchmark of $215,000 (£156,000) per paper.
  - Working with the IMF delivers efficiency gains in research uptake through MRLIC frameworks and toolkits that can be operationalised across IMF practice and feed into influential policy documents.
- Effectiveness
  - The IMF has a major influence on macroeconomic policymaking in Low-Income Countries through lending programmes, surveillance, and capacity building.
  - MRLIC’s ability to affect macroeconomic policy rests on its capacity to influence IMF policy and practice (Board papers, policy papers, etc.) and publishing in the IMF Working Paper series increases research reach.
- Equity
  - MRLIC research workstreams on gender inequality, income inequality, and distributional analysis have had particular traction.
  - MRLIC provided analytical underpinning of the IMF Gender Mainstreaming Strategy.
  - MRLIC launched the Multi-sector Incomplete Markets Macro Inequality (MIMMI) toolkit to simulate long-run macro and distributional impacts of policies and shocks.

### Risk management
- Overall risk level: minor.
- Risk register last updated: April 2023.
- Key risk factors and mitigations
  - External context: Most research is carried out at IMF headquarters using secondary datasets, so exposure to LIC contexts is limited.
  - Delivery: Established delivery systems with demonstrated high delivery; demand for MRLIC outputs remains high.
  - Operational: Experienced management teams at FCDO and IMF.
  - Fiduciary: All funds spent directly by the IMF and subject to extensive IMF financial management controls.
  - Reputational: Low reputational risk from research activities and topics.
  - Innovation: Low innovation risk for research activities and topics.
  - Safeguarding: Programme activities rarely involve contact with vulnerable persons; external researchers are managed under IMF procedures.
- Due diligence
  - Central Assurance Assessment (CAA) of the IMF conducted by FCDO in December 2021 confirmed the IMF as a low-risk partner and covered safeguarding procedures.
  - A light touch due diligence was conducted in July 2023, largely drawn from the CAA; programme-specific differences were assessed and CAA findings hold for MRLIC.
- Partnership principles: Not applicable — MRLIC is a research programme managed by the IMF; no funding passed to country governments. Funds are held and managed by the IMF under United Kingdom Selected Fund Activities (SFA) sub-account rules.

### Programme management, delivery, commercial & financial performance
- 2021 funding change
  - Annual funding from FCDO was reduced from £1.7m to £0.8m in 2021 due to reduction in UK ODA spending.
  - The reduction posed risks to MRLIC effectiveness by making it harder to cover fixed costs (mainly staff) and research uptake costs.
- Complementary funding and donor contributions
  - MRLIC secured complementary funding to offset FCDO reductions, including funding from the COVID-19 Crisis Capacity Development Initiative (CCCDI) for 21/22.
  - During 22/23, MRLIC secured funding from a bilateral donor; thematic focus of that donor does not fully align with FCDO’s LIC focus.
  - IMF institutional ceilings on external research funding may constrain increases in FCDO budget for LIC research.
- Staffing and recruitment
  - The budget uncertainty made it harder to attract and retain contractual research staff.
  - The IMF reported important difficulties in retaining and recruiting competitive contractuals and visiting scholars.
  - A third of the staff working on the programme left in the last year, triggering a time-intensive hiring process.
- Programme governance and reporting
  - FCDO and IMF conduct regular check-in meetings; IMF provides quarterly summaries of outputs and upcoming presentations.
  - Strong continuity in IMF management supported learning over time; MRLIC programme director remained the main IMF–FCDO contact.
  - MRLIC follows IMF guidelines for hiring, travel, and conferences; contractual employees undergo competitive hiring and outputs must meet Fund publication requirements.
- Financial reporting dates
  - Date of last narrative financial report: May 2021
  - Date of last audited annual statement: October 2019
- CCCDI context
  - CCCDI is a capacity development project focused on climate change and inequality under the COVID-19 pandemic.
  - The CCCDI is supported by Belgium, Canada, China, Germany, Japan, Korea, Spain, Singapore, and Switzerland.
  - The CCCDI funding for the fiscal year 2022 amounts to USD 1.2 million.

### Working papers and selected empirical findings (Output 1.1)
- Topic 1. Modelling and understanding policy choices
  1. Quarterly Projection Model for the Bank of Ghana (authors listed)
     - Describes the QPM underlying the Bank of Ghana FPAS: a New Keynesian semi-structural model incorporating inflation targeting, fiscal transmission, shock propagation, endogenous policy credibility; validated by out-of-sample forecasting and used for real-time policy analysis and medium-term forecasting.
  2. Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment (Cedric Okou, John A Spray, Filiz D Unsal)
     - Uses domestic market prices of five most consumed staple foods from 15 countries.
     - Finds external factors drive food price inflation with pass-through from global to local food prices estimated close to unity for highly imported staples.
     - Adverse shocks: natural disasters bring 1.8 percent staple food price surges beyond generalized price increases; wars bring 4 percent surges.
     - Domestic factors (greater local production, lower consumption shares) and policy (monetary and fiscal frameworks, transport constraints) mitigate vulnerabilities.
- Topic 2. Understanding macro-financial linkages
  3. What Explains Remittance Fees? Panel Evidence (Thorsten Beck, Mathilde Janfils, Kangni R Kpodar)
     - Uses data across 365 corridors to document time and country variation in remittance fees.
     - Documents a general reduction in fees over the past decade but many corridors have not met the goal of fees below 3 percent.
     - Identifies cost- and risk-based constraints and market structure as barriers to lower fees; rural sending populations and lower scale raise fees; fixed exchange rate stability and Internet payments lower fees; bank-dominated corridors with few players have higher fees.
  4. How Do Transaction Costs Influence Remittances (Kangni R Kpodar, Patrick A. Imam)
     - Uses a quarterly panel database on remittances covering 71 countries over 2011Q1-2020Q4.
     - Finds cost reductions have a short-term positive impact on remittances that dissipates beyond one quarter.
     - Estimates that reducing transaction costs to the Sustainable Development Goal target of 3 percent could generate an additional US$32bn in remittances, higher than direct cost savings, implying an absolute elasticity greater than one.
     - Cost-mitigation factors (higher competition, deeper financial sector, correspondent banking) and cost-adaptation factors (enhanced transparency, improved financial literacy, higher ICT development) reduce sensitivity of remittances to transaction costs.
     - Micro data from the USA-Mexico corridor confirm migrants facing higher transaction costs remit less; effect is less pronounced for skilled migrants and those with bank accounts.
- Topic 2 (continued)
  5. Bank Ownership Around the World (Ugo Panizza)
     - Builds a dataset covering more than 6,500 banks in 181 countries (including 59 low-income economies) over 1995-2020.
     - Until 2010 there was a reduction in state-ownership and increase in foreign ownership; the Global Financial Crisis interrupted or reversed these trends.
     - Country-level relationships between bank ownership and GDP growth/financial depth are mixed; foreign-owned banks positively associated with future economic growth; state ownership negatively but not robustly associated with future financial depth.
     - Bank-level results: state-owned banks are less profitable and have higher non-performing loans; state-owned and foreign-owned banks in developing economies pay and charge lower interest rates than domestic private counterparts.
     - State-owned banks stabilize credit in presence of domestic shocks; foreign banks amplify external shocks; foreign banks not significantly different from domestic private counterparts for domestic shocks.
- Topic 3. Building resilience
  6. Monetary Policy Under Natural Disaster Shocks (Alessandro Cantelmo, Nikos Fatouros, Giovanni Melina, Chris Papageorgiou)
     - Analysis of IMF reports for 34 disaster-years in 16 disaster-prone countries from 1999 to 2017 reveals lack of systematic approach by monetary authorities to climate shocks.
     - A small-open-economy New-Keynesian model with disaster shocks shows that inflation targeting remains the welfare-optimal regime; monetary authorities should resist accommodating impulses after catastrophic natural disasters and continue to focus on price stability.
  7. Do Monetary Policy Outcomes Promote Stability in Fragile Settings? (Oumar Diallo, Steve Loris Gui-Diby, Patrick A. Imam)
     - Assesses how monetary policy outcomes affect fragility across fragile settings.
     - Finds that the combination of reduced inflation and lower unemployment delivers the highest payoff in promoting peace and cohesion.
     - Low inflation is the primary desired outcome; low unemployment is secondary; robustness tests confirm findings.
- Topic 4. Promoting structural change and institutional development
  8. Political Institutions and Output Collapses (Patrick A. Imam, Jonathan R. W. Temple)
     - Uses cross-country data to classify five-year periods in a two-dimensional state space based on growth regimes and political institutions; models joint evolution as a finite state Markov chain.
     - Finds growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; stagnation under autocracy can lead to outright collapse; democratic countries are more resilient.

*Source: IMF / MRLIC content summarized from fcdo-ar-june2023 — April 2022 Fiscal Monitor Box 1.1 and related sections.*

### 9. Climate Change and Chronic Food Insecurity in Sub-Saharan Africa

### 9. Climate Change and Chronic Food Insecurity in Sub-Saharan Africa

### Summary
- Climate change is intensifying food insecurity across sub-Saharan Africa (SSA) with lasting adverse macroeconomic effects, especially on economic growth and poverty.
- Successive shocks from the war in Ukraine and the COVID-19 pandemic have increased food prices and depressed incomes, raising the number of people suffering from high malnutrition and unable to meet basic food consumption needs by at least 30 percent to 123 million in 2022 or 12 percent of SSA’s population.
- Addressing the lack of resilience to climate change—that critically underlies food insecurity in SSA—will require careful policy prioritization against a backdrop of financing and capacity constraints.
- The international community can help with financial assistance—especially for social assistance and key infrastructure areas—capacity development, and facilitating transfers of technology and know-how.

### Key findings
- Fiscal policies focused on social assistance and efficient public infrastructure investment can:
  - Improve poorer households’ access to affordable food.
  - Facilitate expansion of climate-resilient and green agricultural production.
  - Support quicker recovery from adverse climate events.
- Improving access to finance is key to:
  - Stepping up private investment in agricultural resilience and productivity.
  - Improving the earning capacity and food purchasing power of poorer rural and urban households.
- Greater regional trade integration, complemented with resilient transport infrastructure, enables sales of one country’s bumper harvests to its neighbors facing shortages.

### Policy implications and tradeoffs
- Prioritize fiscal support for social assistance to protect poor households’ food access while investing in efficient public infrastructure that enhances resilience and productivity.
- Scale up policies that improve access to finance for farmers and agribusinesses to catalyze private investment in resilience and productivity.
- Advance regional trade integration and invest in resilient transport infrastructure to allow cross-border mitigation of localized shortages.
- Leverage international financial assistance, concessional financing, capacity development, and technology transfer to overcome domestic financing and capacity constraints.

*Authored by Diogo Baptista, Mai Farid, Dominique Fayad, Laurent Kemoe, Loic Lanci, Pritha Mitra, Tara Muehlschlegel, Cedric Okou, John Spray, Kevin Tuitoek, and Filiz Unsal.*

### 7. Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)

### Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)

### Objective and scope
- The note analyzes the role for income taxes in a new revenue strategy for Vanuatu, taking into account aggregate and distributional effects.
- It specifically considers the outstanding proposal from the 2017 Vanuatu Revenue Review to introduce a personal income tax.
- Analysis focuses on distributional effects of alternative revenue-mobilization strategies through three exercises using a heterogeneous agents general equilibrium model for low-income countries.

### Modeling framework
- Model: heterogeneous agents general equilibrium model for low-income countries (developed by Peralta-Alva, Tam, Tang, and Tavares; 2019, 2022).
- Model purpose: analyze trade-offs between efficiency and equity of different taxes and to study trade-offs between different tax structures.
- Key abstraction: the model abstracts from external sector dynamics, and debt and investment decisions to remain tractable.

### Scenarios and exercises
- Exercise (i): introduction of a personal income tax without changing value-added tax rates.
- Exercise (ii): alternative combinations of value-added and income taxes that can increase the tax-to-GDP ratio by 2 percentage points.
- Exercise (iii): introduction of income taxes in an economy with a smaller informal sector.

### Analytical focus and trade-offs
- Aggregate effects: assessment of how introducing personal income tax and altering VAT-income tax mixes affect overall revenue mobilization and macroeconomic aggregates.
- Distributional effects: evaluation of how different tax structures impact household welfare across heterogeneous agents, with attention to equity implications.
- Efficiency vs. equity trade-offs: the model is used to quantify the balance between minimizing distortions (efficiency) and protecting or improving income distribution (equity) under alternative tax designs.

*Source: Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV).*

### 1. The team provided an updated memorandum on potential crowding-out of development aid in the context of

### fcdo-ar-june2023 - 1. The team provided an updated memorandum on potential crowding-out of development aid in the context of 

### Memorandum findings on potential crowding-out of development aid
- The memorandum recognized mounting concerns over potential crowding-out of official development aid for low-income countries (LICs).
- Concern arose because many advanced economies scaled up defense spending and refugee-related aid to Ukraine.
- The memorandum noted that, at the time, there was no clear evidence of aid budget diversions from LICs to increase military spendings.

### Context and institutional authorship
- The item is embedded within the Macroeconomic Research in Low-Income Countries: An FCDO/IMF Research Partnership.
- Eleventh Year Annual Report to FCDO (for period April 2022—March 2023).
- Prepared by the Staff of the Research (Hites Ahir, Futoshi Narita, Cedric Okou, Chris Papageorgiou) and Strategy, Policy and Review (Alassane Drabo, Carine Meyimdjui, Baoping Shang, Ana Paola Cepeda Valor) Departments.
- Date on the document: May 31, 2023.

### Program description (objectives and scope)
- The FCDO and IMF established “Macroeconomic Research in Low-Income Countries” as a strategic research partnership to:
  - (a) enhance the generation of high-quality research on key macroeconomic issues in low-income countries (LICs);
  - (b) ensure uptake through the design of the research, and its execution in close collaboration with policymakers within and outside the IMF;
  - (c) use the IMF’s catalytic power to expand the network of macroeconomic researchers working on LICs;
  - (d) achieve this as cost-effectively as possible.
- The project started in March 2012, with the current phase (Phase 4) to conclude on March 31, 2025 (extended from the original end date of March 31, 2023, reflecting a rephasing of the disbursement schedule).

### Research agenda and core areas
- The program is articulated around five core areas and includes new topics investigated during Phase IV:
  - (1) Modelling and understanding policy choices
    - For example, monetary, exchange rate, fiscal and structural policies
  - (2) Understanding macro-financial linkages
    - For example, capital flows, financial deepening and inclusion, macro-prudential policies, and transmission of macro-financial shocks
  - (3) Building resilience
    - For example, issues related to natural disaster, climate change, migration, and conflict
  - (4) Promoting structural change and institutional development
    - For example, public investment, growth, and debt sustainability, macroeconomic management of natural resource wealth, growth through diversification, structural reforms
  - (5) Enhancing inclusion
    - For example, income inequality, macroeconomic policy and income distribution, gender and macroeconomics
- IMF staff members and project-funded researchers collaborate to produce high-quality research papers aimed at policymakers in LICs and at IMF country teams.
- Most papers are freely shared with FCDO and external policy makers through FCDO’s research portal and a dedicated project website maintained by the IMF.
- Other components include designing frameworks to support IMF policy for LICs, presentations at high-level policy conferences, training, commissioned papers, quarterly e-newsletters to a broad network of LIC researchers and policy makers, and project-financed conferences.

### Project timeline and phases
- Start and End Dates:
  - 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 2025

### Coverage
- The project covers the countries listed in Table 1 (countries referred to as “low-income countries (LICs)” in the report).
- Note on table construction: The countries included are those that were eligible for IMF concessional financing under the Poverty Reduction and Growth Trust (PRGT) as of 2013, and the table includes countries that had graduated since then (e.g., Bolivia and Mongolia) but continued to face policy challenges similar to those in the PRGT-eligible countries.

*Eleventh Year Annual Report to FCDO (for period April 2022—March 2023), Macroeconomic Research in Low-Income Countries — An FCDO/IMF Research Partnership.*

### 2.  OVERVIEW OF THE YEAR

### 2. OVERVIEW OF THE YEAR

### Progress and achievements
- The MRLIC concluded a productive fiscal year while LICs faced multiple challenges, including high inflation, intensified debt vulnerabilities, and acute food insecurity.
- The MRLIC team met the high target for all outputs except three, where two outputs are above the medium target, and one meets the medium target.
- Temporary financial support from the COVID-19 Crisis Capacity Development Initiative (CCCDI) fund helped meet the project’s financial needs and enabled successful completion of numerous deliveries.
- Funding uncertainty from the FCDO has triggered a particularly stressful transition period for the team in carrying out its research and policy program.
- MRLIC products were featured in IMF policy documents:
  - A box in the April 2022 Fiscal Monitor highlights that "70 million more people fell into extreme poverty in 2021, relative to pre-pandemic trends."
  - A box in the 2022 External Sector Report analyzes the impact of natural disasters on the external sector and emphasizes that adverse effects can be mitigated ex-ante through investment in adaptation.
- MRLIC contributed to two IMF Executive Board–discussed policy documents: the IMF Strategy toward Mainstreaming Gender and the 2022 Macroeconomic Development and Prospects in LICs. The latter was presented to the U.K. FCDO, OECD DAC, and AfDB, and at a meeting organized by the Banque de France and FERDI.
- High-level conferences organized or supported by the program:
  - An international conference on Development Economics at CERDI, Clermont-Auvergne University, focusing on development financing, sustainable development paths, and integration into the global economy.
  - A flagship conference on Fragile States exploring the nexus between fragility, conflict, and macroeconomic policy, attended by officials from Fragile and Conflict-affected States (FCS).
  - A hybrid conference to launch and disseminate the IAPOC toolkit (Independence and Accountability, Policy and Operational Strategy, and Communications). Pierre-Olivier Gourinchas (IMF) opened the conference; David Wessel (The Hutchins Center, Brookings Institution) moderated; Alan Blinder (Princeton University) and Richard Clarida (Columbia University) were panelists.
- A G-20 Background Note on the Macroeconomic Impact of Food and Energy Insecurity was presented to the international community, identifying constraints and proposing reinforcing policies for LIC resilience.
- Statements highlighting MRLIC impact:
  - Antoinette Monsio Sayeh, Deputy Managing Director in charge of LICs at the IMF, emphasized that MRLIC models and toolkits have been instrumental in shaping policy choices and enhancing resilience for LICs.
  - Pierre-Olivier Gourinchas, IMF Economist Counselor and Director of the Research Department, stated that the IMF-FCDO partnership delivered rigorous analytical tools to safeguard macroeconomic stability and build resilience in low-income countries.
- Academic dissemination:
  - Research from the program was published in the Economic Journal, the Journal of Development Economics, the Journal of Macroeconomics, the Oxford Economic Papers, among others.

### Research impact and engagement metrics
- The IMF Library compiled bibliometric data from Lens.org, Altmetric, and Overton for 241 research products.
- Citation metrics:
  - 241 research products have been cited at least 4,054 times—an increase from 3,326 citations reported last year.
  - 83 percent of publications have been cited.
  - Average of 17 citations per article.
  - 85 percent of citations are by authors with no IMF or FCDO affiliation.
  - IMF Working Papers account for 1,336 citations.
  - IMF publications cited by over 137 organizations in 44 countries.
- Social media and downloads:
  - Over 1,500 social media posts from 78 different countries.
  - The paper “Structural Reforms and Elections: Evidence from a World-Wide New Dataset” was referenced by 182 Twitter accounts with around 1,142,477 followers.
  - “Loss-of-Learning and the Post-Covid Recovery in Low-Income Countries” gained attention within one month of its March 2023 publication from accounts totaling 15,076 followers.
  - Downloads of IMF Working Papers increased to around 155,000 from 140,000 last year, with an average of 885 per paper.

### Technical assistance, training, and country engagement
- Toolkits and country support:
  - The Debt Investment Growth and Natural Disaster (DIGNAD) toolkit continued to attract country team interest and was applied in Technical Assistance Report to Madagascar and Article IV work for Rwanda, Bangladesh, and Timor Leste.
  - A Gender Labor Market toolkit contributed to the Niger Selected Issues Paper (SIP) by analyzing education gaps for girls.
  - Other toolkits assisted in the Guinea Country Report on revenue and the Vanuatu Article IV.
- Support to Bank of Ghana:
  - Technical assistance for the Bank of Ghana Forecasting and Policy Analysis System (FPAS) included decomposing model-based GDP into agriculture, oil, and non-agriculture-non-oil value added to better analyze drivers of price dynamics.
- Training delivered:
  - Three courses on Macroeconomics of Climate Change:
    - One course at the African Training Institute (ATI) reviewed the DIGNAD model and policy trade-offs; attended by officials from Sub-Saharan African countries, including 20 LICs.
    - A follow-up course at the Kenya School of Monetary Studies (KSMS) addressed practical sessions requested by central banks and finance ministries of Ethiopia, Kenya, Rwanda, Tanzania, and Uganda.
    - Presentations of DIGNAD were made to Ministries of Finance during the Coalition of Finance Ministers for Climate Action HP4 Workshop; the Coalition Secretariat specifically acknowledged the course.
  - A clinic on Macroeconomics of Gender Equality to help staff identify gender issues and use fiscal policies to address gender inequality in LICs, aligned with the IMF Gender Mainstreaming Strategy.
  - A virtual clinic on the Distributional Impact of Policies introducing the Multi-sector Incomplete Markets Macro Inequality (MIMMI) toolkit, which includes an App to simulate long-run macro and distributional impacts of policies and shocks.

### Challenges
- Substantial budget cuts continued to create a challenging work environment.
- One-off CCCDI financing mitigated some impacts, but funding uncertainties severely affected activities.
- Operational model relies on contractual employees who deliver more than 70% of the work; difficulty in renewing contracts beyond initial periods constrains staffing and continuity.
- A committee to oversee operationalization of the partnership was established but has yet to meet due to global shocks and urgent membership requests; work remains closely monitored by IMF senior management.

### Highlights of five broad topics

H3 Modeling and understanding policy choices
- Research on the drivers of energy and food prices and monetary policy responses in fragile environments:
  - A Journal of International Money and Finance paper shows price levels are sensitive to energy price shocks with larger and more persistent effects in economies with lower energy intensity, less flexible labor markets, looser fiscal policy stances, and less credible monetary policy.
  - An IMF working paper analyzing local staple food price changes in Sub-Saharan Africa finds staple food price inflation is lower in economies with greater local production and among products with lower consumption shares; natural disasters and wars cause sharp real increases in staple food prices.
  - An Applied Economics paper finds that a combination of reduced inflation and lower unemployment helps promote peace and cohesion, highlighting the role of monetary policy in addressing fragility.
  - A research paper described the Quarterly Projection Model (QPM) as the foundation for the Bank of Ghana’s FPAS, underscoring its role in real-time policy analysis and medium-term forecasting.

H3 Understanding macro-financial linkages
- Remittances and remittance fees:
  - A Journal of Development Studies paper documents that remittances increase with Covid-19 infection rates in recipient countries and that fiscal stimulus in host countries was positively associated with increased remittances.
  - An IMF working paper finds high remittance fees are associated with high rural population share and lower amounts of remittances; lower fees are associated with exchange rate stability and internet access.
  - Remittance corridors dominated by banks and few players are characterized by higher fees.
  - Remittance fee reductions have been effective at boosting remittance flows, but the effect lasts for a quarter.
  - Higher competition in remittance markets, a deeper financial sector, and adequate correspondent banking relationships are associated with lower elasticity of remittances to fees; improved financial literacy and higher ICT development coincide with remittances being less sensitive to fees.
- Banking sector ownership:
  - A commissioned paper using a sample including 59 LICs finds state-owned and foreign-owned banks in developing economies pay and charge lower interest rates than domestic private counterparts.
  - State-owned banks stabilize credit in the presence of domestic shocks while foreign banks amplify external shocks.

H3 Building resilience
- External shocks and policy tools:
  - A Journal of Development Economics paper shows weather shocks have large and persistent effects on income convergence in disaster-prone countries; on average, shocks cause a welfare loss equivalent to a permanent fall in consumption of 1.24 percent relative to non-disaster-prone countries.
  - The paper finds larger welfare gains when international aid contributes to financing resilient settings before disasters rather than disbursing after shocks.
  - A working paper reviewing 34 IMF reports for disaster years in 16 disaster-prone countries finds a lack of systematic monetary policy responses to increasing climate shocks; inflation targeting remains the welfare-optimal regime, and monetary authorities should resist accommodating catastrophic natural disasters and continue focusing on price stability.

H3 Promoting structural change and institutional development
- Climate and food insecurity:
  - A departmental paper on climate change and chronic food insecurity in Sub-Saharan Africa recommends strengthening social assistance programs and public infrastructure, improving access to finance, enhancing regional trade integration, and improving transport infrastructure to improve household food access, while investing in resilient and green production capacities and exchange facilities.
- Trade and retaliation:
  - High-frequency data analysis shows within-year retaliations through temporary barriers are more intense and frequent than previously understood; trade retaliation is larger during periods of higher unemployment and when the trading partner targeted a domestic sector with comparative advantage.
- Human capital and labor markets:
  - An Oxford Economic Papers publication finds segmented labor markets shift the optimal public investment program further in favor of human capital relative to flex-wage full-employment labor markets.
- Political institutions:
  - A publication studying political institutions and output collapses finds growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy while democratic countries appear more resilient.

H3 Enhancing inclusion
- COVID-19 and loss-of-learning:
  - A Journal of Macroeconomics paper analyzes medium-term macroeconomic impacts of the pandemic and lockdown in LICs and finds that without sustained external financing, loss-of-learning effects on labor productivity will make the post-pandemic recovery more muted and more costly than previously suggested.
  - Research shows higher vaccination rates and targeted virus containment policies are associated with faster medium-term income recovery; however, there is no clear evidence that economic support policies efficiently reduce cross-country income inequality in developing countries.
  - Firms primarily responded to global lockdowns and virus spread by reducing trade volumes (intensive margin) rather than exiting markets (extensive margin), with extensive-margin adjustments playing a more important role in developing countries.
- Revenue mobilization and inequality:
  - An Economic Journal calibration on Ethiopian data shows changing taxes alters demand composition and, with limited labor mobility, causes higher taxes to fall disproportionately on the rural population regardless of the instrument; consumption taxes produce the largest welfare loss.
  - Analysis of additional taxation of a foreign extractive sector in Guinea quantifies long-run equilibrium impacts when proceeds are invested in human capital, inclusive infrastructure, and social transfers and finds complementarities among these investments.
- MENA inclusivity:
  - Two IMF book chapters in "Promoting inclusive growth in the MENA" find that (i) reforms that reduce market distortions and improve access to credit can boost output, wages, and jobs, and (ii) gender disparities in basic and financial legal rights are the most powerful barriers to women's participation in economic activities in MENA, followed by labor market codes and regulation.

*Source: IMF–FCDO MRLIC Annual Report, "2. OVERVIEW OF THE YEAR".*

### 3.  LOG-FRAME OUTPUTS

### 3. LOG-FRAME OUTPUTS

### Overview
- The research project is structured around four main categories:  
  1) Produce high quality, policy-relevant research on macroeconomic issues affecting LICs  
  2) Promote and increase the usage of IMF research products generated under this project by IMF country teams and partner authorities  
  3) Strengthen engagement by senior IMF policymakers on issues affecting LICs  
  4) Strengthen capacity-building by expanding the network of LIC researchers
- Targets were revised in May 2023 to reflect a substantial reduction in funding; the log-frame was streamlined accordingly.
- For year 11 (FY2023) the project “met the high target for all outputs for year 11 of the programme except for three outputs, where two exceeds the medium target and one meets the medium target.”

### Output 1 — Produce high quality, policy-relevant research on macroeconomic issues affecting LICs
- Annual research production (year reported):  
  - 13 working papers produced.  
  - 6 papers published in peer-reviewed journals.
- Output 1.1 — Working Papers (listed by topic)
  - Topic 1. Modelling and understanding policy choices
    1. Quarterly Projection Model for the Bank of Ghana
    2. Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment
  - Topic 2. Understanding macro-financial linkages
    3. What Explains Remittance Fees? Panel Evidence
    4. How Do Transaction Costs Influence Remittances
    5. Bank Ownership Around the World
  - Topic 3. Building resilience
    6. Monetary Policy Under Natural Disaster Shocks
    7. Do Monetary Policy Outcomes Promote Stability in Fragile Settings?
  - Topic 4. Promoting structural change and institutional development
    8. Political Institutions and Output Collapses
    9. Climate Change and Chronic Food Insecurity in Sub-Saharan Africa
    10. Retaliation through Temporary Trade Barriers
  - Topic 5. Enhancing inclusion
    11. Trade and the COVID-19 Pandemic: Lessons from French Firms
    12. Income Convergence or Divergence in the Aftermath of the COVID-19 Shock?
    13. Mining Revenues and Inclusive Development in Guinea
    14. Inclusiveness, Growth, and Stability [Chapter 2 of Promoting Inclusive Growth in the Middle East and North Africa]
    15. Addressing Gender Gaps in MENA Labor Markets: [Chapter 5 of Promoting Inclusive Growth in the Middle East and North Africa]
- Output 1.2 — Published Papers (titles and journals)
  - Topic 1. Modelling and understanding policy choices  
    1. How large and persistent is the response of inflation to changes in retail energy prices? — Journal of International Money and Finance
  - Topic 2. Understanding macro-financial linkages  
    2. Defying the Odds: Remittances during the COVID-19 Pandemic — The Journal of Development Studies
  - Topic 3. Building resilience  
    3. Macroeconomic Outcomes in Disaster-Prone Countries — Journal of Development Economics  
    4. Do Monetary Policy Outcomes Promote Stability in Fragile Settings? — Applied Economics
  - Topic 4. Promoting structural change and institutional development  
    5. Public Investment and Human Capital with Segmented Labour Markets — Oxford Economic Papers
  - Topic 5. Enhancing inclusion  
    6. Loss-of-learning and the Post-Covid Recovery in Low-income Countries — Journal of Macroeconomics

### Output 2 — IMF research product produced under this project used by authorities and IMF country teams
- Aggregate uptake and training (year reported):  
  - 10 uptakes by country authorities and IMF country teams.  
  - 5 courses offered to country authorities and IMF staff.
- Output 2.1 — Country Applications with authorities and IMF Country Teams (listed)
  1. Ghana Forecasting and Policy Analysis System (FPAS) TA
  2. Madagascar: Technical Assistance Report—Climate Macroeconomic Assessment Program (CMAP)
  3. Application of DIGNAD model to Madagascar (Article IV)
  4. Policy Lessons from DIGNAD Simulations in Rwanda
  5. Macro-Fiscal Implications of Climate Change Policies in Bangladesh
  6. Application of DIGNAD model to Timor-Leste (Selected Issues)
  7. Selected Issues Paper: Macroeconomic Gains from Closing Gender Educational Gaps in Niger
  8. Mining Revenues to Strengthen Guinea’s Development
  9. Toward a New Revenue Strategy for Vanuatu: The Role of Income Taxes (Article IV)
  10. Economic Effects of Climate Change and Food Insecurity in Niger: Niger (Selected Issues Paper)
- Output 2.2 — Courses to authorities and IMF Staff (listed)
  1. Course on Macroeconomics of Gender Equality
  2. Course on Distributional Impact of Policies and Reforms
  3. Online Course Delivery: Training Course on Macroeconomics of Climate Change
  4. ATI/AFE Workshop on Climate Change and Macro-Financial Policies
  5. Helsinki Principle 4 Workshop: Using Economic Tools to Adapt and Build Resilience to Climate Change

### Output 3 — IMF strengthens engagement by senior IMF policymakers on issues affecting LICs
- High-level policy conferences attended by IMF senior staff (3)
  1. 2022 International Conference on Development Economics
  2. Conference on Fragile States
  3. Conference on Monetary Policy Frameworks-An Index and New Evidence
- Research reflected in IMF policy papers and Board materials (5)
  1. April 2022 Fiscal Monitor Box 1.1: Social Protection and Poverty during the Pandemic
  2. 2022 External Sector Report – Box 1.3: External Sector Impact of Disaster Shocks
  3. IMF Strategy Toward Mainstreaming Gender
  4. Macroeconomic Developments and Prospects in Low-income Countries—2022
  5. G-20 Background Note on the Macroeconomic Impact of Food and Energy Insecurity
- Outcome Indicator 1 — Thematic areas of IMF policy influenced and made LIC-specific:
  1. Monetary policy and natural disasters and stability in fragile settings
  2. Multi-sector Incomplete Markets Macro Inequality (MIMMI)

### Other outputs, presentations, and toolkits
- E-newsletters published (4): June 2022; September 2022; December 2022; March 2023.
- Blogs/Articles/Press/Other (4):  
  1. VoxEU Blog: Investigating the drivers of remittance fees  
  2. IMF Blog: How Africa Can Escape Chronic Food Insecurity Amid Climate Change  
  3. IMF Blog: Africa Food Prices Are Soaring Amid High Import Reliance  
  4. Work on food insecurity featured prominently in the MD’s curtain raiser speech of the 2022 IMF-World Bank Annual Meetings.
- Internal presentations (10) and external presentations (6) documented, including presentations on the DIGNAD toolkit and Monetary Policy Framework toolkit.
- Toolkits developed: Gender Labor Market Tool; DIGNAD toolkit; MIMMI toolkit; IAPOC toolkit (monetary policy).

### Outcomes and impacts
- MRLIC outputs featured in flagship IMF documents: Regional Economic Outlook (REO), External Sector Report, Fiscal Monitor, various Staff Reports and Article IV, and Technical Assistance Reports.
- MRLIC outputs supported PRGT fundraising via the LICs Report; the report "documented key stylized facts and presented in-depth analyses together with proposals to improve living conditions in LICs."
- The DIGNAD toolkit used in six country applications; presented at ATI/AFE workshop on Climate Change and Macro-Financial Policies in Nairobi, Kenya.
- Training/clinic outcomes:
  - Clinic on Macroeconomics of Gender Equality earned an average rating of 4.54 out of 5.
  - "More than 80 percent of participants agree that the course coverage was great, while more than 95 percent indicate that the course expectations were met."
- Senior staff acknowledgements:
  - Bo Li, Deputy Managing Director overseeing climate work, stated: “The IMF has a crucial role in assisting its members in addressing the challenges of climate change... The FCDO-IMF partnership has been instrumental in advancing research on the macroeconomics of climate adaptation, leading to the development of models and toolkits that have empowered IMF country teams to provide policy advice across a wide range of country applications, addressing the macro-fiscal trade-offs involved in scaling up adaptation investments.”
  - Ceyla Pazarbasioglu, Director of the Strategy, Policy, and Review Department, stated: "For more than a decade, the IMF-FCDO MRLIC program has played a tremendous role in our commitment to serve low-income countries... The collaboration has made a rich contribution by helping highlight the impacts of the shocks and assess policy options with often difficult tradeoffs."

### Costs, value for money, and management
- Approved project budget: US$29.5 million.
- As of April 2023, $24.9 million has been drawn from the subaccount.
- Project expenditures, Years 1-11 cumulative (indicative breakdown)
  - HQ led missions including entire mission team: $6,823,847
  - Research HQ based / Visiting Scholars; Short-term Advisors; Development of CD tools; Development of general CD technical materials; Development of training courses or other learning materials: $10,644,535
  - Seminars & Study Tours; Interactive learning and workshops: $1,772,410
  - Project Backstopping: $3,173,599
  - Project Management: $344,669
  - Exceptional Expenses: $550,638
  - Language Services: $2,170
  - Trust Fund Fee: $1,631,131
  - Total: $24, 932,999
- Value for Money statements:
  - The average cost per paper is lower than the FCDO benchmark of $186,720 (£150,000) per paper.
  - Table 4 (Years 1-11):
    - Total Staff/Contractual/VS Costs: $17,468,382
    - Research Paper Costs: $13,101,287
    - Country Applications Costs: $4,367,096
    - Working Papers: 180
    - Cost Per Working Paper: $72,785
    - Published Papers: 105
    - Cost per Published Paper: $124,774
  - Direct project management costs represent approximately one percent of the total budget; including the Trust Fund management fee, program management costs are about eight percent.
  - Estimated allocation of staff, contractual employees, and visiting scholars’ time: 75 percent on research papers and 25 percent on country applications work.
- Notes on financial reporting:
  - Appendix 2 provides formal financial reporting generated by the IMF’s accounting system.
  - Reported draws reflect a lag of actual expenses of approximately two to three months for verification before charging to donor subaccounts.

*Source: MRLIC program report: 3. LOG-FRAME OUTPUTS (FCDO-IMF partnership annual reporting).*

### 8. WORK PLAN AND TIMETABLE

### 8. WORK PLAN AND TIMETABLE

### Individual work plans — (1) COVID-19
- Prepare a paper: "Will Working from Home Stick in Developing Economies?"
  - Finding: shift to working from home during the COVID-19 pandemic varies substantially across 10 developing countries covered by an online survey.
  - Statistic: an increase in teleworking days per week ranges from 0.7 to 17.6 percentage points across 10 developing countries.
  - Sample: about 500 respondents per country.
  - Finding: an estimated income discount associated with telework disappeared temporarily at the onset of the pandemic.
  - Model insight: a calibrated model indicates workers’ preferences to telework may largely depend on educational attainments.
  - Policy implication: persistence of telework could depend on obstacles to telework—particularly for workers with less education—and a degree of economy-wide externality.
- Develop toolkit: "Online Survey on COVID-19 Impacts on Developing Economies"
  - Content: preview of responses for a survey on impacts of COVID-19 in different areas for ten developing economies.
  - Survey provider: Nielsen.
  - Countries included: Argentina, Brazil, Ecuador, India, Indonesia, Pakistan, Peru, South Africa, Türkiye, and Vietnam.
  - Aggregated topics: telework, health and economic impacts during the pandemic, and respondent characteristics.

### Individual work plans — (2) Modelling policy choices
- Paper: market reforms and debt sustainability
  - Empirical sample: 62 EMDEs over 1970-2014.
  - Finding: reforms are associated with sizeable and long-lasting reductions in the debt-to-GDP ratio mainly through higher fiscal revenue and lower borrowing costs.
  - Heterogeneity: effects larger in countries with greater tax efficiency, lower informality, and higher initial debt.
  - Model result: fiscal gains can be enhanced when revenue windfalls associated with reforms are saved or channeled through higher public investment.
- Paper: anatomy of monetary policies, tools, and transmission in LICs
  - Approach: survey country teams and authorities; utilize country technical assistance reports, central bank documents, and the IMF’s internal database.
  - Focus: structural elements/frictions—financial factors, fiscal concerns, and real sector issues—that shape monetary transmission.
  - Outputs: quantify degree of frictions and study conceptual and empirical impacts on monetary transmission.
- Macroframeworks TA: Bank of Ghana
  - Objective: develop forecasting and policy analysis system; improve FPAS organization including model extensions, alternative scenarios, documentation, and integration into decision-making.
  - Capacity building: further development of analytical and forecasting skills of Bank of Ghana staff.
- Paper: "A Monetary Policy Framework for Low Income Countries"
  - Method: develop an Open Economy HANK model with LIC-relevant features (poor households without access to markets; subsistence consumption for tradable goods).
  - Analysis: calibrated for an average LIC to analyze a shock to external prices on macro variables, inequality, poverty, and optimal monetary policy response.
  - Dissemination: plan to present at external conferences.
- Input to paper: Strengthening Monetary Policy Frameworks in the Caucasus and Central Asia
  - Scope: review CCA monetary policy landscape; highlight design and implementation challenges; identify areas for strengthening.
- Paper: Monetary Policy Frameworks and Communication in the Caucasus and Central Asia
  - Data/tools: use IAPOC index (Independence and Accountability; Policy and Operational Strategy; Communications) developed by Unsal and others (2022) plus central bank laws and monetary operations.
  - Assessment: analyze CCA central banks’ press releases in terms of features, content, and tones.
- IMF blog: central bank communications
  - Focus: improvements in central bank communications between 2018 and 2021 and potential drivers; heterogeneity across income levels with emerging markets improving more.
  - Linked output: updated IAPOC toolkit with data for 2021 to be released at blog time.
- Country application: DIGNAR for Guinea
  - Purpose: study impacts of investments in public infrastructure amid increased commodity-driven exports.
- Tool development: economic growth Excel tool
  - Function: simulate economic growth scenarios accounting for gender gaps in the labor market.
- Toolkit: user-friendly Excel interface for nowcasts of quarterly GDP growth for 200 economies
  - Method: new panel approach enabling nowcasts even for countries without quarterly GDP data.

### Individual work plans — (3) Understanding macro-financial linkages
- Current status: no work planned under this topic at present; subject to change in coming months.

### Individual work plans — (4) Building resilience
- Application: Solomon Islands — Big Data and High Frequency Surveillance for Pacific Islands Countries
  - Motivation: fill capacity gaps in publishing timely high-frequency data.
  - Method: simplified implementation of Arslanalp, Koepke and Verschuur (2021) using satellite-based Automatic Identification System vessel tracking to nowcast monthly trade flows.
  - Additional use: port activity data to estimate economic disruptions due to social unrest in 2021.
- Work series: "A Macroeconomic Framework for Climate Adaptation"
  - Outputs: working paper, conference presentation, Article IV and Selected Issues application.
  - Model features: small open economy with two climate risks—slow-moving resource depletion and natural disasters; endogenous entry and adaptation in land-intensive agriculture; neoclassical manufacturing and services.
  - Focus: private sector endogenous adaptation decisions (green technology, resilient capital) and government policies to achieve first-best private adaptation.
- Online course: Macroeconomics of Climate Change - Economics of Adaptation
  - Audience: IMF staff and country authorities (registration open).
  - Curriculum: definition of adaptation; policies and strategies for promoting and mainstreaming adaptation; DIGNAD tool for resilience analysis in low-income countries exposed to natural disasters.
- Course: Debt, Investment, Growth, and Natural Disaster (DIGNAD) for IMF staff.
- Country applications: DIGNAD in context of Resilience and Sustainability Trust (RST) facility requests
  - Countries included: Mauritania, Kenya, and potentially others.
  - Use: analysis could be featured as a Box or Annex in IMF Country Report.
  - Simulations: assess impact of natural disasters on GDP and total public debt; illustrate trade-offs of investing in robust infrastructure (initial higher public debt vs. improved resilience, reduced output losses, asset damages, and post-disaster fiscal costs).
- External release: DIGNAD Toolkit User Manual and publication of the toolkit for external users.
- Workshop: Climate Community of Practice – Macroframeworks and Projections (IMF staff)
  - Objective: familiarize Fund staff, particularly country economists, with climate-macro models and tools and facilitate exchange of ideas and best practices.
- Workshop: Climate Change and Macro-Financial Policies (Africa Regional Technical Assistance Center South)
  - Context: follow-up to ATI/AFE Workshop at Kenya School of Monetary Studies; present DIGNAD with hands-on practice in Sandton, South Africa.
- Academic workshop: economics of climate adaptation for DIGNAD external launch
  - Format: 6 presentations with discussants (3 internal, 3 external) plus a keynote presentation.
- Country application: Chad — Development and Resilience to Climate Change
  - Focus: explore impact of development policies given limited fiscal space and measure protective power against climate change.
- Presentation: climate change and domestic debt costs at the 1st Women in Macroeconomics, Law and Economics, and Economic History Workshop in Boon (Germany).
- Working paper: private sector reaction to large natural disasters in terms of investment.

### Individual work plans — (5) Promoting structural change and institutional development
- Working paper: mitigating social unrest from fuel price increases
  - Empirical sample: 101 developing countries over 2000-2020.
  - Objectives: investigate association between fuel price increases and social unrest; examine mitigation roles of macroeconomic and institutional factors.
- Paper: "Do Capital Inflows Spur Technology Adoption? Evidence from a New Technology Diffusion Index"
  - Approach: compile novel indicator of technological intensity of imports leveraging PATSTAT patent data.
  - Analysis: evaluate impact of exogenous variations in statutory capital flow regulations on technology adoption across emerging and low-income countries.
- Paper: growth strategies and diversification for Pacific Islands Countries
  - Methods: panel regressions to quantify tourism’s contribution to growth and compute additional tourism needed to sustain comparator growth rates; identify diversification spurts using synthetic control and quantify benefits.
  - Output: framework for designing growth strategies focused on detecting binding constraints and working around limitations.
- Paper: climate shocks and structural transformation
  - Hypothesis: climate shocks/natural disasters disproportionately impact agriculture leading to atypical structural transformation via labor reallocation to industry and services.
  - Approach: use sectorally disaggregated dataset and relevant measures of structural transformation.

### Individual work plans — (6) Enhancing inclusion
- MIMMI App extension
  - Feature: include gender differences to test mutual impact of gender and macro/distributional outcomes.
- Working paper: International Food Prices, Growth and Inequality in Africa
  - Focus: long-run effects of higher international food prices and policy remedies.
- Paper: Mining Revenues and Inequality in Guinea
  - Focus: impacts of development policy using increased revenue from foreign extractive industries.
- Paper: Distributional Consequences of Fiscal Policies in Namibia.
- Internal tools and training: new version of MIMMI — internal training, user’s manual, and internal app for IMF staff to compute customizable economic models for macroeconomic and distributional analysis.
- Study: Impact of the Simandou Project in Guinea
  - Output: estimate macro-inequality impact of a large mining project and provide guidance on use of increased government revenues.
- Research: digitalization and perceptions of women as political leaders
  - Scope: 34 Sub-Saharan African countries; presentation planned at the 2nd Workshop on Gender and Economics in Luxembourg University (Luxembourg).
- Paper: legal barriers to women’s labor force participation: which laws matter the most?
  - Scope: evaluate effectiveness of 35 different policies in fostering increased participation of women in the labor market.
- Paper: gender as a factor for remittance inflow
  - Data: household survey data to explore gendered effects on remittance inflows and balance of payments.
- Toolkit: assess interplay of gender inequality in the labor market and debt sustainability analysis.
- Paper: drivers of life expectancy in low-and-middle income countries
  - Method: empirical assessment of determinants of health outcomes in LICs.

### Risk
- Main challenge: project’s annual budget cuts to the FCDO-IMF partnership.
  - Context: many LICs face high debt, lingering inflation, climate shocks, legacies of the pandemic, geoeconomic fragmentation spillovers, and fallout of the war in Ukraine.
- Risk implications:
  - Additional budget cuts, disbursement delays, or funding uncertainties will severely compromise ability to sustain production and delivery of high-quality outputs agreed in the Letter of Understanding.
  - Staffing difficulty: extremely difficult to retain or hire competitive contractuals and visiting scholars and to respond to increased support requests.
  - Staff departures: 7 out of the 15 FCDO team members who have left RES and SPR since last year are contractuals.
  - Proportion: these 7 contractuals accounted from about a third of RES and SPR staff working the program.
  - Operational impact: triggered broad and time-consuming hiring process and weighed on number of outputs produced to meet yearly targets.
  - Funding uncertainty: CCCDI envelope used to support the program this year is only temporary, compelling IMF to look for complementary funding sources; searching for alternatives requires time and increases pressure on the team.

### Monitoring and evaluation
- Monitoring practices:
  - IMF reports to FCDO annually regarding outputs included in the log-frame.
  - Quarterly updates are provided to the project website.
  - Quarterly e-newsletters reach an audience of more than 1500 academics, policymakers, central bank staff, and government representatives.
  - Public access: all publicly available working and published papers uploaded to the R4D portal on the FCDO website; "gold access" provided to journal publications produced through the grant when deemed necessary.
  - Communication: video conference calls conducted between IMF and FCDO project members when necessary.
- Evaluation:
  - FCDO conducts a yearly evaluation of the program.
  - Budget note: no budget for an external evaluation was included in the project budget.

*Source: FCDO-IMF Annual Report, June 2023 — 8. WORK PLAN AND TIMETABLE.*

### 11. FURTHER INFORMATION

### 11. FURTHER INFORMATION

### Phase V planning
- The team has started brainstorming on a Phase V proposal to improve the analytical and policy tools to bolster the economic resilience of LICs amid increasingly frequent and large shocks.

### Appendix 1 — Log-frame: impact, outcomes, outputs, inputs (selected indicators and targets)
- Project name: Macroeconomic Research in Low-Income Countries (LICs).
- Impact Indicator 1 — Proportion of people living in extreme poverty in MRLIC countries:
  - Planned (2018) MRLIC countries: 28.5%
  - Target (March 2025): (no numerical target beyond baseline presented)
  - Source: World Bank, Poverty and Equality dataset, Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population), Simple average of MRLIC countries (Table 1 of Annual Report).
- Impact Indicator 2 — Economic growth rates in MRLIC countries:
  - Planned (2019) MRLIC countries: 4.0%
  - Target (March 2025): (no numerical target beyond baseline presented)
  - Source: IMF WEO data, Real GDP growth, Annual percent change, Simple average of MRLIC countries (Table 1 of Annual Report).

- Outcome Indicator 1 — Evidence of improved IMF policymaking and integration of LIC-specifics:
  - Planned March 2020: (12)
  - By March 2021: H (16) M (14) L (12)
  - By March 2022: H (18) M (16) L (14)
  - By March 2023: H (20) M (19) L (18)
  - By March 2024: H (21) M (20) L (19)
  - By March 2025: H (22) M (21) L (20)
  - Specific context: the average per year (Yr 1 - 8) is 2. So medium case is one per year for Yr 11-13. High case one additional, low case one fewer.
  - Achieved (selected years): 16 18 20
  - Source: IMF Reporting - board papers, policy papers, conference reports/papers, pilot applications of country teams, refs in staff docs, or internal policy memos.

- Inputs (financial memorandum):
  - FCDO (£) £5.1 million
  - Govt (£) £1.0 million
  - Total (£) £6.1 million
  - FCDO SHARE (%) 84
  - Note: "Other" is USD 1.2 million for FY2022 from the IMF's COVID-19 Crisis Capacity Development Initiative (CCCDI). Exchange: U.K. £1 = USD 1.219950 (as of May 13, 2022).
  - The outputs of the CCCDI-funded project are counted towards MRLIC output targets only when assessed to be within the aims and scope of the MRLIC.
  - For Yr 11 - 13, the annual disbursement is rephased and the output target levels are adjusted accordingly.

- Output 1.1 — Number of priority research papers (five research themes):
  - Planned March 2020 (130)
  - By March 2021: H (151 papers) M (146 papers) L (141 papers)
  - By March 2022: H (167 papers) M (160 papers) L (155 papers)
  - By March 2023: H (176 papers) M (172 papers) L (168 papers)
  - By March 2024: H (186 papers) M (182 papers) L (178 papers)
  - By March 2025: H (196 papers) M (192 papers) L (188 papers)
  - Specific context: the average output per year (Yr 1 - 8) is 16. Medium case is 8 per year for Yr 11-13. High case 3 additional, low case 3 fewer.
  - Achieved (selected years): 151 162 180
  - Source: IMF publications.
  - Five research themes of the MRLIC:
    1) Modelling and understanding policy choices
    2) Understanding macro-financial linkages
    3) Building resilience
    4) Promoting structural change and institutional development
    5) Enhancing inclusion

- Output 1.2 — Papers accepted in high-quality peer-reviewed journals:
  - Planned March 2020 (77)
  - By March 2021: H (90 papers) M (86 papers) L (82 papers)
  - By March 2022: H (99 papers) M (95 papers) L (91 papers)
  - By March 2023: H (105 papers) M (103 papers) L (101 papers)
  - By March 2024: H (110 papers) M (108 papers) L (106 papers)
  - By March 2023 (likely intended March 2025 entry): H (115 papers) M (113 papers) L (111 papers)
  - Specific context: the average output per year (Yr 1 - 8) is 9. Medium case is 5 per year for Yr 11-13. High case 2 additional, low case 2 fewer.
  - Achieved (selected years): 90 98 105
  - Source: IMF to provide details of academic publications and acceptances.

- Output 2.1 — IMF research products used by country teams and partner authorities:
  - Planned March 2020 (161)
  - By March 2021: H (181) M (174) L (167)
  - By March 2022: H (199) M (194) L (189)
  - By March 2023: H (214) M (211) L (208)
  - By March 2024: H (222) M (219) L (216)
  - By March 2025: H (230) M (227) L (224)
  - Specific context: the average output per year (Yr 1 - 8) is 21, including courses that are now separated to output indicator 2.2. Medium case is 8 per year for Yr 11-13. High case is 3 additional, low case is 3 fewer.
  - Achieved (selected years): 183 203 213
  - Source: IMF reporting on evidence of number of country teams applying policy tools and frameworks.

- Output 2.2 — Courses offered to country authorities and IMF staff:
  - Planned March 2020 (20)
  - By March 2021: H (28) M (25) L (22)
  - By March 2022: H (35) M (32) L (30)
  - By March 2023: H (44) M (42) L (40)
  - By March 2024: H (48) M (46) L (44)
  - By March 2025: H (52) M (50) L (48)
  - Specific context: Newly separated from output indicator 2.1. Medium case is 4 per year for Yr 11-13. High case 2 additional, low case 2 fewer.
  - Achieved (selected years): 28 38 43
  - Source: IMF reporting evidence of number of country authorities applying policy tools and frameworks.

- Output 3.1 — High-level policy conferences attended by senior IMF staff reflecting project research:
  - Planned March 2020 (40)
  - By March 2021: H (45) M (43) L (41)
  - By March 2022: H (48) M (46) L (44)
  - By March 2023: H (54) M (53) L (52)
  - By March 2024: H (57) M (56) L (55)
  - By March 2025: H (60) M (59) L (58)
  - Specific context: the average output per year (Yr 1 - 8) is 5. Medium case is 2 per year for Yr 11-13. High case is 1 additional, low case is 1 fewer.
  - Achieved (selected years): 42 50 53
  - Source: IMF reporting on number of policy conferences drawing on outputs from the project.

- Output 3.2 — Research results reflected in IMF Board discussions and papers:
  - Planned March 2020 (41)
  - By March 2021: H (48) M (45) L (42)
  - By March 2022: H (53) M (52) L (50)
  - By March 2023: H (59) M (57) L (55)
  - By March 2024: H (62) M (60) L (58)
  - By March 2025: H (65) M (63) L (61)
  - Specific context: the average output per year (Yr 1 - 8) is 5. Medium case is 3 per year for Yr 11-13. High case is 2 additional, low case is 2 fewer.
  - Achieved (selected years): 49 55 59
  - Source: IMF reporting on number of IMF Board discussions and IMF Policy Papers drawing on outputs from the project.

### Appendix 2 — Financial reports (selected figures)
- Cumulative FY 2018 Contributions 1/: 19,623,637 1,968,935 2,088,790 -2,270,441 -25,951,803
- Interest Earned: 65,170 56,743 41,005 236 1,438 54,253
- Total Cash Available: 19,688,807 2,025,678 2,129,795 236 2,271,879 54,253 26,170,648
- Expenses Paid 2/: 16,398,896 2,490,122 1,892,693 1,790,324 1,093,154 1,267,810 24,932,999
- Cash Balance: 3,289,911 2,825,467 3,062,569 1,272,481 2,451,206 1,237,649 1,237,649
- As of April 30, 2023 — Bilateral Cash Flow Statement (In U.S. Dollars) for United Kingdom - Project on Macroeconomic Research in LICs.
- Agreement Summary (selected):
  - Closed project IMF_IMF_2012_01 DFID Macro Research 1&2: Latest Approved/Proposed Budget 12,451,409; Expenses 12,451,410; Remaining Balance 0; Execution (%) 100%
  - Closed project SPR_IMF_2017_04 DFID Macro Research 3: Latest Approved/Proposed Budget 6,991,674; Expenses 6,991,674; Remaining Balance 0; Execution (%) 100%
  - Approved project SPR_IMF_2020_02 DFID-4 Macro Research (4/1/2020 - 3/31/2025): Latest Approved/Proposed Budget 6,902,049; Expenses 3,858,784; Remaining Balance 3,043,265; Execution (%) 56%
- Sub Total: 26,345,131
- Trust Fund Management Fee: 1,844,159 1,631,131 213,029
- Grand Total: 28,189,291 24,932,999 3,256,294
- Additional figures appearing in the financial annex:
  - 25,951,803
  - 218,845
  - 26,170,648
  - 28,189,292
  - 2,124,469
  - 105,825
- Notes:
  1/ Contributions are net of transfers and return of funds.
  2/ Expenses paid include the 7% TFM.
  - The remaining balance for closed projects is zeroed out upon project completion.
  - The expenses shown do not include costs related to Long-Term Experts.

### Appendix 3 — Research outputs (working papers, selected summaries and key quantitative findings)
- Topic 1. Modelling and understanding policy choices
  1. Quarterly Projection Model for the Bank of Ghana (Philip Abradu-Otoo et al.)
     - Describes the Quarterly Projection Model (QPM) underlying the Bank of Ghana Forecasting and Policy Analysis System (FPAS).
     - New Keynesian semi-structural model; includes inflation targeting central bank, fiscal policy aggregate demand effects, endogenous policy credibility.
     - Out-of-sample forecasting accuracy and historical use support QPM’s role in forward-looking monetary policy.
  2. Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment (Cedric Okou, John A Spray and Filiz D Unsal)
     - Uses domestic market prices of the five most consumed staple foods from 15 countries.
     - Finds pass-through from global to local food prices estimated close to unity for highly imported staples.
     - Natural disasters and wars bring 1.8 and 4 percent staple food price surges respectively beyond generalized price increases.
     - Domestic factors (greater local production, lower consumption shares) and stronger monetary/fiscal frameworks reduce staple food price inflation.

- Topic 2. Understanding macro-financial linkages
  3. What Explains Remittance Fees? Panel Evidence (Thorsten Beck, Mathilde Janfils and Kangni R Kpodar)
     - Uses data across 365 corridors; documents reduction in remittance fees over the past decade but many corridors have not met the goal of fees below 3 percent.
     - Identifies cost- and risk-based constraints and market structure as barriers to lower fees.
  4. How Do Transaction Costs Influence Remittances (Kangni R Kpodar and Patrick A. Imam)
     - Quarterly panel database: 71 countries over 2011Q1- 2020Q4.
     - Reducing transaction costs to the Sustainable Development Goal target of 3 percent could generate an additional US$32bn in remittances.
     - Finds a short-term positive impact of cost reductions that dissipates beyond one quarter; cost-elasticity heterogeneity across country characteristics.
     - Microdata (USA-Mexico corridor) confirm migrants facing higher transaction costs remit less; effect less pronounced for skilled migrants and those with bank accounts.
  5. Bank Ownership Around the World (Ugo Panizza)
     - Dataset covers more than 6,500 banks in 181 countries (including 59 low-income economies) over 1995-2020.
     - Until 2010, reduction in state-ownership and increase in foreign ownership; Global Financial Crisis interrupted or reversed these trends.
     - Country-level relationships between bank ownership and GDP growth and financial depth are mixed.
     - State-owned banks are less profitable and have higher non-performing loans; state-owned and foreign-owned banks in developing economies pay and charge lower interest rates than domestic private counterparts.
     - State-owned banks stabilize credit in domestic shocks; foreign banks amplify external shocks.

- Topic 3. Building resilience
  6. Monetary Policy Under Natural Disaster Shocks (Alessandro Cantelmo et al.)
     - Review of IMF reports for 34 disaster-years in 16 disaster-prone countries from 1999 to 2017 reveals lack of systematic approach by monetary authorities to climate shocks.
     - Model-based result: inflation targeting remains the welfare-optimal regime; central banks should resist accommodating impulses and continue to focus on price stability.
  7. Do Monetary Policy Outcomes Promote Stability in Fragile Settings? (Oumar Diallo et al.)
     - Examines monetary policy outcomes and fragility across fragile settings.
     - Finds the combination of reduction of inflation and lower unemployment delivers the highest payoff in promoting peace and cohesion.
     - Low inflation is identified as the primary desired outcome, low unemployment as a secondary one; robustness tests confirm findings.

*International Monetary Fund — United Kingdom - Project on Macroeconomic Research in LICs (Appendices 1–3, Financial Reports, Working Paper summaries).*

### 8.   Political Institutions and Output Collapses

### 8.   Political Institutions and Output Collapses

### Summary
- Major output collapses are costly and frequent in the developing world.
- Using cross-country data, five-year periods are classified using a two-dimensional state space based on growth regimes and political institutions.
- The joint evolution of output growth and political institutions is modeled as a finite state Markov chain to study how countries move between states.

### Methodology
- Classification of five-year periods in a two-dimensional state space defined by growth regimes and political institutions.
- Modeling of the joint evolution of output growth and political institutions as a finite state Markov chain.
- Analysis focuses on transition dynamics between states to assess persistence and resilience.

### Key findings
- Growth is more likely to be sustained under democracy than under autocracy.
- Output collapses are more persistent under autocracy.
- Stagnation under autocracy can give way to outright collapse.
- Democratic countries appear to be more resilient.

*Patrick A. Imam and Jonathan R. W. Temple, "Political Institutions and Output Collapses".*

### 4.   Policy Lessons from DIGNAD Simulations in Rwanda

### 4.   Policy Lessons from DIGNAD Simulations in Rwanda

### Key findings from the DIGNAD analysis (IMF Country Report No 22/381)
- The DIGNAD toolkit was used to assess the impact of natural disasters on GDP and total public debt for Rwanda in the context of the country’s request for an arrangement under the RST facility.
- Investing in more robust infrastructure results initially in higher public debt but:
  - Improves the resilience of the economy by reducing the adverse impact of natural disasters on output.
  - Lowers damages to physical assets.
  - Reduces post-disaster fiscal costs for rebuilding and lifeline support.
- Enhanced reforms to improve the efficiency of public investment raise the resilience of the economy to shocks.
- The initial increase in public debt from adaptation or resilience investments can be mitigated by:
  - Securing private financing.
  - Securing more concessional financing.

### Policy implications and recommendations
- Prioritize investment in more robust, climate- and disaster-resilient infrastructure despite short-term increases in public debt, given the longer-term benefits in reducing output losses and reconstruction fiscal costs.
- Implement reforms to improve public investment management and the efficiency of public investment to boost the resilience payoff from infrastructure spending.
- Pursue financing strategies that limit the fiscal burden of upfront resilience investments:
  - Mobilize private financing to share financing costs and risks.
  - Secure more concessional financing to reduce the public debt impact of adaptation investments.

*Source: IMF Country Report No 22/381 (analysis using the DIGNAD toolkit).*

### 1.   June 2022 Newsletter

### June 2022 Newsletter

### Newsletters issued
- 1. June 2022 Newsletter
- 2. September 2022 Newsletter
- 3. December 2022 Newsletter
- 4. March 2023 Newsletter

### Blogs, articles, and press highlights
- 1. VoxEU Blog: Investigating the drivers of remittance fees
- 2. IMF Blog: How Africa Can Escape Chronic Food Insecurity Amid Climate Change
- 3. IMF Blog: Africa Food Prices Are Soaring Amid High Import Reliance
- 4. Food insecurity was a top issue raised by all low-income countries (LICs)’ governors. The work by the MRLIC team on food security was featured prominently, including in the MD’s curtain raiser speech of the 2022 IMF-World Bank Annual Meetings. Recognizing recent food price surges, she highlighted the importance of the new “food shock window” as part of the Fund’s emergency financing tools to support countries most affected by term of trade shocks. There was also an analytical corner presentation featuring the MRLIC team’s work, joint with the IMF’s African Department, on climate change and chronic food insecurity. Representatives from many LICs were interested using our analytical framework on food insecurity.

### Internal presentations
- 1. Presentation on “A Macroeconomic Framework for Climate Adaptation and Mitigation Analysis" at the IMF Climate Innovation Challenge 2022
- 2. Presentation on “Adapting to Climate Change: A Macro Framework” at the IMF Research Development-Macroeconomic Seminar Series on June 27, 2022.
- 3. Presentation of Monetary Policy Framework (MPF) toolkit/data to IMF’s iLab on May 18, 2022.
- 4. Presentation on “A Monetary Policy Framework for Low Income Countries”” at the IMF Research Development-Macroeconomic Seminar Series on September 21, 2022.
- 5. Presentation on “A Macroeconomic Framework for Climate Adaptation and Mitigation Analysis" at the IMF FAD Analytical Hour in December 2022.
- 6. Internal Launch: The DIGNAD toolkit was launched at an iLab Innovation Event on Thursday, December 8, 2022.
- 7. Presentation of the DIGNAD model and toolkit at Institute for Capacity Development Department’s Climate Working group in October 2022.
- 8. Presentation of the DIGNAD model and toolkit to Strategy, Policy and Review Department in November 2022.
- 9. Presentation of the DIGNAD model and toolkit to IMF's Resilience and Sustainability Trust working group in November 2022.
- 10. Presentation of the DIGNAD model and toolkit to Climate Indicators Dashboard’s working group of Statistics Department in February 2023.

### External presentations
- 1. Presentation of “A Monetary Policy Framework for Low Income Countries” during the 2nd Lille Reading Workshop on International Finance on November 18.
- 2. Presentation of “Staple Food Prices in Sub-Saharan Africa: An Empirical Assessment” at CSAE Conference on March 19-21, 2023.
- 3. Presentation on “Monetary Policy Frameworks-An Index and New Evidence” a joint research seminar with the 'Caucasus, Central Asia, and Mongolia Regional Capacity Development Center' (CCAMTAC) on July 28, 2022.
- 4. Presentation of “Current Developments in LICs” London School of Economics in February 2023.
- 5. Presentation of “Current Global Crises and their Impact on the Great Divergence” at London School of Economics on January 25, 2023.
- 6. Presentation at international discussion meeting “New horizons for increasing the understanding of the economic consequences of climate change” at the Royal Society in London on March 29-30, 2023.

### Toolkits
- 1. Gender Labor Market Tool
  - Summary: Staff developed an innovative Excel-based toolkit that simplifies gendered labor market analysis. The toolkit is user-friendly and helps identify the most important factors contributing to employment gender gaps in levels and rates of change. With this tool, employment gender gaps can be easily decomposed into gaps in Employment Rates, LFP Rates, and Population Shares, making it an essential resource for staff working with gender issues. It can be applied to individual countries, regions, income groups, or the entire world. To make it even more convenient, the toolkit is already populated with all the data covering the entire IMF membership, which saves valuable time and resources.

### ODA memorandum to management
- 1. The team provided an updated memorandum on potential crowding-out of development aid in the context of Russia’s war in Ukraine to our Senior Management. The memorandum recognized mounting concerns over potential crowding-out of official development aid for low-income countries. This was because many advanced economies scaled up defense spending and refugee-related aid to Ukraine. Although there was no clear evidence at the time of aid budgets diversions from LICs to increase military spendings.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/annual-reports/fcdo-ar-june2023.pdf_