## High Level Conference in Botswana: Fostering Diversification to Escape the Middle-Income Trap ## Source details **Canonical URL:** [High Level Conference in Botswana: Fostering Diversification to Escape the Middle-Income Trap](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2020.pdf) ## Other formats - [Markdown version](/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2020.pdf.md) - [Structured JSON version](/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2020.pdf.json) --- ### Conference scope and participants - Jointly organized by the IMF, AFRITAC South, Bank of Botswana, Delegation of the European Union to Botswana, the Southern African Development Community (SADC) and DFID. - Brought together senior officials from the Botswana government, representatives from emerging market and advanced economies, academics, regional institutions and six IMF staff including the Deputy Managing Director Mr. Tao Zhang. ### Themes and lessons - Discussed experiences from countries that have successfully diversified their economies, including Chile, Costa Rica, Estonia, South Korea and Mauritius. - Covered the policies used by those countries, reforms to macroeconomic frameworks and institutions, and the extent of diversification upgrades. - Mr. Tao Zhang urged Botswana to learn from other countries' experiences when identifying “the general principles and arrangements that are relevant to countries’ specific circumstances in order to maximize the chances of the success". --- ### High Level Virtual Conference on Fragile States Facing COVID-19 (London School of Economics seminar) ### Participation and focus - On May 27, Ralph Chami and Raphael Espinoza joined a panel discussion during a high-level virtual seminar on “COVID-19 in Fragile States” hosted by the London School of Economics (LSE). - Focused on the impact of the COVID-19 pandemic in fragile states and the policy responses required for social and economic aftermath. ### Key points and policy perspectives - Humanitarian aid identified as indispensable to help fragile economies fight the pandemic. - Seminar highlighted need for transition from current frameworks to development policies better tailored to countries’ specificities. - Other speakers included Professors Oriana Bandiera, Tim Besley and Adnan Khan (Chair). --- ### The COVID-19 Pandemic in Africa: Macroeconomic Impacts and Policy Responses (virtual conference) ### Organization and timing - Organized by the African Union Commission, the African Training Institute and the IMF. - Held from May 19 to June 2nd 2020. ### Presentations and findings — Ralph Chami (May 22nd) - Presentation topic: impact of COVID-19 on Migrants and Remittances in Low-Income and Fragile States. - Observations: - Remittances will certainly drop as host economies experience significant income losses and an increase in unemployment. - Recipient-country impacts include: - Decrease in household consumption and expenditure. - Narrower fiscal space: decrease in consumption tax, increase on debt service and spending in public health. - More pressures on financial and private sectors: decrease on bank liquidity, a raising cost of borrowing and a decrease on bank capital. - Many recipient countries under fixed exchange rate regimes could undergo devaluation pressures. - Job losses may lead migrants to return home, raising challenges of rising un- and under-employment, potential increase in informality and rise in social pressures. - Policy recommendations: - Host countries should consider regulating migrant workers' employment opportunities. - Extend social protection. - Help reduce the cost of remitting. ### Presentations and findings — Filiz Ünsal (May 27) - Presentation based on forthcoming IMF Working Paper “Monetary Policy Frameworks: An Index and New Evidence” and a policy note on Central Bank Communication Through COVID-19. - Core argument: - Soundness of monetary policy frameworks affects a central bank’s ability to deal with shocks; the central bank’s response to shocks, in turn, affects the soundness of the monetary policy framework. - Emphasis and guidance: - Role of communication in safeguarding existing frameworks, longer-term focus on price stability and credibility. - Explicit guidance on how to communicate crisis measures. --- ### Moldova Article IV Consultation: Tax Expenditures — Medium-Term Growth Benefits from Alternative Policies ### Analysis and findings - Republic of Moldova’s latest Article IV Staff Report features an estimation of the medium- to long-term macroeconomic impact of replacing tax expenditure with public investment. - Observations: - Tax expenditures result in significant revenue losses and are an inefficient way to extend support compared to better-targeted spending programs. - Tax expenditures are distortive and impair the level playing field for businesses. - Simulation results: - Replacing tax expenditures with public investment would yield large growth dividends. --- ### Accelerating Development in Sierra Leone ### Human capital findings (IMF Selected Issues Paper “Boosting Human Capital, Accelerating Development, and Lowering Inequality in Sierra Leone”, published in April) - Historical context: - Indicators of human capital in Sierra Leone generally improved over the past two decades, despite major setbacks during the Ebola health crisis. - Education and health outcomes continue to lag most other countries. - Quantified potential gains: - Gains from providing each child with at least lower secondary education could, in the long-term, boost GDP by 40 percent, substantially lower income inequality, and generate additional revenues through higher individual incomes. - Closing gender gaps in education across income groups could yield gains of 8 percent of GDP. - Increasing the quality of education could yield gains of 27 percent of GDP. - Policy implications: - With limited fiscal space, evidence-based prioritizing, sequencing and targeting of policies—coordinated across sectors—is critical for sustained improvements to human capital outcomes. --- ### Central Bank Communication Through COVID-19 (Research Department Special Series note) ### Content and guidance - Authors: D. Filiz Ünsal and Hendre Garbers. - Purpose: - Provides detailed guidance on how central banks should communicate crisis measures without compromising existing monetary policy frameworks, longer-term focus on price stability, or credibility. --- ### Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States? (Working paper) ### Dataset and period - Sample: 187 economies. - Period: 2004-2014. ### Findings - Relationship between remittances and financial inclusion depends on the size of remittances. - At lowest level of remittances (less than 13% of GDP), financial inclusion seems to improve when remittances increase. - Relationship becomes negative for highest level of remittances. - Interpretation: - Lowest amounts of remittances tend to substitute formal financial intermediation by alleviating credit constraints to households while making their need for banking services less likely. - Highest remittance inflows increase households’ deposits in formal financial institutions and thereby increase formal financial intermediation by adding to liquidity. - Additional result: - Remittances inflow increase financial inclusion in Fragile States. --- --- _Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2020.pdf_