Investing in people helps to share in benefits of economic growth, technological progress

Shaimaa Al-Aees
15 Min Read
The Fiscal Forum panel on "Boosting Investiment in People and Infrastructure" of Gillian Tett (L), MD Christine Lagarde (3rd L), Gloria Alonso (2ndL) , Paschal Donohoe (R), Nicolas Dujovne (3rd R), and Vera Songwe (2nd R) will explore how best to address these challenges at IMF Headquarters during the 2019 IMF/World Bank Spring Meetings April 14, 2019 in Washington, DC. IMF Staff Photograph/Stephen Jaffe

The spring meetings of the International Monetary Fund (IMF) and the World Bank ended on Saturday in Washington, DC with an optimistic atmosphere following US statements suggesting that a trade war with China could end what may allow global economic recovery.

Trade frictions are seen as a main source of uncertainty for a slowing global economy, but there are more glimmers of hope for a US-China agreement.

US Treasury Secretary Steven Mnuchin said Saturday “the talks are nearing their conclusion,” a fresh signal of progress.

On the sidelines of the IMF and World Bank’s meetings, Mnuchin said that a US-China trade agreement would go “way beyond” previous efforts to open China’s markets to US companies and hoped that the two sides were “close to the final round” of negotiations.

The IMF predicted that the slowing world economy should begin to rebound in the latter part of 2019, provided in part that the world’s top two economies resolve their differences.

The Egyptian delegation to the spring meetings, including Ministers of Finance and Investment and Governor of the Central Bank of Egypt, tackled different issues such as finance, entrepreneurships, Capacity Development: Building Institutions and Beyond, Bretton Woods at 75-Rethinking International Cooperation in which panelists shared their views on the evolution of the global financial and monetary system, what challenges lie ahead, and the central role of the IMF in continuing to provide expertise to member states and as an avenue for further strengthening multilateral cooperation. Also, the delegation attended the session of Money and Payments in the Digital Age, this session has dealt with digitalisation, which is reshaping economic activity, shrinking the role of cash and spurring new digital forms of money and payments. The panel engaged in a lively discussion of the perils and promise of digital payments, focusing on the role of the private sector versus that of central banks.

The delegation met with a number of international credit foundations, such as Fitch, Standard & Poor’s, and Moody’s.

The Egyptian delegation also met with a group of investors and banks including Standard and Chartered, BNP Paribas, and Merrill Lynch to review the outcome of the Egyptian economic reform programme and its positive impact on the performance reports issued by various financial credit rating foundations.

Additionally, the delegation met with Christine Lagarde, the IMF managing director, and took part in the G20 meetings, the WB, international investors to discuss ways and opportunities of investments through presenting them the economic reforms and current supportive investment climate in Egypt, furthermore, the delegation met with ministries of some countries.

Boosting Investment in People and Infrastructure

In the last session of spring meetings, dubbed “Boosting Investment in People and Infrastructure”, Lagarde said that investing in people helps them share in the benefits of economic growth and technological progress. Investing in infrastructure grows the pie that can be distributed to all. Public investment levels need to be raised in countries at all levels of development. But investment needs must be met without harming fiscal sustainability. Improving the governance of infrastructure investment is key to increasing its value for money. This seminar panel explored how best to address these challenges.

Lagarde added that a clear shortage in public investment on a part of advanced economies that 1.7% of the public investment in infrastructure which is twice as little what was in the nineties which is undershorts side of it. Therefore, the IMF believes that there should be a clear focus that would be applies on advanced economies and the fund welcomes developing countries that currently financing such investment as not exactly highly possibly costs.

“The advanced economies should currently finance such investments. For developing countries, they are in serve need for infrastructure investments as human dimension should be on the agenda so we are trying to develop tools in order to help those countries actually manner as best as eel can and support as much as we can to support these countries to boost and attract private sector investments, Lagarde elaborated. “There is need for private investment and engagement in education, health, life long training which is clearly investing in very soft infrastructure and these investing should be materialising in whole the countries.”

Regarding Sustainable Development Goals (SDGs) session that has been held in the headquarter of the WB, Lagarde said that the IMF has done some work in identify and quantify the fiscal efforts that will be needed and it figured out how much it will be needed, therefore, the has IMF built a model and concentrated on health, education, and certain number of infrastructure.

She added, “We have applied that to all 49 low-income countries and we come up with a big number which is $0.5tn that will be needed in order to reach the sustainable development goals only those that I have mentioned so how will that money will be connected as well believe that countries themselves can actually achieve a lot.”

She further noted that the countries have to be focused on sustainable and inclusive growth and fiscal and capacity, as well as, they do not need to spend so much more but certainly too much belter and finally need to make sure that they have good and transparent governance because those will be key for the private sector to take an interest and to complement the funding and will be key as well for aid money to join this effort.

The IMF will continue to support countries in each of the areas that I have mentioned for instance we have increased our capacity development on strengthening tax system by 41% over three years within large increases in our support for fragile states, according to Lagrade.

“We are also expanding our engagement on governance and corruption issues given the cost that weak governments  governance imposes on growth but clearly all the efforts have to be made by all concerned countries such as countries themselves, international institutions, the private sector and all the donors who can also help by producing the volatility of aid and by ensuring that allocation of aid better reflects the recipients SDG needs the bottom line is that achieving these as SG’s will require that strong partnership all stakeholders all hands on deck and we will be a strong participant,” she said.

Egypt moves forward digital strategy

Regarding the ICT infrastructure in All Africa Digital Economy Moonshot session, Egyptian Minister of International and Investment Sahar Nasr said Egypt moves forward digital strategy focusing on three main pillars infrastructure is one of the most highlighted as digital technology requires adequate infrastructure. Additionally, digital technology needs ecosystem to complement what is the government is undertaken and that is the key to make the environment productive.

Nasr added, “The third pillar is investing in human capital such as training which is critical in developing the region , besides, investing in a smart cities and communities that will promote more innovative technology and digital transformation and access to finance and services to be provided to people that including invertors and automating systems and competing corruption. Moreover, we rely on the World Bank’s support in infrastructure, renewable energy, and ICT.”

Moreover, she pointed out, “Digital entrepreneurship is one of our interests. We will focus on collaborating with African on education reforms is currently taking place and moving forward to entrepreneurship and promoting youth in markets to succeed and produce, as well as, we cooperate in health and pharmaceutical sector for growing and prosperous of the African continent.

Over and above, Nasr elaborated that there is commitment by the state’s president to digital transformation the private sector is present and involved in to transform strategies to realty in the ground. Egypt and African countries are moving forward with the implementation in such field and we work very closely with our partners such as WB, International Finance Corporation (IFC) in digital technology and we signed agreements with private sector to cooperate with the government in promoting infrastructure in that field.

She concluded that there is more integration with African countries and private sector under our leadership of the African Union to promote creating jobs for youth.

Egypt exerts energetic efforts to sustain economic growth

Egypt’s Finance Minister Mohamed Moeit said Egypt exerts energetic efforts to sustain the economic growth rates given the improvement of the public financial indicators.

During a meeting with the heads and directors of the international investment banks in Washington, Moeit noted that this could be achieved through continuous working on reducing the public debt-to-GDP and deficit-to-GDP ratios.

During the G20 finance ministers and central bank governors meeting early this week, Moeit has asserted the importance of Egypt’s ongoing efforts to support the G20 Compact with Africa (CwA), given its chairmanship of the African Union.

Moeit added that as many as 12 African countries have so far joined the initiative that was launched by the G20 in 2017 to back African reforms.

The minister added that the CwA has seen promising results as regards the conformity of African nations’ reform agendas with the initiative’s guiding principles, which depend on attracting more foreign investments to Africa, particularly in key sectors.

Each African country, including Egypt, will benefit from the advantages of the CwA, he said, noting that Cairo seeks to lead Africa to a prosperous future via cooperation with various African Union’s member states.

World Bank increases its investments in human capital in Africa by 50%

In this regard, the World Bank unveiled a new plan today to help African countries strengthen their human capital. The objective of the plan is to enable Africa’s young people to grow up with optimal health and equipped with the right skills to compete in the digitizing global economy.

In an effort to help countries turn these indicators around, the World Bank’s Africa Human Capital Plan is setting ambitious targets to be achieved in the region by 2023. These include a drastic reduction in child mortality to save 4 million lives, averting stunting among 11 million children, and increasing learning outcomes for girls and boys in school by 20%. These achievements can raise Africa’s Human Capital Index score upwards to increase the productivity of future workers by 13%.

The World Bank will increase its investments in human capital in Africa by 50% in the next funding cycle. This includes new World Bank grants and concessional finance for human capital projects in Africa totalling $15bn in fiscal years 2021-2023. The World Bank will invest these funds strategically to unblock structural constraints to human capital development. The World Bank will also target game changing interventions that leverage technology and innovation and that prevent and reverse damage to human capital in fragile and conflict-affected settings.

The World Bank is already supporting countries to come up with new strategies to invest more and better in their people. Twenty-three African countries, covering over 60% of the region’s population, have joined a coalition of nearly 60 countries to join the Human Capital Project, committing to a set of accelerated investments in their human capital.

World Bank to provide a $31.5m grant for migrants

Additionally, the Global Concessional Financing Facility (GCFF) announced on Friday a $31.5m grant as budget support for Colombia’s efforts to facilitate access to jobs and basic social services for Venezuelan migrants and refugees, as well as the communities that are hosting them.This concessional funding will be part of a $750m development policy operation being prepared by the World Bank to support Colombia’s fiscal sustainability, competitiveness and migration..

The GCFF was launched in 2016 by the World Bank, the United Nations and the Islamic Development Bank as a global platform to provide concessional funding to middle-income countries delivering a global public good by hosting large numbers of refugees. To date, the GCFF has been used to help Jordan and Lebanon address the influx of Syrian refugees. In two years, the Facility has approved $500m in grants, which, due to the leveraging factor of the Facility, has unlocked more than $2.5bn in concessional financing for development projects aiming to improve the lives of refugees and their host communities.

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