Is world hunger rising again?

In a report released a few days ago by multiple UN agencies, the reader is confronted with a distressing piece of evidence: world hunger, after decreasing steadily over the 2000s, might be rising again. Using statistics on ‘prevalence of undernourishment (PoU)’, the report shows that

‘…the share of undernourished people in the world decreased from 14.7 per cent in 2000 to 10.8 per cent in 2013. However…FAO estimates for 2016 indicate that the global prevalence of undernourishment in 2016 may have actually risen to 11 per cent, implying a return to the level reached in 2012 and suggesting a possible reversal of the downward sustained over recent decades’.

The report attributes the likely rise in global hunger attributes to various types of conflicts in different parts of the world that attenuates food security, to climate change and to economic downturns that sap the capacity of governments in developing countries to look after the poor and the needy. The report suggests that the evidence on the latest trends in PoU pose a challenge to the Sustainable Development Goals which is committed to end hunger and prevent all forms malnutrition by 2030. The case, it contends, for collective and corrective action is strong.

The more cynical observer might conclude that, given typical margins of error that accompany global estimates of material deprivation, the suggestion of a rise in global hunger is premature and that trends in income poverty as compiled by the World Bank are a lot more positive. The response to this cynicism is that world hunger might not have increased, but there are multiple observations (2013 to 2016) to suggest that at least that progress in reducing global hunger has stalled. Furthermore, positive trends on income poverty between 2012 and 2015 are based on forecasts rather than actual estimates.

The IMF on Armenia: an epiphany?

The Armenian government has had various lending arrangements with the IMF for 10 years (2009 to 2017). Over this period, IMF was rather quiet about Armenia’s law on public debt – enacted in 2008 – that drove the country’s fiscal consolidation exercise. The World Bank called it ‘one of the most ambitious’ in the region and documented its pernicious impact on public investment and growth. The IMF agreed, but did not explicitly point out the need for revising the 2008 public debt law – until now.

In its July 2017 review of Armenian macroeconomic policy, the IMF notes that:

‘…the authorities agree with staff that the implementation of the fiscal rule is overly contractionary at this conjunction. From a legislative perspective, the current fiscal framework is quite unique in the international landscape…such a framework does not provide a useful anchor when debt is sufficiently below the ceiling and…is likely to bind when economic activity is weak, resulting in a pro-cyclical bias…This may, therefore aggravate the economic downturn and thereby undermine the credibility of the fiscal framework. The authorities are currently being assisted by (the) IMF to revise and modernize their fiscal rule…’

The draft of a new fiscal rule is expected to be debated by the National Assembly in October 2017.

This current approach by the Fund represents a sharp change from previous positions. Indeed, in its December 2016 review, the IMF accepted the fact that:

‘…the authorities remain committed to fiscal consolidation and debt sustainability, as embodied in their fiscal rule, which aims to ensure that debt remains below 60 percent of GDP over the medium term. In this context, they have developed a fiscal consolidation plan for 2017 and beyond’.

One wonders why it took the IMF – a body with vast expertise on fiscal affairs – ten years to urge the Armenian government to revise its now discredited fiscal rule. Such a rule – and its manifest inadequacies – was  public knowledge by the time the IMF entered into a lending arrangement with Armenia in 2009 and acquiesced in the unveiling and implementation of a fiscal consolidation programme that has turned to be damaging to growth and employment. Indeed, I do not feel flattered at all that I drew attention to the Armenian government (and more specifically the Ministry of Labour) to the problems that were embedded in its fiscal rule when I wrote a report on behalf of the Moscow office of ILO in May 2017 (see blog entries for June 2017).

The IMF and social protection: the perennial tension between a targeted and rights-based approach

In one of its latest reports, The  Independent Evaluation Office (IEO), examined IMF’s changing role in providing advice and assistance to member states in strengthening social protection systems. While being mildly critical, the IEO commended the Fund for the role that it played since the 1990s in placing social protection as a ‘macro-critical’ issue when engaging with member states, both operationally through its various lending arrangements and through its advisory and surveillance roles.  The IEO then suggested various recommendations  to strengthen the IMF’s capacity in offering advice and support to member states in enacting and implementing social protection policies. There is, however, one area where the IEO frankly acknowledges the IMF faces a major challenge, namely, institutional collaboration with UN agencies, most notably UNICEF and ILO.

The challenge of developing  productive collaboration between the IMF and UN agencies stems from different approaches to social protection. The IMF generally favours a ‘targeted’ approach to social protection in which means-testing is used to allocate scarce public funds to help the poor and the needy. Given its mandate, the IMF is understandably concerned about the fiscal sustainability of social protection policies. The UN agencies, on the other hand, subscribe to a ‘rights-based’ approach which ‘…emphasizes universal benefits and targeting by category (e.g. demographic groups) rather than income’. Combining the two different approaches into a unified position has proven to be rather difficult.

The IEO also notes that ‘IMF-World Bank cooperation on social protection generally worked well’ but worries that this might not necessarily be the case in the future. This is because in 2015 the World Bank decided to ‘…adopt the goal of universal social protection’.  How that proclamation will manifest itself in practice remains to be seen, but at least there is a formal change in approach. As the World Bank group President puts it, ‘…universal coverage and access to social protection are central to the World Bank Group’s twin goals, to end extreme poverty by 2030 and boost shared prosperity’.

There is in addition the Sustainable Development Goals (SDGs) endorsed by 193 member states of the UN system which supports universal social protection. For example, under goal 1 (ending extreme poverty in all its forms) the SDGs proclaim: ‘Implement nationally appropriate social protection systems and measures for all, including floors, and by 2030 achieve substantial coverage of the poor and the vulnerable’. The IMF has, as a good citizen of the international community, subscribed to the SDGs. Yet, at the same time, it adheres to a fiscal-centric and targeted approach to social protection.  Resolving this tension, especially in light of the World Bank moving in the direction of the UN agencies in the area of social protection, will remain a major challenge for the Fund. Unless it does so, it will be unable to appease its critics that it really is serious about social protection beyond helping the poor and the needy through means-tested programmes.

Brexit: when ideology matters more than facts

How bad is Brexit going to be for the British economy? In a highly perceptive and iconoclastic piece, Graham Gudgin – an economist and econometric model-builder with impeccable credentials –  questions the ‘majority view …that the loss of GDP could be severe’. Gudgin shows that the so-called ‘gravity models’ that were used by the UK Treasury, for example, incorporated EU-wide, rather than UK-specific, trade gains and losses to work out the impact on GDP. Yet, when UK-specific parameters are used by Gudgin and his co-authors to replicate the results of the Treasury model, the negative consequences on GDP becomes rather moderate amounting to no more than a ‘..worst-case loss of under 2% in 2025’.

Gudgin and his co-authors found it difficult get a proper hearing. The UK Treasury ‘refused multiple requests to discuss their work’. The ‘major economics media’ also refused to grant publicity to these contrarian findings. Gudgin makes the plausible speculation that the UK Treasury is not really independent but intimidated and influenced by its political masters. The Chancellor of the Exchequer at the time (George Osborne) was a strong advocate of remaining within the EU and the Treasury was mindful of that fact. Furthermore, a professional consensus has developed among the economics fraternity that Brexit is bad for Britain. The UK Treasury seems unable – at least until now – to question that consensus.



Corruption, Politics, and a Word Font

Next time you prepare a document in Microsoft Word, be careful as to which font you use. The very use of a specific font (Calibri) apparently cost  the prime ministership of Nawaz Sharif. Well, there is nothing wrong with the font per se, it’s something else.

Remeber Panama papers? If your name appeared there, you must be a very rich person. The Panama papers listed some of the influential political leaders in Pakistan including Nawaz Sharif.  Critics alledged that Nawaz Sharif and his children were associated with some offshore companies that had been used to buy posh flats in central London using  corrupt money smuggled out of Pakistan.  Panama papers suggested Maryam Sharif, Nawaz’s daughter and considered to be his  successor in the political dynasty, was the owner of an offshore company. She claimed she was only a trustee, not an owner.  She presented a deed that was typed in 2006. And it was typed using the font ‘Calibri’!  The beta version of this font was availble in  2004, but the font was publicly available only in 2007.

Yesterday, the five-judge bench of the Pakistan’s Supreme Court gave an unimous verdict that Nawaz Sharif  failed to give a transparent account of his assets and hence, he is incompetent to run public office. Within an hour of the verdict, Mr Sharif resigned from his Prime Ministership.

Corruption is not foreign to South Asia. Based on Transparency International’s   17-month long survey, Forbes magazine reports South Asia has the five most corrupt economies of Asia. The dangerous cocktail of politics and corruption in Asia transforms politicians into tycoons and offers business tycoons the centre stage in politics (See also political connections and family firms in Bangladesh).