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Financial risk assessment and management in times of compounding climate and pandemic shocks

Financial risk assessment and management in times of compounding climate and pandemic shocks | Speevr

More than 4 million people have died from COVID-19, and many others face long-lasting effects on their lives and livelihoods. While the full social, economic, and financial implications of COVID-19 are yet to be seen, millions have lost their jobs, and incomes in many countries have sharply declined. This raises concerns about sovereign debt sustainability and financial vulnerability in the medium term, particularly in developing countries and emerging markets.

The pandemic diverted the attention from another ongoing crisis: Climate change has affected the lives of more than 130 million people and resulted in over 15,000 deaths since the beginning of the COVID-19 crisis. Natural hazards such as tropical cyclones, floods, and wildfires are expected to become more frequent and intense in the coming years.
Understanding the economic and financial impacts of compound risks
With worsening climate change, compound risks (e.g., floods and droughts or pandemics and hurricanes hitting the same country shortly thereafter) could be more likely in the future. This should be the main concern for governments and financial supervisors because compound risks could exacerbate social and financial vulnerabilities. For instance, natural hazards destroying socioeconomic infrastructures, such as hospitals, provide a fertile ground for pandemics to spread, thus strengthening the pandemic’s socioeconomic toll and delaying recovery. In countries with limited fiscal space and capacity to respond, compound risk can lead to substantial fiscal impacts and slowed recovery.

The assessment and management of compound risks require a better understanding of how shocks of different nature (e.g., pandemics, climate change) are entering and passing through the economy. Eventually, we need to identify which assets and sectors are most vulnerable yet relevant in shocks’ transmission and amplification, in the economy and finance. This information would support policymakers and financial supervisors, answering the following questions “What are direct and indirect impacts of compound COVID-19 and climate physical risks, and how do they affect socio-economic and financial stability?” “Under which conditions can effective recovery policies be implemented?” “To what extent can countries strengthen their financial resilience to compound risks?”
Fit for purpose tools to assess compound risk
Answering these questions calls for macroeconomic models where heterogeneous agents—such as banks, firms, households, government, and a central bank—interact and adapt their investment and financing behavior, based on available information and on their expectations about the future. Consistently with the real world we live in, agents differ with regard to access to information (for instance, asset managers may have better information about financial market reaction to COVID-19 than car dealers) and risk management tools. Agents endowed with different access to information, preferences, and expectations, may diverge in their risk assessment and management strategies, with implications for the shock recovery.
Compound risk can amplify losses
A recent paper applies such a macroeconomic model to Mexico and shows that when shocks compound, such as the case of COVID-19 and natural disasters, losses could get amplified. Economic impacts are shock dependent, as a hurricane that might affect the supply side first by destroying productive plants and infrastructure differs from COVID-19 that enters as an aggregate demand shock by curbing people’s ability and willingness to spend money. The interplay between supply and demand shocks in the case of compound risk matters for the shock transmission through the economy and thus overall economic, private, and public finance impacts. This amplified impact is captured by the compound risk indicator in Figure 1, which compares GDP impacts of compound risks versus the sum of individually occurring pandemic and climate risk. A value of the indicator higher than 100 signals that the impact of the compound shocks is higher than the impact of the sum of individual shocks. In the case of a compounding strong climate physical shocks with COVID-19, non-linear amplification effects emerge.
Figure 1. Compound risk indicator for Mexico

Source: Dunz et al. 2021.
Drivers of shocks mitigation and amplification
Diverging preferences, expectations, and risk assessment are a main driver of compound shock amplification. Timely governments’ fiscal response is crucial to support the economic recovery and influence economic expectations. However, procyclical banks’ lending can counteract the effectiveness of fiscal stimulus by limiting firms’ recovery investments, creating the conditions for public finance distress (e.g., public debt sustainability). For instance, banks may revise their lending conditions to firms due to the uncertainty about the duration of the crisis, despite government and central banks’ actions (e.g., credit guarantees, recovery investments). By limiting the ability of firms to invest and of households to consume, procyclical lending can trigger persistent and nonlinear macroeconomic effects, such as higher unemployment and lower GDP (Figure 1).
Banks’ lending behavior is thus relevant for the success of government fiscal policies, and for their financial sustainability. Indeed, government’s recovery funds, financed by issuance of debt, are less effective in fostering the economic recovery in presence of credit and labor constraints. Coordination of fiscal and financial policies could help to tackle the complexity of the implications of compound risk, creating the conditions for functioning credit markets, and preserving sovereign debt sustainability.
Insights to build back better
Introducing compound risk considerations in fiscal and financial risk management can help governments and financial authorities build resilience to compounding shocks that could be more likely in the near future. Nevertheless, the assessment of compound risks requires an adaptation of the analytical tools that support policy making. Accounting for adaptive expectations and finance-economy interactions (e.g., bank lending conditions) that affect economic and financial agents’ response (e.g., investment, consumption) in times of crises could improve our understanding of how and why individual and compounding shock impacts might amplify. Such a new generation of macroeconomic models can thus support investors and policy makers in the assessment of risk and in the design of better-informed risk financing strategies. This, in turn, would enable the role of public and private finance in building resilience to compounding climate, pandemic, and other risks, for the benefit of the environment, the economy, and society.

Financial risk assessment and management in times of compounding climate and pandemic shocks

Financial risk assessment and management in times of compounding climate and pandemic shocks | Speevr

More than 4 million people have died from COVID-19, and many others face long-lasting effects on their lives and livelihoods. While the full social, economic, and financial implications of COVID-19 are yet to be seen, millions have lost their jobs, and incomes in many countries have sharply declined. This raises concerns about sovereign debt sustainability and financial vulnerability in the medium term, particularly in developing countries and emerging markets.

Irene Monasterolo

Professor of Climate Finance, EDHEC Business School – EDHEC-Risk Institute, Nice, France

Senior Research Fellow – Vienna University of Economics and Business

Senior Research Fellow – Boston University

Nepomuk Dunz

Junior Professional Officer – World Bank

Andrea Mazzocchetti

Postdoctoral Researcher – Ca’ Foscari University of Venice, Italy

Arthur H. Essenfelder

Lead Researcher on Performance Assessment of Disaster Risk Reduction Strategies – Euro-Mediterranean Centre on Climate Change and Ca’ Foscari University of Venice, Italy

The pandemic diverted the attention from another ongoing crisis: Climate change has affected the lives of more than 130 million people and resulted in over 15,000 deaths since the beginning of the COVID-19 crisis. Natural hazards such as tropical cyclones, floods, and wildfires are expected to become more frequent and intense in the coming years.
Understanding the economic and financial impacts of compound risks
With worsening climate change, compound risks (e.g., floods and droughts or pandemics and hurricanes hitting the same country shortly thereafter) could be more likely in the future. This should be the main concern for governments and financial supervisors because compound risks could exacerbate social and financial vulnerabilities. For instance, natural hazards destroying socioeconomic infrastructures, such as hospitals, provide a fertile ground for pandemics to spread, thus strengthening the pandemic’s socioeconomic toll and delaying recovery. In countries with limited fiscal space and capacity to respond, compound risk can lead to substantial fiscal impacts and slowed recovery.

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The assessment and management of compound risks require a better understanding of how shocks of different nature (e.g., pandemics, climate change) are entering and passing through the economy. Eventually, we need to identify which assets and sectors are most vulnerable yet relevant in shocks’ transmission and amplification, in the economy and finance. This information would support policymakers and financial supervisors, answering the following questions “What are direct and indirect impacts of compound COVID-19 and climate physical risks, and how do they affect socio-economic and financial stability?” “Under which conditions can effective recovery policies be implemented?” “To what extent can countries strengthen their financial resilience to compound risks?”
Fit for purpose tools to assess compound risk
Answering these questions calls for macroeconomic models where heterogeneous agents—such as banks, firms, households, government, and a central bank—interact and adapt their investment and financing behavior, based on available information and on their expectations about the future. Consistently with the real world we live in, agents differ with regard to access to information (for instance, asset managers may have better information about financial market reaction to COVID-19 than car dealers) and risk management tools. Agents endowed with different access to information, preferences, and expectations, may diverge in their risk assessment and management strategies, with implications for the shock recovery.
Compound risk can amplify losses
A recent paper applies such a macroeconomic model to Mexico and shows that when shocks compound, such as the case of COVID-19 and natural disasters, losses could get amplified. Economic impacts are shock dependent, as a hurricane that might affect the supply side first by destroying productive plants and infrastructure differs from COVID-19 that enters as an aggregate demand shock by curbing people’s ability and willingness to spend money. The interplay between supply and demand shocks in the case of compound risk matters for the shock transmission through the economy and thus overall economic, private, and public finance impacts. This amplified impact is captured by the compound risk indicator in Figure 1, which compares GDP impacts of compound risks versus the sum of individually occurring pandemic and climate risk. A value of the indicator higher than 100 signals that the impact of the compound shocks is higher than the impact of the sum of individual shocks. In the case of a compounding strong climate physical shocks with COVID-19, non-linear amplification effects emerge.
Figure 1. Compound risk indicator for Mexico

Source: Dunz et al. 2021.
Drivers of shocks mitigation and amplification
Diverging preferences, expectations, and risk assessment are a main driver of compound shock amplification. Timely governments’ fiscal response is crucial to support the economic recovery and influence economic expectations. However, procyclical banks’ lending can counteract the effectiveness of fiscal stimulus by limiting firms’ recovery investments, creating the conditions for public finance distress (e.g., public debt sustainability). For instance, banks may revise their lending conditions to firms due to the uncertainty about the duration of the crisis, despite government and central banks’ actions (e.g., credit guarantees, recovery investments). By limiting the ability of firms to invest and of households to consume, procyclical lending can trigger persistent and nonlinear macroeconomic effects, such as higher unemployment and lower GDP (Figure 1).
Banks’ lending behavior is thus relevant for the success of government fiscal policies, and for their financial sustainability. Indeed, government’s recovery funds, financed by issuance of debt, are less effective in fostering the economic recovery in presence of credit and labor constraints. Coordination of fiscal and financial policies could help to tackle the complexity of the implications of compound risk, creating the conditions for functioning credit markets, and preserving sovereign debt sustainability.
Insights to build back better
Introducing compound risk considerations in fiscal and financial risk management can help governments and financial authorities build resilience to compounding shocks that could be more likely in the near future. Nevertheless, the assessment of compound risks requires an adaptation of the analytical tools that support policy making. Accounting for adaptive expectations and finance-economy interactions (e.g., bank lending conditions) that affect economic and financial agents’ response (e.g., investment, consumption) in times of crises could improve our understanding of how and why individual and compounding shock impacts might amplify. Such a new generation of macroeconomic models can thus support investors and policy makers in the assessment of risk and in the design of better-informed risk financing strategies. This, in turn, would enable the role of public and private finance in building resilience to compounding climate, pandemic, and other risks, for the benefit of the environment, the economy, and society.

Sub-Saharan Africa’s debt problem: Mapping the pandemic’s effect and the way forward

Sub-Saharan Africa’s debt problem: Mapping the pandemic’s effect and the way forward | Speevr

Background
The COVID-19 pandemic has, thus far, spared Africa from the high number of cases and deaths seen in other regions in the world (Figure 1). As of April 2021, sub-Saharan Africa accounted for just 3 percent of the world’s cases and 4 percent of its deaths. Some experts attribute the relatively low case counts in sub-Saharan Africa to the region’s extremely young population or, importantly, the swift and preemptive lockdowns that many countries implemented in March 2020. While these lockdowns have likely saved lives, they have also left significant scars on the fiscal position of sub-Saharan Africa and the market conditions it faces. Dwindling revenues following the fall in global trade met a wave of unemployment among a population that lacks widespread access to safety nets and health infrastructure.
Figure 1. Population, COVID cases, and COVID deaths, sub-Saharan Africa vs. world

Source: Our World in Data, 2021. Data taken on September 1, 2021.
In response, African governments have, by and large, borrowed to finance stimulus packages to support at-risk groups, struggling businesses, creative education solutions, and health-related infrastructure. International and regional financial institutions, such as the World Bank, International Monetary Fund (IMF), African Development Bank (AfDB), and European Union (EU) countries (both bilaterally and multilaterally) have responded through debt relief measures and restructurings. The fiscal and monetary responses of sub-Saharan Africa and various financial institutions will have important consequences for indebtedness, debt servicing capacity, and debt sustainability more broadly.

Debt was an increasing problem across all income groups of African countries prior to COVID-19, and the pandemic has only exacerbated the problem. In fact, African countries had been borrowing heavily in the global financial markets in recent years—a trend that has created both new opportunities and new challenges. Rising debt levels have corresponded with rising debt service cost, but countries have not necessarily improved their ability to finance such obligations. Indeed, failure to meet debt service obligations will have devastating impacts, including downgrading of credit ratings (and, hence, future higher costs), heightened pressure on foreign exchange reserves and domestic currency depreciation, and the real possibility of being rationed out of the market—and negative reputational consequences.
This paper utilizes new data to study the impact of the COVID-19 pandemic on debt sustainability and vulnerability in sub-Saharan Africa and sheds light on the channels through which these impacts have taken place. We find that debt levels have risen substantially in sub-Saharan Africa since the onset of the COVID-19 pandemic. We utilize IMF projections as a comparison to analyze the impacts on the pandemic on debt levels and how they covary with key determinants of growth and fiscal space.

Related Content

In particular, sub-Saharan Africa experienced a 4.5 percent increase in “pandemic debt”—the debt taken on above and beyond projections due to the COVID-19 crisis. HIPC countries in particular saw large increases in pandemic debt, with levels 8.5 percent higher than projected. Non-HIPC countries took on mostly planned debt and borrowed from both private and official (that is, bilateral or multilateral) credit markets alike. HIPC countries, on the other hand, were largely shut out of private credit markets and instead relied on official credit to fund increases in (largely unplanned) debt. We also find that the domestic bond market played a more important role in private borrowing than it has in recent years and that eurobond issuance was relatively scarce. Countries that rely on metal exports issued less pandemic debt than did those that rely on oil, thanks to the strong growth and relative stability of metal prices during the pandemic.
Despite taking on substantial pandemic debt, HIPC countries experienced less extreme drops in GDP compared to their non-HIPC counterparts, underscoring the need for HIPC countries to accelerate financial sector development and enhance public-sector financial management, including mitigating financial leakages, curbing illicit follows, and galvanizing domestic resource mobilization. Looking forward, this paper argues that both sub-Saharan Africa’s recovery and debt sustainability depend on two factors: the success of the African Continental Free Trade Agreement (AfCFTA) and obtaining the participation of private partners in debt restructuring. Economic recovery, in this regard, will affect the millions of informal workers that have lost their jobs at the hands of the pandemic as well as revenue levels that coincide to some degree with the workers’ eventual participation in the formal economy.
Key findings

Debt levels in 2020 were 4.5 percent higher in sub-Saharan Africa than projections. The increase was particularly acute in HIPC countries, whose debt had mirrored non-HIPC countries the decade prior.
Non-HIPC countries and especially upper-middle-income countries retained access to credit markets and used a mixture of private and official creditors to finance increases in debt (which were largely in line with projections).
HIPC countries were largely shut out of private debt markets and instead relied on unplanned borrowing from official creditors.
Domestic bond markets played a relatively more important role in private borrowing. Eurobond issuance dropped sharply.
Some resource-rich countries saw sharp increases in bond yields despite having comparatively low yields pre-pandemic.
Metal prices showed more stability and higher growth than oil prices during the pandemic. Consequently, top metal exporters took on less debt than top oil-exporting countries.
Many sectors, especially manufacturing, witnessed “formalization” of employment during the pandemic.

Policy recommendations

Obtain full participation of all creditors, including private ones, in debt restructuring
Accelerate financial sector development
Enhance public financial management and internal resource mobilization
Mitigate financial leakages and illicit flows
Harness and accelerate opportunities afforded by AfCFTA
Design incentive-compatible and state-contingent contracts
Revisit existing institutional mechanisms for debt resolution

This paper is organized as follows. Section 2 begins by taking brief stock of the region’s debt landscape prior to the advent of COVID-19, before illustrating how the debt burden has changed during the pandemic. It also reviews key reasons why indebtedness has risen, including stimulus packages, current account deficits, and borrowing costs. Section 3 examines key economic channels along which the pandemic shock unfolded. Section 4 considers the magnitude of revenue loss and the vulnerability of the informal workers during the pandemic. Section 5 discusses attempts to rectify the unexpected, unsustainable increases in debt (or “pandemic debt”) and explores important considerations of which effective policies must take account. Section 6 recommends a number of policies and the way forward.
Download the full report

Sub-Saharan Africa’s debt problem: Mapping the pandemic’s effect and the way forward

Sub-Saharan Africa’s debt problem: Mapping the pandemic’s effect and the way forward | Speevr

Background
The COVID-19 pandemic has, thus far, spared Africa from the high number of cases and deaths seen in other regions in the world (Figure 1). As of April 2021, sub-Saharan Africa accounted for just 3 percent of the world’s cases and 4 percent of its deaths. Some experts attribute the relatively low case counts in sub-Saharan Africa to the region’s extremely young population or, importantly, the swift and preemptive lockdowns that many countries implemented in March 2020. While these lockdowns have likely saved lives, they have also left significant scars on the fiscal position of sub-Saharan Africa and the market conditions it faces. Dwindling revenues following the fall in global trade met a wave of unemployment among a population that lacks widespread access to safety nets and health infrastructure.
Figure 1. Population, COVID cases, and COVID deaths, sub-Saharan Africa vs. world

Source: Our World in Data, 2021. Data taken on September 1, 2021.
In response, African governments have, by and large, borrowed to finance stimulus packages to support at-risk groups, struggling businesses, creative education solutions, and health-related infrastructure. International and regional financial institutions, such as the World Bank, International Monetary Fund (IMF), African Development Bank (AfDB), and European Union (EU) countries (both bilaterally and multilaterally) have responded through debt relief measures and restructurings. The fiscal and monetary responses of sub-Saharan Africa and various financial institutions will have important consequences for indebtedness, debt servicing capacity, and debt sustainability more broadly.

Chris Heitzig

Research Analyst – Africa Growth Initiative

Twitter
ChrisHeitzig

Aloysius Uche Ordu

Director – Africa Growth Initiative

Senior Fellow – Global Economy and Development

Twitter
AloysiusOrdu

Lemma Senbet

William E. Mayer Chair Professor of Finance – University of Maryland

Member, Distinguished Advisory Group – Africa Growth Initiative

Twitter
lsenbet

Debt was an increasing problem across all income groups of African countries prior to COVID-19, and the pandemic has only exacerbated the problem. In fact, African countries had been borrowing heavily in the global financial markets in recent years—a trend that has created both new opportunities and new challenges. Rising debt levels have corresponded with rising debt service cost, but countries have not necessarily improved their ability to finance such obligations. Indeed, failure to meet debt service obligations will have devastating impacts, including downgrading of credit ratings (and, hence, future higher costs), heightened pressure on foreign exchange reserves and domestic currency depreciation, and the real possibility of being rationed out of the market—and negative reputational consequences.
This paper utilizes new data to study the impact of the COVID-19 pandemic on debt sustainability and vulnerability in sub-Saharan Africa and sheds light on the channels through which these impacts have taken place. We find that debt levels have risen substantially in sub-Saharan Africa since the onset of the COVID-19 pandemic. We utilize IMF projections as a comparison to analyze the impacts on the pandemic on debt levels and how they covary with key determinants of growth and fiscal space.

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In particular, sub-Saharan Africa experienced a 4.5 percent increase in “pandemic debt”—the debt taken on above and beyond projections due to the COVID-19 crisis. HIPC countries in particular saw large increases in pandemic debt, with levels 8.5 percent higher than projected. Non-HIPC countries took on mostly planned debt and borrowed from both private and official (that is, bilateral or multilateral) credit markets alike. HIPC countries, on the other hand, were largely shut out of private credit markets and instead relied on official credit to fund increases in (largely unplanned) debt. We also find that the domestic bond market played a more important role in private borrowing than it has in recent years and that eurobond issuance was relatively scarce. Countries that rely on metal exports issued less pandemic debt than did those that rely on oil, thanks to the strong growth and relative stability of metal prices during the pandemic.
Despite taking on substantial pandemic debt, HIPC countries experienced less extreme drops in GDP compared to their non-HIPC counterparts, underscoring the need for HIPC countries to accelerate financial sector development and enhance public-sector financial management, including mitigating financial leakages, curbing illicit follows, and galvanizing domestic resource mobilization. Looking forward, this paper argues that both sub-Saharan Africa’s recovery and debt sustainability depend on two factors: the success of the African Continental Free Trade Agreement (AfCFTA) and obtaining the participation of private partners in debt restructuring. Economic recovery, in this regard, will affect the millions of informal workers that have lost their jobs at the hands of the pandemic as well as revenue levels that coincide to some degree with the workers’ eventual participation in the formal economy.
Key findings

Debt levels in 2020 were 4.5 percent higher in sub-Saharan Africa than projections. The increase was particularly acute in HIPC countries, whose debt had mirrored non-HIPC countries the decade prior.
Non-HIPC countries and especially upper-middle-income countries retained access to credit markets and used a mixture of private and official creditors to finance increases in debt (which were largely in line with projections).
HIPC countries were largely shut out of private debt markets and instead relied on unplanned borrowing from official creditors.
Domestic bond markets played a relatively more important role in private borrowing. Eurobond issuance dropped sharply.
Some resource-rich countries saw sharp increases in bond yields despite having comparatively low yields pre-pandemic.
Metal prices showed more stability and higher growth than oil prices during the pandemic. Consequently, top metal exporters took on less debt than top oil-exporting countries.
Many sectors, especially manufacturing, witnessed “formalization” of employment during the pandemic.

Policy recommendations

Obtain full participation of all creditors, including private ones, in debt restructuring
Accelerate financial sector development
Enhance public financial management and internal resource mobilization
Mitigate financial leakages and illicit flows
Harness and accelerate opportunities afforded by AfCFTA
Design incentive-compatible and state-contingent contracts
Revisit existing institutional mechanisms for debt resolution

This paper is organized as follows. Section 2 begins by taking brief stock of the region’s debt landscape prior to the advent of COVID-19, before illustrating how the debt burden has changed during the pandemic. It also reviews key reasons why indebtedness has risen, including stimulus packages, current account deficits, and borrowing costs. Section 3 examines key economic channels along which the pandemic shock unfolded. Section 4 considers the magnitude of revenue loss and the vulnerability of the informal workers during the pandemic. Section 5 discusses attempts to rectify the unexpected, unsustainable increases in debt (or “pandemic debt”) and explores important considerations of which effective policies must take account. Section 6 recommends a number of policies and the way forward.
Download the full report

SDRs for COVID-19 relief: The good, the challenging, and the uncertain

SDRs for COVID-19 relief: The good, the challenging, and the uncertain | Speevr

In August 2020, as a response to the pernicious impact of the COVID-19 pandemic on the global economy and on the finances of member states, the International Monetary Fund (IMF) decided to issue $650 billion of special drawing rights (SDRs). Conceptually, SDRs are a form of unconditional financing for addressing urgent liquidity challenges.

SDRs were created in the late 1960s as a precautionary mechanism to address potential sovereign liquidity shortfalls in the context of the rigid monetary order of fixed exchange rates of the Bretton Woods system. SDRs were designed to serve as a low-cost reserve asset that could be sold by a government via the IMF acting as intermediary to another government and thereby converted into currency using an exchange rate pegged to a basket representing five of the world’s leading currencies. Currently, these five currencies are the U.S. dollar, the Chinese renminbi, the euro, the Japanese yen, and the British pound sterling. SDRs are not technically the IMF’s currency but a claim on reserves. To that effect, SDRs are not money per se but rather a means to establish a line of credit with a sovereign lender (government) acting as buyer of SDRs. Besides paying a low rate of interest on SDR use, countries benefit from the absence of refinancing risks imposed by conventional maturities. For foreign currency-strapped economies, many emerging markets, and lower-income economies in Africa, SDRs can, therefore, provide the immediate means to pay for vaccines and/or other health care investments.
The Good
As the pandemic has wreaked havoc on both developed and developing country finances, the IMF moved to address the liquidity shortfalls in the global economic system and help provide financing for many countries. Given the pronounced contraction in output and employment, this injection of liquidity represents a lifeline to countries with scarce reserves. SDRs buy time as they can be used to finance critical expenditure, build reserves, and service debts, although they do not provide a long-term remedy for underlying problems. In operational terms, the IMF SDR department facilitates the exchange of existing SDRs between countries and reduces any transaction costs.
The Challenging
The formula for SDR allocation is based on a country’s quota within the IMF, which reflects its relative position in the world economy (Table 1). The problem with the SDR allocation is that richer countries receive more than poorer countries. In fact, barely 3 percent of the $650 billion total in pandemic response went to low-income countries, and only 30 percent went to middle-income emerging markets. In other words, the countries that are most in need of financial relief and support are not the top beneficiaries of the SDRs. Instead, countries like the U.S., which can print its money, and China, which has several trillions in reserves, benefit the most.

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This disconnect occurs because SDRs were created to address potential liquidity shortfalls in an entirely different monetary system rather than in the present context. As a result, experts are proposing reforms to this system. In October 2021, the IMF began building support among members for a proposed “Resilience and Sustainability Trust”—a funding mechanism that would allow richer countries to channel their IMF reserves to poorer countries in need. By lending at cheaper rates and with longer maturities than the IMF’s traditional lending terms, and with funding targeted toward areas such as climate and pandemic preparedness, the trust could help channel funds toward development projects. Another potentially good option is for the IMF to work closely with the regional development banks, such as the African Development Bank, to channel some of the SDR financing through the regional bank’s lending program. Given the regional banks’ proximity to the client, this approach could help to ensure greater links to the development strategies and programs of member states.
Table 1. Select country SDR quotas and SDR allocations

Country
Quota (%)
Allocation (USD billions)

USA
17.43
79.5

China
6.4
29.2

France
4.23
19.3

United Kingdom
4.23
19.3

Nigeria
0.52
2.4

South Africa
0.64
2.9

Cote d’Ivoire
0.14
0.62

Kenya
0.11
0.52

Mali
0.04
0.18

Source: IMF.
The Uncertain
SDRs were not originally designed as open-ended cash transfers. For one, SDRs are not included in the assessment of debt sustainability. While the SDRs can provide liquidity, there is no mechanism for ensuring that money is used productively and reaches those in need. Conversion of SDRs into foreign currency happens on a sovereign level with few strings attached, meaning multilateral leaders cannot ensure that the SDRs are properly used for COVID-19 relief. There is also no discrimination between progressive or dictatorial countries in terms of SDR allocation. Some of the SDRs can end up being used by developing-country governments to pay debt service to public and private creditors in the absence of debt restructuring. For instance, SDRs can be used to boost reserves in Nigeria and South Africa, to pay back debt in the case of Argentina or, in the case of the CFA franc zone, especially in countries like Equatorial Guinea and Republic of Congo, to postpone necessary governance and exchange rate reforms. In this context, it would be good to have oversight by international experts to ensure SDRs are used for developmental impact. However, even assuming effective governance frameworks, for low-income African countries, the flows of SDRs may be too low to have a strong impact anyway.
Conclusion
Unless we believe limited liquidity shortfalls of a more-or-less temporary nature are the only consequence of current macroeconomic and public health stresses, policymakers should not just fall back on SDRs to avoid the more complex questions typically raised in the context of conventional debt or more permanent financial transfers. Beyond a limited (and welcome boost), liquidity SDRs appear to be an imperfect substitute for a financing package able to serve both specific pandemic relief and long-term development objectives. In sum, SDRs represent a second-best solution to a complex problem, with clear advantages and clear shortcomings.

SDRs for COVID-19 relief: The good, the challenging, and the uncertain

SDRs for COVID-19 relief: The good, the challenging, and the uncertain | Speevr

In August 2020, as a response to the pernicious impact of the COVID-19 pandemic on the global economy and on the finances of member states, the International Monetary Fund (IMF) decided to issue $650 billion of special drawing rights (SDRs). Conceptually, SDRs are a form of unconditional financing for addressing urgent liquidity challenges.

Ali Zafar

Author – The CFA Franc Zone: Economic Development and the Post-COVID Recovery

Macroeconomist

Twitter
zafarglobal

Jan Muench

Banker

Aloysius Uche Ordu

Director – Africa Growth Initiative

Senior Fellow – Global Economy and Development

Twitter
AloysiusOrdu

SDRs were created in the late 1960s as a precautionary mechanism to address potential sovereign liquidity shortfalls in the context of the rigid monetary order of fixed exchange rates of the Bretton Woods system. SDRs were designed to serve as a low-cost reserve asset that could be sold by a government via the IMF acting as intermediary to another government and thereby converted into currency using an exchange rate pegged to a basket representing five of the world’s leading currencies. Currently, these five currencies are the U.S. dollar, the Chinese renminbi, the euro, the Japanese yen, and the British pound sterling. SDRs are not technically the IMF’s currency but a claim on reserves. To that effect, SDRs are not money per se but rather a means to establish a line of credit with a sovereign lender (government) acting as buyer of SDRs. Besides paying a low rate of interest on SDR use, countries benefit from the absence of refinancing risks imposed by conventional maturities. For foreign currency-strapped economies, many emerging markets, and lower-income economies in Africa, SDRs can, therefore, provide the immediate means to pay for vaccines and/or other health care investments.
The Good
As the pandemic has wreaked havoc on both developed and developing country finances, the IMF moved to address the liquidity shortfalls in the global economic system and help provide financing for many countries. Given the pronounced contraction in output and employment, this injection of liquidity represents a lifeline to countries with scarce reserves. SDRs buy time as they can be used to finance critical expenditure, build reserves, and service debts, although they do not provide a long-term remedy for underlying problems. In operational terms, the IMF SDR department facilitates the exchange of existing SDRs between countries and reduces any transaction costs.
The Challenging
The formula for SDR allocation is based on a country’s quota within the IMF, which reflects its relative position in the world economy (Table 1). The problem with the SDR allocation is that richer countries receive more than poorer countries. In fact, barely 3 percent of the $650 billion total in pandemic response went to low-income countries, and only 30 percent went to middle-income emerging markets. In other words, the countries that are most in need of financial relief and support are not the top beneficiaries of the SDRs. Instead, countries like the U.S., which can print its money, and China, which has several trillions in reserves, benefit the most.

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Friday, October 8, 2021

Africa in Focus
How special drawing rights could help Africa recover from COVID-19

Ahunna Eziakonwa
Wednesday, March 24, 2021

This disconnect occurs because SDRs were created to address potential liquidity shortfalls in an entirely different monetary system rather than in the present context. As a result, experts are proposing reforms to this system. In October 2021, the IMF began building support among members for a proposed “Resilience and Sustainability Trust”—a funding mechanism that would allow richer countries to channel their IMF reserves to poorer countries in need. By lending at cheaper rates and with longer maturities than the IMF’s traditional lending terms, and with funding targeted toward areas such as climate and pandemic preparedness, the trust could help channel funds toward development projects. Another potentially good option is for the IMF to work closely with the regional development banks, such as the African Development Bank, to channel some of the SDR financing through the regional bank’s lending program. Given the regional banks’ proximity to the client, this approach could help to ensure greater links to the development strategies and programs of member states.
Table 1. Select country SDR quotas and SDR allocations

Country
Quota (%)
Allocation (USD billions)

USA
17.43
79.5

China
6.4
29.2

France
4.23
19.3

United Kingdom
4.23
19.3

Nigeria
0.52
2.4

South Africa
0.64
2.9

Cote d’Ivoire
0.14
0.62

Kenya
0.11
0.52

Mali
0.04
0.18

Source: IMF.
The Uncertain
SDRs were not originally designed as open-ended cash transfers. For one, SDRs are not included in the assessment of debt sustainability. While the SDRs can provide liquidity, there is no mechanism for ensuring that money is used productively and reaches those in need. Conversion of SDRs into foreign currency happens on a sovereign level with few strings attached, meaning multilateral leaders cannot ensure that the SDRs are properly used for COVID-19 relief. There is also no discrimination between progressive or dictatorial countries in terms of SDR allocation. Some of the SDRs can end up being used by developing-country governments to pay debt service to public and private creditors in the absence of debt restructuring. For instance, SDRs can be used to boost reserves in Nigeria and South Africa, to pay back debt in the case of Argentina or, in the case of the CFA franc zone, especially in countries like Equatorial Guinea and Republic of Congo, to postpone necessary governance and exchange rate reforms. In this context, it would be good to have oversight by international experts to ensure SDRs are used for developmental impact. However, even assuming effective governance frameworks, for low-income African countries, the flows of SDRs may be too low to have a strong impact anyway.
Conclusion
Unless we believe limited liquidity shortfalls of a more-or-less temporary nature are the only consequence of current macroeconomic and public health stresses, policymakers should not just fall back on SDRs to avoid the more complex questions typically raised in the context of conventional debt or more permanent financial transfers. Beyond a limited (and welcome boost), liquidity SDRs appear to be an imperfect substitute for a financing package able to serve both specific pandemic relief and long-term development objectives. In sum, SDRs represent a second-best solution to a complex problem, with clear advantages and clear shortcomings.

Navigating the debt legacy of the pandemic

Navigating the debt legacy of the pandemic | Speevr

COVID-19 has left a legacy of record-high debt and shifted the trade-offs between benefits and costs of accumulating government debt. How do these trade-offs manifest themselves? And how does the current debt boom compare with previous episodes? We argue that the debt legacy of the pandemic is exceptional by historical standards in a way that warrants prompt policy action.
 The pandemic’s debt legacy
 The recent fiscal deterioration in advanced economies and emerging market and developing economies (EMDEs) stands apart over the past half-century. Output collapses and government spending to keep economies afloat triggered a massive increase in global debt levels. In 2020, global government debt increased by 13 percentage points of GDP to a new record of 97 percent of GDP. In advanced economies, it was up by 16 percentage points to 120 percent of GDP and, in EMDEs, by 9 percentage points to 63 percent of GDP.

Even before the pandemic, the global economy experienced an unprecedented wave of debt accumulation that started in 2010—the largest, fastest, and most broad-based of four global debt waves since 1970. In EMDEs, the accompanying widening of fiscal deficits and the speed at which both government and private debt rose far exceeded changes in previous waves of debt.
This rapid increase in debt is a major cause for concern because of the risks associated with high debt. Previous waves of debt ended in widespread financial crises, such as the Latin American debt crises in the 1980s and the East Asian financial crisis in the late 1990s.
Trade-offs of debt accumulation
The pandemic has vividly illustrated the benefits of accumulating debt in the role of large fiscal support programs during the 2020 global recession. They were a critical policy response to avoid worse economic outcomes. They supported household incomes, kept businesses afloat, and helped stabilize financial markets.

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However, as the initial recovery from the pandemic gives way to a new normal, the balance of benefits and costs of debt accumulation is increasingly tilting toward costs. The costs of debt include interest payments, the possibility of debt distress, constraints that debt may impose on policy space and effectiveness, and the possible crowding out of private sector investment (Figure 1).

As the global economy strengthens, financial conditions are likely to tighten, whether because central banks begin to normalize monetary policy or because investors expect higher inflation. In EMDEs, this may be accompanied by depreciations that put pressure on debt sustainability in those countries with a large share of foreign currency-denominated debt. Even where foreign currency-denominated debt is limited, rising borrowing cost may erode debt sustainability, especially if growth fails to rebound strongly. Record-high EMDE debt makes countries vulnerable to financial market stress. Meanwhile, a recovery in domestic demand and closing output gaps may make additional fiscal stimulus unhelpful.
Ongoing debt booms
And many EMDEs are now particularly vulnerable to financial stress. More than two-thirds of EMDEs are currently experiencing debt booms. Their median government debt boom currently underway is similar in magnitude to, but has already lasted three years longer than, the median past debt boom (Figure 2). Current booms have been accompanied by a considerably larger fiscal deterioration than past booms (Figure 3). And booms currently underway have also been associated with slower output, investment, and consumption growth than in previous episodes.

Historically, about half of such booms in EMDEs were associated with financial crises either during the boom itself or in the two years after the end of the boom. Government debt booms associated with financial crises featured significantly weaker macroeconomic outcomes than booms without crises.
Low-income countries (LICs) are particularly at risk of debt distress, both because of high debt levels and because of a fragile composition of debt. In LICs, government debt rose by 7 percentage points, to 66 percent of GDP, in 2020. The composition of LIC debt has become increasingly non-concessional over the past decade as they have accessed capital markets and borrowed from non-Paris Club creditors. Since the end of April 2021, about one-half of LICs have been classified as being at high risk of debt distress or already in debt distress.
What to do?
National policymakers, as well as the global community, need to act urgently to address debt-related risks. Unfortunately, there is no easy policy fix that EMDE policymakers can implement to overcome these risks. For these economies, containing the potential risks associated with accumulating debt may mean resorting to alternatives for borrowing, including better spending and revenue policies, in an improved institutional environment. Spending can be shifted toward areas that lay the foundation for future growth, including education and health spending as well as climate-smart investment to strengthen economic resilience. Government revenue bases can be broadened by removing special exemptions and strengthening tax administrations. Business climates and institutions can be strengthened to support vibrant private sector growth that can yield productivity gains and expand the revenue base.
The global community can play a significant role in supporting a return to fiscal sustainability in EMDEs. In the near term, this includes supporting the vaccine rollout in these economies, where it has lagged and has weighed on the recovery. In the medium term, this includes fostering an open and rules-based trade and investment climate that has been a critical growth engine for many economies in the past. For some EMDEs, and LICs in particular, additional support may be needed to return debt to manageable levels, including debt relief.

Navigating the debt legacy of the pandemic

Navigating the debt legacy of the pandemic | Speevr

COVID-19 has left a legacy of record-high debt and shifted the trade-offs between benefits and costs of accumulating government debt. How do these trade-offs manifest themselves? And how does the current debt boom compare with previous episodes? We argue that the debt legacy of the pandemic is exceptional by historical standards in a way that warrants prompt policy action.
 The pandemic’s debt legacy
 The recent fiscal deterioration in advanced economies and emerging market and developing economies (EMDEs) stands apart over the past half-century. Output collapses and government spending to keep economies afloat triggered a massive increase in global debt levels. In 2020, global government debt increased by 13 percentage points of GDP to a new record of 97 percent of GDP. In advanced economies, it was up by 16 percentage points to 120 percent of GDP and, in EMDEs, by 9 percentage points to 63 percent of GDP.

M. Ayhan Kose

Nonresident Senior Fellow – Global Economy and Development

Franziska Ohnsorge

Manager, Prospects Group – World Bank

Naotaka Sugawara

Senior Economist, Prospects Group – World Bank

Even before the pandemic, the global economy experienced an unprecedented wave of debt accumulation that started in 2010—the largest, fastest, and most broad-based of four global debt waves since 1970. In EMDEs, the accompanying widening of fiscal deficits and the speed at which both government and private debt rose far exceeded changes in previous waves of debt.
This rapid increase in debt is a major cause for concern because of the risks associated with high debt. Previous waves of debt ended in widespread financial crises, such as the Latin American debt crises in the 1980s and the East Asian financial crisis in the late 1990s.
Trade-offs of debt accumulation
The pandemic has vividly illustrated the benefits of accumulating debt in the role of large fiscal support programs during the 2020 global recession. They were a critical policy response to avoid worse economic outcomes. They supported household incomes, kept businesses afloat, and helped stabilize financial markets.

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Report
Debt service risks, Special Drawing Rights allocations, and development prospects

Homi Kharas and Meagan Dooley
Tuesday, September 7, 2021

Report
Debt distress and development distress: Twin crises of 2021

Homi Kharas and Meagan Dooley
Wednesday, March 17, 2021

Africa in Focus
Addressing the perception premium for sustainable development in Africa

Hippolyte Fofack
Friday, October 8, 2021

However, as the initial recovery from the pandemic gives way to a new normal, the balance of benefits and costs of debt accumulation is increasingly tilting toward costs. The costs of debt include interest payments, the possibility of debt distress, constraints that debt may impose on policy space and effectiveness, and the possible crowding out of private sector investment (Figure 1).

As the global economy strengthens, financial conditions are likely to tighten, whether because central banks begin to normalize monetary policy or because investors expect higher inflation. In EMDEs, this may be accompanied by depreciations that put pressure on debt sustainability in those countries with a large share of foreign currency-denominated debt. Even where foreign currency-denominated debt is limited, rising borrowing cost may erode debt sustainability, especially if growth fails to rebound strongly. Record-high EMDE debt makes countries vulnerable to financial market stress. Meanwhile, a recovery in domestic demand and closing output gaps may make additional fiscal stimulus unhelpful.
Ongoing debt booms
And many EMDEs are now particularly vulnerable to financial stress. More than two-thirds of EMDEs are currently experiencing debt booms. Their median government debt boom currently underway is similar in magnitude to, but has already lasted three years longer than, the median past debt boom (Figure 2). Current booms have been accompanied by a considerably larger fiscal deterioration than past booms (Figure 3). And booms currently underway have also been associated with slower output, investment, and consumption growth than in previous episodes.

Historically, about half of such booms in EMDEs were associated with financial crises either during the boom itself or in the two years after the end of the boom. Government debt booms associated with financial crises featured significantly weaker macroeconomic outcomes than booms without crises.
Low-income countries (LICs) are particularly at risk of debt distress, both because of high debt levels and because of a fragile composition of debt. In LICs, government debt rose by 7 percentage points, to 66 percent of GDP, in 2020. The composition of LIC debt has become increasingly non-concessional over the past decade as they have accessed capital markets and borrowed from non-Paris Club creditors. Since the end of April 2021, about one-half of LICs have been classified as being at high risk of debt distress or already in debt distress.
What to do?
National policymakers, as well as the global community, need to act urgently to address debt-related risks. Unfortunately, there is no easy policy fix that EMDE policymakers can implement to overcome these risks. For these economies, containing the potential risks associated with accumulating debt may mean resorting to alternatives for borrowing, including better spending and revenue policies, in an improved institutional environment. Spending can be shifted toward areas that lay the foundation for future growth, including education and health spending as well as climate-smart investment to strengthen economic resilience. Government revenue bases can be broadened by removing special exemptions and strengthening tax administrations. Business climates and institutions can be strengthened to support vibrant private sector growth that can yield productivity gains and expand the revenue base.
The global community can play a significant role in supporting a return to fiscal sustainability in EMDEs. In the near term, this includes supporting the vaccine rollout in these economies, where it has lagged and has weighed on the recovery. In the medium term, this includes fostering an open and rules-based trade and investment climate that has been a critical growth engine for many economies in the past. For some EMDEs, and LICs in particular, additional support may be needed to return debt to manageable levels, including debt relief.

Renforcer les capacités en lecture et calcul des enfants en Côte d’Ivoire

Renforcer les capacités en lecture et calcul des enfants en Côte d’Ivoire | Speevr

Avant même que la COVID-19 ait laissé 1,6 milliard d’élèves non scolarisés au début de 2020, des millions d’enfants et de jeunes dans le monde n’avaient pas accès à l’éducation de qualité dont ils avaient besoin pour mener une vie saine, sure et productive. Pire encore, les enfants les plus pauvres et les plus marginalisés continuent d’être les plus touchés par cette crise de l’apprentissage, perdant ainsi leur droit à l’éducation. Cette situation est lourde de conséquences pour les générations à venir, notamment en termes de pauvreté, d’inégalités, de changement climatique et de santé publique.

Il est urgent d’agir pour élargir rapidement et durablement l’accès à des possibilités d’apprentissage de qualité pour tous les enfants. Bien entendu, la question est de savoir “comment?” S’il existe de nombreuses innovations qui améliorent l’apprentissage des enfants, la grande majorité ne touche qu’une petite fraction des enfants qui en ont besoin. Par conséquent, il existe une demande croissante pour plus de probations et de conseils sur la manière d’identifier, d’adapter et d’étendre des politiques et des pratiques rentables qui aboutiraient à l’apprentissage de millions d’enfants supplémentaires.
Laboratoire de Mise à l’Echelle en Temps Réel de la Côte d’Ivoire : Accompagner les efforts pour générer des changements durables et significatifs dans l’apprentissage fondamental des enfants
En réponse, le Centre pour l’Education Universelle (CEU) de Brookings a étudié les efforts visant à mettre à l’échelle et à soutenir les initiatives fondées sur des preuves et conduisant à des améliorations à grande échelle dans l’apprentissage des enfants. Le CEU a mis en oeuvre une série de Laboratoires de Mise à l’Echelle en Temps Réel (RTSL), en partenariat avec des institutions locales dans plusieurs pays, afin de produire des preuves et de fournir des recommandations pratiques autour du processus de mise à l’échelle dans l’éducation mondiale – encourageant un lien plus fort entre la recherche et la pratique. Ce rapport porte sur l’un des laboratoires de mise à l’échelle en Côte d’Ivoire – lancé en 2019 en collaboration avec le programme Transformer l’Education dans les Communautés du Cacao (TRECC) et le Ministère de l’Education Nationale et de l’Alphabétisation (MENA).
Il est articulé autour du processus de mise en oeuvre, d’adaptation et de mise à l’échelle du Programme d’Enseignement Ciblé (PEC), dirigé par le gouvernement, à travers une approche de rattrapage scolaire visant à améliorer la lecture et le calcul en début de scolarité et adapté de l’approche Teaching at the Right Level (TaRL). Bien que le laboratoire se soit concentré sur l’expérience du PEC à ce jour, ce programme sert d’étude de cas pour des questions plus larges sur la manière dont une initiative basée sur des preuves peut progresser vers une échelle nationale durable, avec des leçons qui sont transférables au-delà du PEC et de la Côte d’Ivoire.
La première section du rapport fournit un bref historique du cas, y compris une vue d’ensemble du Laboratoire de Mise à l’Echelle en Temps Réel et de l’écosystème de l’éducation en Côte d’Ivoire, ainsi qu’une brève description des principaux acteurs et initiatives engagés dans le PEC. La deuxième section détaille le parcours de la mise en oeuvre, de l’adaptation et de l’expansion du PEC en Côte d’Ivoire à ce jour, en explorant les facteurs critiques, les opportunités et les défis liés à sa conception, sa mise en oeuvre, son financement et son environnement favorable. La troisième section propose des leçons et des recommandations ciblées organisées autour de quatre thèmes clés qui sont apparus comme essentiels pour renforcer l’expansion continue du PEC, ainsi que pour informer les futurs efforts de mise à l’échelle de l’éducation en Côte d’Ivoire et au-delà.
Le parcours de passage à l’échelle du PEC: Une confluence de facteurs avantageux
A bien des égards, le PEC représente le « scénario idéal » pour le passage à l’échelle et la pérennisation d’une initiative au sein d’un système éducatif formel. Le PEC a bénéficié d’une confluence de facteurs en sa faveur – dont certains ont été orchestrés de manière stratégique et systématique, et d’autres ont émergé de manière fortuite. L’approche de TRECC axée sur les problèmes a favorisé le développement de l’adhésion du gouvernement au PEC dès le début et a contribué à sa forte appropriation par le gouvernement. La simplicité de l’approche, le fait qu’elle rejoint les príncipes théoriques que les enseignants apprennent au cours de leur formation initiale, son pilotage par la prestation directe du gouvernement, ses résultats convaincants et sa trajectoire précise pour la mise à l’échelle dans le système éducatif ont également favorisé l’engagement du gouvernement et facilité l’expansion du PEC.

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Les partenariats noués dans le cadre du modèle TRECC ont été d’autres facteurs importants pour susciter le soutien au PEC, notamment la possibilité d’expérimenter différentes solutions potentielles avant d’en retenir une, le rôle d’une tierce partie neutre évaluant les résultats des projets pilotes, le soutien technique d’organisations ayant initialement développé et étudié l’approche TaRL, et l’existence d’un laboratoire de mise à l’échelle réunissant diverses parties prenantes pour la réflexion et l’apprentissage par les pairs. Le PEC a également réussi à obtenir un soutien de haut niveau au sein du MENA, avec des personnes influentes qui le défendent. Ce soutien essentiel a été maintenu malgré les changements politiques et les changements dans l’environnement éducatif plus large, incluant une pandémie mondiale. Enfin, la disponibilité d’un financement pour le PEC au-delà de la phase pilote initiale – y compris un financement pour une adaptation et une expansion supplémentaires et un accès potentiel à un financement quinquennal par la création d’un fonds commun public-privé – a été essentielle pour que le PEC dépasse le stade de projet éphémère et devienne une approche que le gouvernement a l’intention d’étendre au sein du système.
Néanmoins, malgré les nombreux facteurs en sa faveur, l’expansion et le maintien du PEC en Côte d’Ivoire ne sont pas garantis et des défis critiques demeurent, notamment la capacité limitée du gouvernement à incorporer et à pourvoir le modèle dans les systèmes existants avec qualité, la persistance d’une mentalité de projet chez certains acteurs clés impliqués, et une attention insuffisante à l’engagement des parties prenantes de l’éducation au niveau local (y compris les enseignants et les communautés). D’autres contraintes potentielles à l’expansion future et au maintien du PEC incluent des retards dans le lancement du nouveau fonds commun et des difficultés à identifier et à garantir un financement national durable.
Les leçons à tirer pour renforcer l’expansion du PEC et informer les futurs efforts de mise à l’échelle
En accompagnant le parcours de mise à l’échelle de PEC, des leçons ont été tirées du cas centré autour de quatre thèmes clés qui ont été déterminants pour le succès de la mise à l’échelle de PEC à ce jour, et qui continueront à jouer un rôle essentiel dans les efforts futurs. Ces thèmes sont: 1) l’institutionnalisation comme voie vers une mise à l’échelle durable; 2) les partenariats et les champions; 3) les coûts et le financement; et 4) l’adaptation et l’apprentissage continu. Chacun de ces thèmes offre des leçons tirées du cas du PEC et des recommandations ciblées, non seulement pour soutenir les progrès en cours afin d’étendre et d’approfondir l’impact du PEC, mais aussi pour informer les efforts de mise à l’échelle d’autres initiatives d’éducation basées sur des preuves. Un bref aperçu de chacune des leçons est présenté ci-dessous, avec des recommandations ciblées pour les responsables de la mise en oeuvre, les décideurs politiques, les bailleurs de fonds et les chercheurs, lesquelles sont plus amplement détaillées dans le rapport complet.
1. L’institutionnalisation comme voie à la mise à l’échelle dans l’éducation

Assurer sans relâche dès le départ une concentration sur qui va livrer à grande échelle : Le pilotage d’une initiative avec le gouvernement demande plus de temps et de capacités au départ, mais il favorise également l’adhésion, détermine ce qui est faisable et démontre le potentiel de fonctionnement d’une solution dans le système.
Se concentrer sur la scalabilitéa d’une innovation dans le contexte local : S’il est tentant de rechercher des innovations qui bouleversent considérablement les méthodes de travail existantes ou qui testent des technologies de pointe, il est essentiel de se concentrer sur l’aspect pratique de la mise à l’échelle d’une innovation dans un contexte particulier, notamment sur la meilleure façon de l’intégrer durablement et équitablement dans les systèmes existants. Souvent, les innovations ayant le plus grand potentiel d’impact à grande échelle sont celles qui sont les plus faisables à supporter par le système.
Créer des structures de coordination dotées de capacités suffisantes et d’un mandat gouvernemental fort : Le passage à l’échelle par l’institutionnalisation nécessite une structure de coordination dotée d’un mandat de haut niveau pour prendre des décisions, harmoniser les efforts et s’assurer de l’avancement du travail de mise à l’échelle – en particulier lorsque l’institutionnalisation progresse au-delà de la description de poste
d’un individu ou d’un département.
Maintenir un pied sur l’accélérateur, et l’autre sur les freins : Même avec l’adhésion substantielle du gouvernement à la mise à l’échelle, il est important que toutes les parties prenantes comprennent la nécessité d’une approche à plus long terme et progressive de la mise à l’échelle, en mettant l’accent sur les questions de qualité et d’équité, et en équilibrant les compromis inévitables au cours du processus de la mise à l’échelle.

2. Partenariats et collaboration pour la mise à l’échelle dans l’éducation

Catalyser l’action collective, et repérer le point de rendement décroissant: L’engagement du gouvernement dans le processus de mise à l’échelle peut être essentiel pour étendre et soutenir une initiative d’éducation, mais une action collective est néanmoins nécessaire pour apporter des perspectives, des ressources, des expertises et des rôles différents. En même temps, une attention suffisante doit être accordée à la clarification de la motivation et des incitations de chaque partenaire, de la valeur ajoutée, de la vision de la mise à l’échelle et du succès, et de la tolérance au risque.
Soutenir les intermédiaires pour favoriser les partenariats et aligner les intérêts: Les organisations intermédiaires ou tierces – y compris les bailleurs de fonds – peuvent jouer un rôle essentiel de passerelle pour aligner des incitations disparates, développer des approches innovantes pour tirer parti des forces et perspectives uniques de chaque acteur, et rassembler les parties prenantes pour défendre un objectif commun.
Cultiver une ligue de champions de la mise à l’échelle: La création des conditions nécessaires à la diffusion de solutions efficaces requiert des champions de la mise à l’échelle à tous les niveaux au sein et en dehors du gouvernement, des salles de classe et des communautés, ainsi que la création délibérée d’un espace pour travailler ensemble différemment – appelé à perturber les modèles existants de collaboration et de prise de
décision. Le recours à une approche d’apprentissage collaborative, telle que le Laboratoire de Mise à l’Echelle en Temps Réel, est un moyen permettant de “rassembler les éléments du système dans la réunion” et à instaurer une nouvelle façon de travailler.
Soutenir un changement d’état d’esprit et de comportement pour la mise à l’échelle: L’identification et la mise en place d’un cadre de leaders et d’agents du changement pour la mise à l’échelle ne se limite pas à obtenir le soutien des parties prenantes pour la mise à l’échelle d’une initiative particulière: elles requièrent une sensibilisation aux principes clés de la mise à l’échelle, l’encouragement de l’application de ces principes par des actions concrètes et un changement de comportement, ainsi que le renforcement des compétences et des aptitudes nécessaires à la mise à l’échelle de l’impact.

3. Coûts et financement de la mise à l’échelle

Faire la lumière sur le financement public à long terme : Pour beaucoup d’innovateurs et de praticiens, les processus budgétaires et les filières du gouvernement restent opaques, et davantage de clarté est indispensable sur la méthode d’alignement ou d’intégration dans ces processus pour mobiliser des ressources à long terme pour une échelle durable.
Augmenter le soutien pour faire des projections de coûts solides à l’échelle: Il existe un besoin important de renforcer l’expertise et les capacités locales pour collecter, analyser et utiliser les données sur les coûts afin d’informer les projections à l’échelle. Des incitations sont nécessaires pour soutenir la collecte, l’analyse et le partage de ces données, et pour encourager une plus grande transparence et des opportunités d’apprentissage.
Tirer parti du potentiel du financement commun pour franchir la “vallée de la mort”: La collaboration des donateurs et le financement groupé peuvent fournir un financement relais important pour la mise à l’échelle, en aidant les initiatives à effectuer la difficile transition du stade pilote à la mise en oeuvre à grande échelle, mais il faut en apprendre davantage sur les avantages et les défis de ces mécanismes.

4. Adaptation et apprentissage collaboratif dans le processus de mise à l’échelle

Intégrer un processus d’apprentissage continu dans les systèmes gouvernementaux: L’intégration d’une approche d’apprentissage continu, telle que le Laboratoire de Mise à l’Echelle en Temps Réel, dans les systèmes gouvernementaux présente des avantages tangibles pour soutenir la mise en oeuvre, l’adaptation et la mise à l’échelle, avec des circuits de retours d’informations rapides et des possibilités de réflexion et de corrections de trajectoire. Le leadership gouvernemental d’un processus de type laboratoire peut conférer l’autorité nécessaire pour développer, tester et affiner une stratégie de mise à l’échelle avec les décideurs concernés.

Renforcer la capacité d’adaptation pour répondre à des environnements évoluant rapidement: Trop souvent, les adaptations testées dans le cadre du processus de mise à l’échelle ne sont pas systématiquement planifiées ou bien documentées, et l’apprentissage est perdu ; des approches plus systématiques pour planifier et tirer des enseignements des changements anticipés et spontanés sont nécessaires.
Investir du temps et des ressources dans l’apprentissage et l’échange entre pairs: De nombreuses initiatives en cours de mise à l’échelle travaillent de manière isolée et, malgré les différences contextuelles, peuvent bénéficier d’une plus grande collaboration pour partager leurs expériences, réfléchir aux défis et opportunités communs et résoudre les problèmes collectivement. L’apprentissage par les pairs doit aller au-delà d’occasions ponctuelles et doit être soutenu en tant qu’un aspect intrinsèque du travail qui bénéficie de suffisamment de temps, de capacités et de ressources.

Bien qu’elle n’en soit qu’à ses premiers chapitres, l’histoire du PEC est instructive à bien des égards. Plus que tout, le récit du PEC a mis en lumière les efforts inlassables et inspirants de tant de parties prenantes de l’éducation en Côte d’Ivoire qui s’efforcent d’améliorer les résultats de l’apprentissage pour les enfants, en particulier les plus vulnérables.
Et pourtant, le cas du PEC souligne également, que même avec ce scénario de scalabilité et d’opportunité « quasi idéal », l’augmentation de l’impact sur l’éducation reste une entreprise difficile et à long terme qui ne peut être considérée comme acquise. On peut dire que le PEC entre maintenant dans son chapitre le plus difficile, à savoir la phase intermédiaire delicate de la mise à l’échelle, car il dépasse le stade d’un projet pilote à petite échelle pour s’intégrer davantage dans les opérations gouvernementales et atteindre un nombre beaucoup plus important d’enfants.
Cette phase nécessitera une adaptation et une expérimentation continues, la collecte de données et leur utilisation dans des cycles d’apprentissage rapides afin de s’assurer que l’efficacité du PEC est maintenue à mesure qu’il se développe. Indépendamment de ce que l’avenir nous réserve, les efforts du gouvernement ivoirien pour mettre à l’échelle et soutenir le PEC – en partenariat avec divers acteurs – continueront à fournir de riches enseignements sur la mise à l’échelle et le changement systémique pour la Côte d’Ivoire et de nombreux pays dans le monde.
Télécharger le rapport complet ou les conclusions sommaires.
Credit photo: TaRL Africa

Improving children’s reading and math at large scale in Côte d’Ivoire

Improving children’s reading and math at large scale in Côte d’Ivoire | Speevr

Even before COVID-19 left as many as 1.6 billion students out of school in early 2020, millions of children and youth around the world did not have access to the quality education they needed to lead healthy, safe, and productive lives. Even worse, the poorest and most marginalized children continue to be most affected by this learning crisis, losing out on their right to education. This situation has far-reaching consequences for generations to come, including on poverty, inequality, climate change, and public health. Urgent action must be taken to rapidly and sustainably expand access to high-quality learning opportunities for all children. Of course, the question is “how?” While there exist many innovations that improve children’s learning, the vast majority only reach a small fraction of children in need. As a result, there is growing demand for more evidence and guidance on how to identify, adapt, and scale cost-effective policy and practice that lead to millions more children learning.

In response, the Center for Universal Education (CUE) at Brookings has been investigating efforts to scale and sustain evidence-based initiatives leading to large-scale improvements in children’s learning. CUE has been implementing a series of Real-time Scaling Labs (RTSL), in partnership with local institutions in several countries, to generate evidence and provide practical recommendations around the process of scaling in global education—encouraging a stronger link between research and practice.
This report focuses on one of the scaling labs in Côte d’Ivoire—launched in 2019 in collaboration with Transforming Education in Cocoa Communities (TRECC) and the Ministry of National Education and Literacy (MENA). It centers around the government-led process of implementing, adapting, and scaling the Programme d’Enseignement Ciblé (PEC), a remedial education approach to improving early grade reading and math adapted from Teaching at the Right Level (TaRL). While the lab has focused on the experience of PEC to date, it serves as a case study into larger questions of how an evidence-based initiative can achieve progress toward national sustainable scale, with lessons that are transferable beyond PEC and Côte d’Ivoire.
PEC’s scaling journey: A confluence of advantageous factors
In many ways, PEC represents the “ideal scenario” for scaling and sustaining an initiative within a formal education system. PEC benefitted from a confluence of factors in its favor—some of which have been strategically and systematically orchestrated, others which have serendipitously emerged. TRECC’s problem-driven approach supported the development of government buy-in for PEC from the beginning and contributed to strong government ownership. The simplicity of the approach, the fact that it resonates with theoretical principles that teachers learn during initial training, its pilot through direct government delivery, its convincing results, and its clear pathway for scaling in the education system also fostered government engagement and facilitated PEC’s expansion.
The story of PEC has highlighted the tireless and inspiring efforts of so many education stakeholders in Côte d’Ivoire striving to improve learning outcomes for children, especially the most vulnerable.
The partnerships forged in the TRECC model were other important factors in generating support for PEC, including the opportunity to experiment with different potential solutions before settling on one, the role of a neutral third-party assessing pilot results, technical support from organizations that originally developed and studied the TaRL approach, and the existence of a scaling lab bringing together diverse stakeholders for reflection and peer-learning. PEC has also had success in gaining senior-level support within MENA, with key influential individuals championing it. This critical support has been maintained despite political turnover and shifts in the broader education environment, including a global pandemic. Finally, the availability of financing for PEC beyond an initial pilot phase—including funding for additional adaptation and expansion and potential access to five years of financing through the creation of a public-private pooled fund—has been essential for moving PEC beyond a short-lived project to an approach that the government intends to scale within the system.

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Nonetheless, despite the many factors in its favor, scaling and sustaining PEC in Côte d’Ivoire is not guaranteed and critical challenges remain, including limited government capacity to incorporate and deliver the model in existing systems with quality, the persistence of a project mentality among some key actors involved, and insufficient attention to the engagement of education stakeholders at local levels (including teachers and communities). Other potential constraints to future expansion and sustaining of PEC include delays encumbering the launch of the new pooled fund and challenges around identifying and securing sustainable national financing.
Lessons to strengthen PEC’s expansion and inform future scaling efforts
Through accompanying the scaling journey of PEC, lessons emerged from the case centered around four key themes that were consequential to PEC’s scaling success to date, and which will continue to play a critical role in future efforts. These themes are: 1) institutionalization as a pathway to sustainable scale; 2) partnerships and champions; 3) costs and financing; and 4) adaptation and continuous learning. Each of these themes offers lessons from the case of PEC and targeted recommendations not only to support ongoing progress to expand and deepen the impact of PEC but also to inform scaling efforts of other evidence-based education initiatives. Below is a brief overview of each of the lessons with targeted recommendations for implementers, policymakers, funders, and researchers that are further detailed in the full report.
1. Institutionalization as a path to scaling in education

Ensure a relentless focus on who will deliver at large-scale from the start: Piloting an initiative with government takes more time and capacity up front, but also fosters buy-in, determines what is feasible, and demonstrates potential for a solution to work in the system.
Focus on the scalability of an innovation in the local context: While it is tempting to seek innovations that significantly disrupt existing ways of working or test cutting-edge technology, it is critical to focus on the practicality of scaling an innovation in a particular context, including how best to infuse it sustainably and equitably into existing systems. Often, the innovations with the most potential for large-scale impact are those that are most feasible for the system to bear.
Create coordinating structures with sufficient capacity and a strong government mandate: Scaling through institutionalization requires a coordinating structure with a high-level mandate to make decisions, harmonize efforts, and ensure the work of scaling moves forward—particularly once institutionalization progresses beyond any individual’s or department’s job description.
Maintain one foot on the gas, and one foot on the brakes: Even with significant government buy-in for scaling, it is important that all stakeholders understand the need for a longer-term, phased approach to scaling, with a laser focus on quality and equity issues, balancing inevitable trade-offs during the scaling process.

2. Partnerships and collaboration for scaling in education

Catalyze collective action, as well as recognize the point of diminishing returns: Government engagement in the scaling process may be critical for expanding and sustaining an education initiative, but collective action is nonetheless required to bring different perspectives, resources, expertise, and roles. At the same time, sufficient attention must be given to clarify each partner’s motivation and incentives, value addition, vision of scaling and success, and risk tolerance.
Support intermediaries to foster partnerships and align incentives: Intermediary or third-party organizations—including funders—can play a critical bridging role in scaling to align disparate incentives, develop innovative approaches to leverage the unique strengths and perspectives of each actor, and gather stakeholders together behind a shared goal.
Cultivate an alliance of scaling champions: Creating conditions for effective solutions to spread requires scaling champions at all levels within and outside government, classrooms, and communities, and deliberately creating space to work together differently—disrupting existing patterns of collaboration and decisionmaking. Leveraging a collaborative learning approach, such as the RTSL, can help to “bring the system into the room” and build a new way of working.
Support a mindset shift and behavior change for scaling: Identifying and building a cadre of scaling leaders and change agents requires more than getting these stakeholders to support scaling a particular initiative—it requires raising awareness of key scaling principles, encouraging application of these principles through concrete action and behavior change, and strengthening the competencies and skills needed to scale impact.

3. Costs and financing for scale

Shed light on long-term government financing: For many innovators and implementers, government budgetary processes and pipelines remain opaque, and more clarity is needed on how to align with or integrate into these processes to mobilize long-term resources for sustainable scale.
Increase support to make sound cost projections at scale: There is significant need to build local expertise and capacity to collect, analyze, and use cost data to inform scaling projections. Incentives are needed to support its collection, analysis, and sharing, and encourage greater transparency and opportunities for learning.
Leverage the potential of pooled financing to cross the “valley of death:” Donor collaboration and pooled funding can provide important bridge financing for scale, helping initiatives make the challenging transition from pilot to large-scale implementation, but more learning is needed on the benefits and challenges of these mechanisms.

4. Adaptation and collaborative learning in the process of scaling

Integrate a continuous learning process within government systems: There are tangible benefits to infusing a continuous learning approach, such as the RTSL, into government systems to support implementation, adaptation, and scaling, with quick feedback loops and opportunities for reflection and course corrections. Government leadership of a lab-like process can confer the necessary authority to develop, test, and refine a scaling strategy with relevant decisionmakers.
Strengthen adaptive capacity to respond to rapidly changing environments: Too often adaptations being tested in the scaling process are not systematically planned for or well documented, and the learning is lost; more systematic approaches to planning for and learning from anticipated and spontaneous changes are needed.
Invest time and resources in peer learning and exchange: Many initiatives in the process of scaling are working in isolation, and in spite of contextual differences, can benefit from greater collaboration to share experiences, reflect on common challenges and opportunities, and problem-solve collectively. Peer learning must go beyond one-off occasions and should be supported as an intrinsic aspect of the work that receives sufficient time, capacity, and resources.

Though still in its early chapters, PEC’s scaling story is instructive on many levels. More than anything, the story of PEC has highlighted the tireless and inspiring efforts of so many education stakeholders in Côte d’Ivoire striving to improve learning outcomes for children, especially the most vulnerable.
And yet the case of PEC also underscores that even with this almost “best case” scenario of scalability and opportunity, scaling impact in education remains a challenging and long-term endeavor that cannot be taken for granted. PEC is arguably now entering its most challenging chapter—navigating the tenuous middle phase of scaling—as it pushes beyond a small-scale pilot to become further embedded in government operations and reach significantly more children. This phase will require continued adaptation and experimentation, collecting data, and using them in rapid learning cycles to ensure PEC’s efficacy is sustained as it expands. Regardless of what the future holds, the Ivorian government’s efforts to scale and sustain PEC—in partnership with various actors—will continue to provide rich insights into scaling and system-wide change for Côte d’Ivoire and many countries around the world.
Read the full report or the summary findings (forthcoming).
Photo credit: TaRL Africa