Countries should rely on digitalization to speed-up economic recovery: IMF

By Rahul Vaimal, Associate Editor
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As the world struggles with COVID-19 and other restrictions driven by it, digitalization came to the rescue with business, education, entertainment and shopping taking an online shift to navigate the situation.

In a recent blog post, a prominent economist from Kenya and an official from the International Monetary Fund (IMF) stated that governments, the private sector and international organizations should focus on digitalization to accelerate economic recovery and improve the lives of people affected by the pandemic.

The pandemic crisis presents the greatest opportunity to enhance the lives and livelihoods of citizens by relying on digitalization, says Patrick Njoroge, a former IMF official and the current governor of the Central Bank of Kenya and Ceyla Pazarbasioglu, director of the strategy, policy and review department at the IMF.

For the past 18 months, the United Nations Secretary-General’s Task Force on Digital Financing of the Sustainable Development Goals has observed how digitalization can help the world in tackling the urgent development challenges. Mr. Njoroge and Ms. Pazarbasioglu are also a part of this task force.

To boost digitalization across the world, the economists gave three suggestions and the first one is to place people at the center of the global financial system. This means that digital transformation should be based on understanding the needs of the people and working for it.

The second one is to connect citizens to mitigate the digital divide. According to the blog post “over 700 million people lack broadband connectivity, while over a billion lack formal identification.” Countries must work to ensure that citizens get equal access to online services and invest in digital infrastructure and identity as well.

Finally, strengthen the governance of global digital financing platforms. Globally the tech giants are making changes in the delivery of services and the COVID-19 has accelerated this shift but in developing countries, the governance of these platforms is yet to be considered seriously.

“One of the task force’s key initiatives is the dialogue on global digital finance governance, that seeks to facilitate a balanced and more inclusive dialogue, particularly involving developing nations, on better aligning Big Tech governance to the sustainable development goals,” they stated in the post.

Economists also pointed that in the past few years digitalization has enabled developing countries, in particular, to bring a progress in financial inclusion. Countries like Kenya, Ghana, Rwanda and Tanzania have made great advances in bringing their citizens to financial systems by strengthening mobile phone technology.

During the pandemic, policymakers around the globe took several measures to support and promote digital services. The Central Bank of Kenya waived charges and expanded the limit for low-value mobile money transactions, which led to a noticeable increase in both value and number of financial activities.

In Rwanda, all charges were cut off in March and by the end of April 2020, the weekly value of all kinds of digital transactions increased by 450 percent from pre-pandemic levels.

In China, Ant Group has collaborated with over 100 banks to launch the Contactless Loans initiative to help small and medium enterprises recover from COVID-19.