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Climate change is among humanity's greatest challenges, and the
Middle East and Central Asia region is on the frontlines of its
human, economic, and physical ramifications. Much of the region is
located in already difficult climate zones, where global warming
exacerbates desertification, water stress, and rising sea levels.
This trend entails fundamental economic disruptions, endangers food
security, and undermines public health, with ripple effects on
poverty and inequality, displacement, and conflict. Considering the
risks posed by climate change, the central message of this
departmental paper is that adapting to climate change by boosting
resilience to climate stresses and disasters is a critical priority
for the region's economies.
Prior to the COVID-19 shock, the key challenge facing policymakers
in the Middle East, North Africa, and Central Asia region was how
to generate strong, sustainable, job-rich, inclusive growth.
Post-COVID-19, this challenge has only grown given the additional
reduction in fiscal space due to the crisis and the increased need
to support the recovery. The sizable state-owned enterprise (SOE)
footprint in the region, together with its cost to the government,
call for revisiting the SOE sector to help open fiscal space and
look for growth opportunities.
Despite major structural shifts in the international monetary
system over the past six decades, the US dollar remains the
dominant international reserve currency. Using a newly compiled
database of individual economies' reserve holdings by currency,
this departmental paper finds that financial links have been an
increasingly important driver of reserve currency configurations
since the global financial crisis, particularly for emerging market
and developing economies. The paper also finds a rise in inertial
effects, implying that the US dollar dominance is likely to endure.
But historical precedents of sudden changes suggest that new
developments, such as the emergence of digital currencies and new
payments ecosystems, could accelerate the transition to a new
landscape of reserve currencies.
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