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Innovative Finance Can Help Rebuild Ukraine | by Marcus Fedder – Project Syndicate

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Innovative Finance Can Help Rebuild Ukraine | by Marcus Fedder – Project Syndicate

Ukraine won’t be able to finance its large postwar reconstruction wants by itself and shouldn’t depend on reparations from Russia. However two modern and not too long ago confirmed mechanisms will help to bridge a minimum of a number of the funding hole.

ZURICH – Estimates of Ukraine’s postwar reconstruction prices range broadly. Ukrainian Prime Minister Denys Shmyhal not too long ago put the doubtless invoice at $750 billion, whereas European Funding Financial institution President Werner Hoyer thinks the nation may have $1.1 trillion. Each day that the conflict continues, the determine will increase.

Ukraine might want to rebuild energy stations, electrical energy grids, and important water, sanitation, and transport infrastructure. Trade would require investments, and homes will have to be rebuilt and repaired earlier than the winter – though many cities, cities, and villages have been fully destroyed.

However Ukraine won’t be able to finance such a large funding program by itself and shouldn’t depend on reparations from Russia. Financing should subsequently additionally come from multilateral growth establishments such because the World Financial institution, the European Funding Financial institution, and the European Financial institution for Reconstruction and Growth. Western governments should contribute as effectively, as will the European Union.

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The most important drawback is that Ukraine will want the cash as quickly because the conflict is over. As a result of the nation doesn’t have ample reserves of its personal, it should borrow. However its sovereign creditworthiness shall be at all-time low after the conflict, though Fitch Scores not too long ago upgraded Ukraine from RD (restricted default) to CC.

Moreover, Western governments won’t be able merely to switch an preliminary $100 billion in a single day to Ukraine. Their funds are nonetheless reeling from fiscal measures to counter the consequences of the COVID-19 pandemic and the newfound realization that they should spend extra on protection. Germany alone intends to speculate an extra €100 billion ($101 billion) in its navy.

However modern financing mechanisms will help to bridge a minimum of a few of Ukraine’s large funding hole. Policymakers ought to think about two current precedents particularly.

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One promising possibility is to arrange an Worldwide Finance Facility for the Reconstruction of Ukraine (IFFRU). This might be modeled on the Worldwide Finance Facility for Immunization (IFFIm), which was established in 2006 by a number of donor governments underneath the management of the UK to offer up-front cash to vaccinate youngsters on the planet’s poorest international locations.

The IFFIm obtained legally binding multiyear pledges totaling over $6 billion from extremely rated governments, enabling it to acquire a AAA score and begin borrowing in worldwide bond markets. The borrowed funds – the IFFIm’s first bond situation amounted to $1 billion – have been despatched to Gavi, the Vaccine Alliance to finance speedy large-scale immunizations.

The tax-exempt IFFRU can be primarily based outdoors Ukraine and performance in accordance with best-practice operational and governance requirements. And somewhat than diverting large sums of cash out of their present budgets, many Western governments will be capable of make legally binding commitments over 20 years. If appropriately structured, the sums can be included within the respective authorities budgets solely within the yr they’re due.

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Relying on the donor international locations’ credit score rankings and the power’s monetary insurance policies, the IFFRU might have a score of AA or higher. That will allow it to faucet worldwide bond markets and front-load financing for Ukraine, disbursing cash as and when the nation wants it. On this approach, infrastructure and desperately wanted housing for Ukraine’s displaced inhabitants can rapidly be rebuilt.

A second chance is for Ukraine to situation Brady bonds, following the instance of some rising markets – together with a number of Latin American international locations, Bulgaria, Morocco, Nigeria, Poland, and the Philippines – once they defaulted on business financial institution loans three a long time in the past. To resolve the disaster, the banks accepted a haircut, or sure loss, on the loans, and the remaining debt was transformed into tradable sovereign bonds, with principal repayments collateralized and thus secured by specifically issued authorities securities. Within the case of dollar-denominated Brady bonds, the US Treasury issued particular 30-year zero-coupon securities to offer such collateral, making the bonds engaging to buyers.

Ukraine, whose CC score will forestall it from tapping worldwide debt markets by itself, might use the same construction to kick-start its bond-issuance program. The federal government can be chargeable for paying the curiosity on its Brady bonds – with the required overseas change coming from the nation’s taxpayers – and the principal repayments can be collateralized or assured by zero-coupon bonds issued by extremely rated governments, the EU, or different entities. Ukraine must buy these zero-coupon bonds, or governments wishing to assist the nation’s reconstruction might donate them.

Rising rates of interest and tight authorities budgets imply that the big sums wanted to rebuild Ukraine can’t be raised in a single go. However inventive financing mechanisms will help to cut back the pressure and speed up the nation’s reconstruction.

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Online event: Digital Finance Platform – Launch of phase II & data hub

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Online event: Digital Finance Platform – Launch of phase II & data hub

When: 21 March 2024 between 09:30 and 11:00

Don’t miss this online event that will launch the second phase of the Digital Finance Platform, a collaborative space bringing together innovative financial firms and national supervisors to support new thinking in the EU’s financial system.

A key novelty in this second phase is the Data Hub, which provides participating firms with access to synthetic supervisory data for the purpose of testing new solutions and training artificial intelligence and machine learning models.

The event will also take stock of the current state of play of digital finance and look forward to the way ahead.

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Charting the AI revolution: Accelerating adoption of AI in finance – The CFO

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Charting the AI revolution: Accelerating adoption of AI in finance – The CFO

The finance function within organizations is undergoing a significant transformation as the pace of technological advancement is unprecedented, with CFOs at the forefront of this change. They are faced with navigating through the complexities of integrating Artificial Intelligence (AI) into their operations. The adoption of AI in finance is not merely a trend but a strategic imperative that promises enhanced efficiency, accuracy, and insights. This article delves into the ways CFOs can accelerate AI adoption in their finance functions, the challenges they might face, and strategies to overcome these hurdles for a seamless transition into the AI-powered future.

Strategies for Accelerating AI Adoption

To expedite the integration of AI within finance functions, CFOs can adopt several strategic approaches.
Initially, focusing on automating the financial fundamentals is paramount. By automating manual processes across accounting and finance functions, organizations can significantly enhance productivity. This step is crucial in addressing the ongoing accountant talent shortages and improving business visibility through more frequent reporting.
Furthermore, centralizing data and training your own AI models is another vital strategy. An integrated solution, such as a cloud ERP system, can unify data across the business, providing a single source of truth. This approach not only saves time on manual data integrations but also ensures that AI can be as effective as possible.
By starting small and encouraging AI experimentation, CFOs can gradually build a robust foundation for AI within their finance functions, driving long-term change and efficiency.

Overcoming Challenges in AI Integration

Integrating AI into finance functions is not without its hurdles. One significant challenge is the lack of understanding and trust in AI technologies among small businesses, as highlighted by UK Tech Minister Saqib Bhatti. To overcome this, promoting trust and transparency in AI applications is essential. This involves providing increased support and educational resources to help businesses navigate the complexities of AI. Additionally, addressing environmental concerns associated with AI, as noted by Tom Dunning, CEO of Ad Signal, is crucial. Businesses must be mindful of the carbon emissions caused by AI and seek solutions to mitigate its environmental impact. Collaborating with industry and government to ensure the safe development of AI and equipping staff with the necessary skills to harness AI’s benefits positively are also key strategies. By tackling these challenges head-on, CFOs can facilitate a smoother integration of AI into their finance functions, unlocking new avenues for growth and efficiency.

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The Future of AI in Finance

The integration of AI into finance heralds a transformative era of efficiency, insight, and growth. As CFOs navigate this journey, the focus on strategic adoption, overcoming challenges, and learning from success stories will be pivotal. The future of finance is undeniably intertwined with AI, promising a landscape of unprecedented opportunities.

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Teacher using 'Lattimore Bucks' to teach personal finance

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Teacher using 'Lattimore Bucks' to teach personal finance

CHARLOTTE, N.C. — Every Monday, Renaissance West STEAM Academy math teacher Shelby Lattimore starts her class by charging her students for their seats, not with U.S. currency but with “Lattimore Bucks.” It’s a project she started last year as a way to improve attendance.

“It’s not just about having them here,” Lattimore said. “It’s about having them here for the whole day from start to finish, ready to rock and roll. On top of the fact, just to get them accountable for their behavior and taking accountability for certain things in the classroom.”


What You Need To Know

  • Shelby Lattimore started using “Lattimore Bucks” in her classroom to help curb attendance problems
  • Each student has a classroom job, they get paid every week with Lattimore Bucks
  • With their bucks they pay for rent, as well as fines if they misbehave.
  • They also can buy rewards to teach them personal finance lessons

Each student is assigned a job in the classroom, which rotates every two weeks.

“These are their jobs,” Lattimore said. “If they’re underlined, they get paid $10. So those are the harder jobs they have to do every day. And then the ones that are not underlined, like this one, he just has to change my calendar. He just has to change the day on the board, like once in the morning so he doesn’t get paid as much.”

With their salaries, her students pay their rent for their seats. 

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“Their rent was inflated as of January, from $5 to $7,” Lattimore said.

And if students misbehave, they’re fined. 

“Like if you purposely lose your pencil, rip your notebook, things of that sort and then of course disrespect,” Lattimore said. “And their fines are a dollar.”

The more Lattimore Bucks they save, the more rewards they can buy. That is, as long as they have enough to pay their rent.

“Let’s say they have $10, but they want to buy lunch with a friend. If I do 10 minus 5, you’re not, you don’t have $7 for your next rent. So they cannot buy anything past their rent that they have to keep in their wallet,” Lattimore said.

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While the project may have started to improve effort in the classroom, Lattimore says it’s morphed into a much bigger lesson for her students. 

“Some of their parents, you know, thank me all the time,” Lattimore said. “We talk about all the time in Charlotte, generational poverty is a huge statistic here, especially in the kids and the families that we serve in my school.” 

She’s instilling lessons of personal finance and budgeting into the lessons every day.

“So just starting the mindset of how can I hold onto money? How can I make long-term decisions with my money? It all starts from a very young age in a safe environment before they’re out in the real world,” Lattimore said.  

It’s done in hopes of setting up her students for the future.

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“Even my students from last year, they are telling me that they’re saving their money, and they’re budgeting their Christmas money for a pair of sneakers or whatever they want,” Lattimore said. “So they’re holding onto the lesson. So I can only imagine a couple of years from now when they’re adults, how that will affect their family.”

Lattimore says other teachers she knows have started similar programs in their own classrooms. She says the concept can be used at any school for any grade level as a simple way to teach basic finances.

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