Why is it in the News?

The International Monetary Fund (IMF) released the latest global financial stability.

About Global Financial Stability Report (GFSR):

• The Global Financial Stability Report (GFSR) is a semiannual report by the International Monetary Fund (IMF).
  • It is released twice per year, in April and October.
• The GFSR provides an assessment of the global financial system and markets and addresses emerging market financing in a global context.
• It focuses on current market conditions, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging market borrowers.

Key Points from the Report:

• The report highlights significant risks facing the global financial system, including persistent high inflation, increased lending in unregulated credit markets, and a rise in cyber-attacks targeting financial institutions.
• It underscores geopolitical tensions, such as conflicts in West Asia and Ukraine, as potential factors disrupting aggregate supply and driving up prices, possibly constraining central banks from lowering interest rates.
• India emerged as the second-largest recipient of foreign capital in 2023, following the United States, though this trend could shift rapidly if Western central banks signal prolonged high-interest rates.
• Of concern is the expansion of the unregulated private credit market, where non-bank financial institutions extend credit to corporate borrowers, posing potential threats to the broader financial system.
• Many borrowers in this market lack financial stability, with numerous entities unable to cover interest costs with current earnings, highlighting underlying risks.

Why is it in the News?

European astronomers have made a groundbreaking discovery by identifying Gaia-BH3, a colossal black hole located just 2,000 light years away from Earth within the Milky Way, revolutionizing our comprehension of star formation.

What Is Gaia-BH3?

• Gaia-BH3, a stellar black hole in the Milky Way galaxy, has been identified as the most massive one discovered to date.
• The European Space Agency's Gaia mission detected Gaia-BH3 due to its distinctive 'wobbling' effect on a companion star orbiting it.
• Through the use of the Very Large Telescope at the European Southern Observatory in Chile's Atacama Desert and other ground-based observatories, researchers confirmed its enormous mass.
• With a mass 33 times greater than our sun, Gaia-BH3 is situated in the Aquila constellation at a distance of 1,926 light-years from Earth, earning it the title of the second-closest known black hole.
• Gaia BH1, located about 1,500 light-years away, remains the closest known black hole to Earth with a mass approximately 10 times that of our sun.
• While Gaia-BH3 holds the distinction of being the most massive stellar black hole in our galaxy, it pales in comparison to Sagittarius A*, the supermassive black hole at the Milky Way's center, which boasts a staggering mass of roughly 4 million times that of the sun.

Difference Between Stellar and Supermassive Black Holes:

• Stellar and supermassive black holes are two distinct types of cosmic phenomena, each with unique characteristics and origins.
• Stellar-mass black holes result from the gravitational collapse of a single star or the merger of two neutron stars, resulting in masses comparable to stars.
  • Their mass typically ranges from three to fifty times that of our sun.
• In contrast, supermassive black holes boast a mass exceeding 50,000 times the solar mass, often reaching into the millions or billions.
  • The formation of supermassive black holes remains a mystery to scientists, as they are too massive to have formed from a single star's collapse.
• Their consistent presence at the center of galaxies suggests a potential connection to galactic formation.
• While our understanding of these cosmic giants continues to evolve, one thing is clear: both stellar and supermassive black holes are awe-inspiring fixtures in our universe.

Why is it in the News?

Revenue-based financing (RBF) is increasingly popular among startups and digital SMEs due to a lack of venture capital and limited access to traditional credit options.

What Is Revenue-Based Financing?

• Revenue-based financing is a method of raising capital for a business from investors who receive a percentage of the enterprise's ongoing gross revenues in exchange for the money they invested.
• In a revenue-based financing investment, investors receive a regular share of the business's income until a predetermined amount has been paid.
• Typically, this predetermined amount is a multiple of the principal investment and usually ranges between three to five times the original amount invested.

How Revenue-Based Financing Works?

• Capital investment: An investor or a group of investors provides capital to a company (but not as a traditional loan nor in exchange for equity in the company).
• Revenue percentage agreement: In return for the capital, the company agrees to give the investor a fixed percentage of its gross revenues each month.
• Repayment structure: The company repays the invested capital through payments based on monthly or annual revenue.
  • The amount paid each month varies as it is directly tied to the company’s revenue for that month.
• Repayment cap or term: There is usually a cap on the total amount to be repaid, often set as a multiple of the original investment (e.g., 1.5x or 2x the initial amount).
  • Alternatively, the repayment might continue until a specific term is reached, such as a number of years.

Comparing Revenue-based Financing to Debt and Equity-based Models:

• While revenue-based financing shares similarities with debt financing in terms of regular investor repayments, it differs notably as it doesn't involve interest payments.
• Instead, repayments are based on a predetermined multiple, yielding returns higher than the initial investment.
• Moreover, unlike traditional debt arrangements, revenue-based financing doesn't necessitate collateral.
• Additionally, unlike equity-based models, it doesn't entail transferring ownership stakes in the company to investors.

Why in the News?

Recently, the International Energy Agency (IEA) released the World Energy Outlook (WEO) Report 2023.

About World Energy Outlook 2023:

• This flagship publication of the International Energy Agency (IEA) has appeared every year since 1998.
• It provides in-depth analysis and strategic insights into every aspect of the global energy system.
• This year, the report delves into how changes in economies and energy usage are meeting the increasing demand for energy amid geopolitical tensions and fragile energy markets.
• It evaluates the evolution of energy security fifty years after the establishment of the IEA and looks at what's necessary at the COP28 climate conference in Dubai to support the 1.5 °C goal.
• The publication analyzes today's energy trends, covering areas like investment, trade flows, electrification, and energy access.

About the International Energy Agency (IEA):

• The International Energy Agency (IEA) is an independent inter-governmental organization operating within the framework of the Organisation for Economic Co-operation and Development (OECD).
• Its mission involves collaborating with governments and industry to create a secure and sustainable energy future.
• Established in 1974 to safeguard oil supplies, it was a response to the 1973-1974 oil crisis, which exposed the vulnerability of industrialized nations to oil import dependencies due to an oil embargo.
• Comprising 31 member countries and eleven association countries, IEA candidates must be OECD members.
• India joined as an Associate member in 2017.
• The IEA publishes reports such as the World Energy Outlook, World Energy Balances, Energy Technology Perspectives, World Energy Statistics, and Net Zero by 2050.

What is the News ?

Recently, the Organization for Economic Co-operation and Development (OECD), published the "International Migration Outlook 2023."

Facts About:

• In 2021 and 2022, India had the largest migration flows to nations that are members of the Organization for Economic Co-operation and Development (OECD).
• In terms of citizenship, 0.13 million Indians became citizens of an OECD nation in 2021.
• The ongoing conflict between Russia and Ukraine has caused the greatest level of internal displacement and refugee inflows into the OECD, with over 10 million people becoming internally displaced or refugees.
• In terms of workers, migration flows from India (+172 percent), Uzbekistan (+122 percent), and Turkey (+240 percent) increased dramatically, making them the primary countries of origin after Ukraine.

About the Organization for Economic Co-operation and Development (OECD):

• The OECD is an international group of 38 countries that aims to foster economic development, and cooperation, and combat poverty by promoting economic stability.
• It was founded in 1961, by 18 European nations, the United States, and Canada.

                 Its headquarters are in Paris, France.

• Primary Goal: The primary goal of the OECD is to create policies that promote prosperity, equality, opportunity, and well-being for everyone.
• They produce economic reports, data, and predictions about global economic growth.
• The OECD also works to combat bribery and financial crimes worldwide, maintaining a list of uncooperative tax havens.
• India is not a member of the OECD, but a key economic partner.