Aurelia Butler

MARRAKECH (Reuters) -The International Monetary Fund had not been informed about any specific agreements regarding Sri Lankan debt talks, a fund official said on Wednesday, after China announced it had come to an agreement with the country.Peter Breuer told Reuters on the sidelines of the World Bank IMF annual meetings in Marrakech that talks between Sri Lanka and all its creditors were ongoing. “We will need to assess the entire package of agreements in its totality to assess consistency with IMF debt targets,” Breuer said. Sri Lanka, mired in its worst economic crisis in 70 years, is in debt restructuring talks with a range of creditors, including China, its largest single creditor. Colombo suspended debt repayments in May 2022. Sri Lanka’s finance ministry said in a statement that the Export-Import Bank of China had extended an initial debt restructuring deal. Finance Minister Ranjith Siyambalapitiya said the move “will benefit the country’s economy and all aspects linked with it”.China’s Foreign Ministry said on Tuesday that Exim bank reached a preliminary deal on the disposal of China-related debts, but did not share details. Sri Lanka owed Exim $4.1 billion, or 11% of it foreign currency debt, at the end of 2022.Sri Lanka is also in talks over a $2.9 billion IMF bailout. But in September the fund declined to release a second tranche of around $330 million after it failed to reach a staff-level agreement over concerns of a possible government revenue shortfall.Other bilateral creditors including the Paris Club, Japan and India are expected to make an announcement on a deal during the IMF meetings, a source with direct knowledge of the talks told Reuters.Japan, India and France announced in April a common platform for talks among bilateral creditors to coordinate restructuring of Sri Lanka’s debt, a move they hope would serve as a model for solving the debt woes of middle-income economies.As a middle-income country, Sri Lanka is not part of the G20 debt initiative known as the Common Framework, so talks with official creditors from China are conducted separately.Jamie Fallon, economist with Tellimer Research, called the Exim agreement a “surprise deal”. “The development could pave the way for an MoU with commercial and bilateral creditors, plus IMF board approval on the next round of (extended fund facility) funding (if other points of contention such as revenue shortfalls can be overcome),” he wrote in a note. More

MARRAKECH (Reuters) -The European Central Bank has made significant progress in getting inflation back down to target, but new shocks could still require the bank to continue a now-paused tightening cycle, two influential policymakers said on Wednesday.The ECB has raised interest rates at each of its past 10 meetings but has signalled a pause for October, with some policymakers arguing the bank has done enough while others are firmly keeping more rate hikes on the table. “All in all, we made important progress on getting inflation back to target, but we still have a long and winding road ahead,” Dutch central bank chief Klaas Knot told a conference in Marrakech, Morocco.”I do believe that policy at this moment is in a good place … (but) we will remain vigilant and we stand ready to adjust interest rates even more if the disinflation process were to stall.”Pablo Hernandez de Cos, the head of Spain’s central bank, said that even underlying inflation, a key worry for some, has turned a corner – so rates staying on hold for some time now, before cuts, is a plausible scenario. De Cos said that market pricing appeared to suggest investors understood the ECB’s message and found its policy path credible. “They are interpreting well that there might be a need for the current rate to remain in the current (setting) for sufficiently long, but … they are also expecting that rates will decline, which for me is a kind of a confidence of the market that we will fulfil our mandate,” de Cos told a separate event in Marrakech, where the World Bank and IMF annual meetings are taking place this week. Markets see steady rates through mid-2024, before modest cuts in the second half of next year. Still, de Cos added that new shocks could emerge, which would require different decisions given that uncertainty over economic prospects has been especially high. Inflation is seen falling close to 3% by the end of this year, then stagnating for most of next year before declining again into 2025. Knot argued that the euro zone economy was now facing a period of economic stagnation as manufacturing is in a recession now and the services sector has started to suffer too.”The cooling of economy that we’re currently undergoing is also desirable in a way,” Knot said, arguing that weak growth helps reduce demand and fight inflation.The near term outlook is so weak that the third quarter figure could be negative, de Cos added, but said that there is no drama and recovering real incomes will drive a recovery next year. More

Knot also discussed the ECB’s projections for reaching its 2% inflation target by the second half of 2025. He deemed this timeframe acceptable in light of the current economic climate. The ECB’s projection comes despite ten successive rate hikes that have been implemented to combat inflation.Looking ahead to the ECB meeting scheduled for October 26, Knot indicated that no further modifications to interest rates are anticipated. This statement suggests that the central bank believes its current monetary policy is sufficient to manage inflation and stabilize economic conditions.However, Knot was quick to underscore the ECB’s readiness to adjust interest rates as necessary. The central bank remains vigilant and prepared to respond swiftly to any new economic shocks or potential obstacles in the disinflation process.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

The island nation of 22 million suffered its first foreign debt default in May 2022. In March, Sri Lanka secured a nearly $3 billion bailout from the International Monetary Fund that could help it emerge from the crisis.China said this week that the Export-Import Bank of China had reached a preliminary deal with the country on the disposal of China-related debts, but did not share details.WHAT HAS HAPPENED SO FARAs part of the terms of the IMF bailout, Sri Lanka has to secure assurances of debt restructuring from bondholders and key bilateral lenders including China, Japan and India.Sri Lanka has asked foreign investors for a 30% haircut to help restructure its debt and the negotiations, which kicked off in September last year, are still under way.Under a domestic debt restructuring programme announced in June, Sri Lanka accepted offers to exchange about $10 billion worth of defaulted local debt for new bonds, the Finance Ministry said on Tuesday, taking it a step closer towards meeting debt restructuring requirements.A total of 3.2 trillion rupees ($9.91 billion) of the 8.7 trillion rupees in bonds eligible for exchange were accepted, the Finance Ministry said in a statement.The domestic restructuring is likely to set the stage for foreign debt renegotiation.FIRST IMF REVIEWSri Lanka failed to reach an agreement with the IMF in its first review of the bailout package last month due to a potential shortfall in government revenue and the IMF delayed the release of the second tranche of $330 million.SRI LANKA’S CREDITORSAccording to data from the finance ministry, Sri Lanka’s external debt was $36.09 billion at the end of March this year. Once the debt restructuring is completed, Sri Lanka hopes to reduce its overall debt by $16.9 billion.The country owed about $10 billion to multilateral banks like the World Bank and the Asian Development Bank (ADB) and $11.33 billion to bilateral creditors, including the Paris Club nations and China, Japan and India. Commercial loans, comprising of sovereign bonds and other time-bound loans, accounted for $14.75 billion.Among bilateral creditors, Sri Lanka owed China $4.7 billion with debt to India standing at $1.74 billion. Japan, a part of the Paris Club group, was owed $2.68 billion. Sri Lanka has debt outstanding of $5.65 billion to the ADB and owed $3.88 billion to the World Bank.The debt restructuring is also crucial for Sri Lanka to reach a 2.3% primary budget surplus by 2025, the key fiscal target set by the IMF. More

Passenger vehicle sales totalled 2.04 million units in Sept, the China Passenger Car Association (CPCA) said on Wednesday. The year-on-year rate of increase was higher than the 2.2% year-on-year rise in August, the data showed. New energy vehicle (NEV) sales were up 22.1% in September from a year earlier, making up 36.6% of total car sales, and helping several local brands set record high sales. NEV sales growth slowed from a 34.5% jump in August. September is traditionally a bumper month for car sales in China, partly because many people go on a shopping spree ahead of the Mid-Autumn Festival and National Day holidays.CPCA Secretary General Cui Dongshu said the downturn in the property market bode well for car sales, as many people were now choosing to buy cars instead of investing in housing. However, overall consumer sentiment remained subdued amid a slowdown in the world’s second largest economy.For the first nine months, sales in the world’s largest car market rose 2.1% to 15.41 million units. Overseas markets remain an important growth area, although an EU probe into China-made EVs may put a damper on exports.Exports grew 50% in September year-on-year following a 31% gain in August, the data showed. Tesla (NASDAQ:TSLA) exported 30,566 China-made vehicles in September, up 57% from 19,465 in August.Tesla, which pioneered a price war that has engulfed more than 40 brands in China, saw its market share in China’s EV segment in the third quarter shrink to 9.89%, compared with 12.98% in the second and 9.93% a year ago.The U.S. EV giant undershot estimates for its third-quarter global deliveries, as planned factory upgrades to unveil a revamped version of the Model 3 roiled production.EV forerunner BYD (SZ:002594) sold a record 287,454 NEVs in September. EV startup Li Auto (NASDAQ:LI) also set a new monthly record with 36,060 vehicles delivered last month, a surge of 212.7% year-on-year. More