Aurelia Butler

The emerging markets lender has already earmarked 3 billion euros for Ukraine – which is fighting off a Russian invasion – to be invested in 2022-23, and EBRD President Odile Renaud-Basso told its annual meeting assistance would continue.”Increasing paid-in capital will give us the means to sustain such level of investment and step up our investment (in Ukraine),” she told a briefing in the Uzbek city of Samarkand.The bank’s statement said a detailed proposal on a paid-in capital increase would be prepared by the end of this year. For every billion euros of additional capital, the bank can extend a few billion in fresh loans.”As I said to the bank’s governors this morning, Ukraine is the bank’s top priority,” Renaud-Basso said.The multilateral development bank’s support has so far focused on maintaining and repairing essential infrastructure, financing energy companies and supporting Ukraine’s foreign trade, she said.”(We are) supporting also the private sector, food industry, SMEs,.. that are absolutely fundamental to keep the economy going and keeping the jobs and providing those resources.”Renaud-Basso said EBRD shareholders had also approved plans to expand operations to sub-Saharan Africa and Iraq, where the bank plans to start lending in 2025.The EBRD has halted its work in Russia but boosted its presence in the former Soviet region of Central Asia, where it is now promoting the development of transport corridors bypassing Russian territory.Underscoring regional sensitivities, Ukraine itself, despite being the key beneficiary of the meeting, reduced its delegation to a single representative after expressing dismay with the presence of several leaders, including Uzbek President Shavkat Mirziyoyev, at a Victory Day parade in Moscow this month. ($1 = 0.9084 euros) More

BEIJING (Reuters) – China needs to level the playing field between private and state owned firms, the Asian Development Bank’s chief economist said on Thursday, adding that the world’s second-largest economy risks “wasting a tonne of money” with a state-led growth model.”If you just try to use brute force, spend your investment in a few companies that are not really facing a lot of competitive pressure, those policies, usually they often don’t yield much return for your money,” Albert Park told Reuters in his first trip to Beijing since COVID restrictions were lifted.The Manila-based lender “consistently” raises with China the importance of improving the business environment and the sustainability of the country’s development, he said, while noting that a one percentage increase in growth in China can increase growth in developing Asia by 0.3%.The comments come amid growing signs that China’s post-COVID economic recovery is losing steam, intensifying pressure on policymakers to shore up wobbly growth.April industrial output, retail sales, and property investment data this week disappointed investors. Private fixed-asset investment rose only 0.4% last month, in sharp contrast to the 9.4% jump in investment by state entities, indicating weak business confidence.”I feel China does need to move towards really creating a dynamic private sector with open market competition because that’s how you generate innovation,” Park said.”If you look at the history of China’s economic development, a lot of the gains in growth, productivity, and employment have come from the non-state sector,” he added. Youth unemployment hit a record high of 20.4% in April.Park remains optimistic, however, that policymakers will implement further reforms. Not least, so that China can meet the accession requirements of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, an aim China’s commerce minister reiterated to his Australian counterpart in Beijing last Friday. “I think you should take them at their word,” Park responded when asked how China could expect to join the free trade bloc while appearing to place state-owned enterprises at the centre of its economic recovery.”China has always, like many of the countries in Asia, been very supportive of multilateral open trading systems,” he said, pointing to how China is already a member of the Regional Comprehensive Economic Partnership. More

The IMF has approved a $3bn loan to Ghana after the west African country’s creditors, including China, agreed to a crucial debt-restructuring that is vital to resolving Accra’s long-running economic and financial crisis. The approval, which will immediately release $600mn, caps the first stage of a prolonged saga over the $58bn of external and domestic debts that Ghana ran up over the past 15 years.The IMF’s decision to move ahead with the bailout will be welcomed by other countries struggling to reach agreements with their lenders over how to deal with debt woes. Disagreements between western creditors and Beijing over how best to restructure outstanding loans and bond payments have added to the burden facing some of the world’s most financially troubled countries, such as Zambia and Sri Lanka. Ghana owes about $4bn to lender nations, including about $1.5bn to China. But its debts to commercial creditors are much larger, at about $14bn, including roughly $13bn owed to holders of its eurobonds. It also has about $24bn of domestic debts, mainly to local banks and pension funds. Accra stopped paying most of its external debts at the end of last year after reaching a preliminary agreement with the IMF, and has embarked on what its finance minister has called a “punitive” restructuring of its domestic debts. Ghana has had to agree to measures designed to raise more tax revenue and stop the central bank from buying the government’s debt. Announcing the agreement late on Wednesday, Kristalina Georgieva, IMF managing director, said Ghana was putting in place a “strong programme of reforms to revitalise growth and reduce the country’s debt burden”.While countries have now agreed in principle to restructure the country’s debts, the IMF stressed that “securing timely . . . agreements” with Ghana’s private-sector creditors was “essential” for the bailout’s success. Kevin Daly of Abrdn, an asset manager and member of a committee representing private-sector bondholders, said the IMF deal implied creditors would take a $10.5bn hit between 2023 and 2026. That figure amounts to about half of Ghana’s current obligations over the period.He said China had helped to get the initial agreement over the line but wrangling over terms between official and private-sector creditors could delay a final deal into the third quarter of this year.Ghana’s already precarious finances were thrown into crisis after the twin shocks of the pandemic and Russia’s invasion of Ukraine, which helped push up inflation to a two-decade high of 54 per cent in December. The debt crisis has shattered Ghana’s president Nana Okufo-Addo’s ruling New Patriotic party’s reputation for fiscal probity. It has also raised the chances that other African countries will seek debt restructuring and IMF bailouts. The fund estimates that more than 20 countries, including Kenya, another one-time investor favourite, are in danger of debt distress. While the agreement with Ghana calls for government spending to be reined in and taxes raised, it includes some measures to protect the most vulnerable. That contrasts with harsher packages the fund imposed in the 1990s.Zambia secured an IMF bailout last year following assurances from official creditors, led by China, that they would provide relief on their loans to the southern African nation, after it defaulted in 2020.But China has since failed to agree on specific restructuring terms with other creditors, leaving Zambia’s finances in limbo and holding up a second IMF payment. More

JOHANNESBURG (Reuters) -Ghana is targeting $10.5 billion of external debt service relief from 2023-2026, the International Monetary Fund said, giving first indications of how big a hit investors might face in the coming debt overhaul.     The embattled West African country’s debt is currently unsustainable, but Ghana aims to restore it to a “moderate” risk of debt distress by 2028, the fund added in its Debt Sustainability Analysis.      The IMF’s executive board approved a $3 billion, three-year rescue loan on Wednesday, paving a potential path for Ghana out of the worst economic crisis in a generation. Ghana is overhauling its debt after its already strained finances buckled under the economic fallout from COVID-19 and Russia’s invasion of Ukraine. It is seeking external debt relief under the Group of 20’s Common Framework platform and completed a domestic debt exchange earlier this year.Ghana has a $15 billion financing gap in its balance of payments from 2023 to 2026, the IMF said, with the World Bank set to provide $1.6 billion in budget and balance-of-payments support.The country has a medium “debt carrying capacity”, which means the IMF requires Ghana to target bringing its public debt-to-GDP ratio from 88.1% at the end of 2022 to 55% by 2028.The cedi currency strengthened 2.4% against the U.S. dollar to 10.30 on the news, taking its rise so far this month to 12.24% as international investors anticipated IMF board approval. Most of Ghana’s sovereign dollar-denominated bonds strengthened modestly on Thursday, with some rising as much as 0.3 cents in the dollar although still trading at deeply distressed levels of between 36 and 41 cents in the dollar.”Domestic policy slippages represent a significant downside risk to the projections, further compounded by risks associated to the end-2024 general elections,” the IMF report said.Other risks for Ghana include social unrest if economic conditions do not improve for the population, not regaining market access to issue debt and the domestic debt exchange posing dangers to domestic financial sector stability, the fund said. More

JERUSALEM (Reuters) – Israel’s central bank is expected to raise short-term interest rates by another quarter-point to a more than 16-year high next week, in what may be the last increase in an aggressive tightening cycle aimed at battling persistent inflation.All 15 economists polled by Reuters projected a 25 basis points (bps) hike to 4.75% – which would be its highest since late 2006 – when the central bank announces its decision next Monday at 4 p.m. (1300 GMT).A number of economists, including Goldman Sachs (NYSE:GS) and JP Morgan Chase (NYSE:JPM), changed their forecast to a 25 bps hike from no move after stronger than expected inflation and economic growth data earlier this week.Israel’s annual inflation rate held steady at 5% in April versus expectations it would ease to 4.7%, and stayed well above an official annual target of 1-3%.”It will be hard for the BoI (Bank of Israel) to look through the April’s high print, especially as it had already sounded relatively hawkish hinting to further possible hikes in case data remain firm,” said JP Morgan economist Anatoliy Shal.Shal believes the cycle will end next week and expects rates to stay on hold for the rest of the year, before the Bank starts cutting them in early 2024.When it began hiking rates in April of 2022, the Bank of Israel had initially hoped its front-loading stance would be able to cap its key rate at around 3%. But inflation has remained sticky, partly due to a weaker shekel against the dollar, and it continued to tighten.The inflation rate has stayed at at least 5% since last October and peaked at 5.4% in January.Bank Leumi Chief Economist Gil Bufman noted “the drop in inflation in Israel since its peak is low compared to the other countries”. The median decline of other OECD countries stands at 2.6 percentage points, he said, even as Israel’s rate has been lower to begin with.Israel’s economy grew an annualised 2.5% in the first quarter, according to a preliminary estimate, higher than a Reuters forecast of 1.8%. Forecasts for growth in 2023 range from 1.5% to 2.7%.Goldman’s Tadas Gedminas believes more hikes this year are possible following a price increase in government supervised basic food items. “The inflation decline will be relatively limited this year given shekel weakness, which is why we continue to lean on the hawkish side,” he said. More