Aurelia Butler

WASHINGTON (Reuters) -Zambia could lose gains achieved so far from macroeconomic reforms if its ongoing debt restructuring is further delayed, Treasury Secretary Felix Nkulukusa said on Wednesday.The nation defaulted on its overseas debt in 2020 and is working on a restructuring with both bilateral creditors and private bondholders, but talks have been dragging on amid a lack of consensus on how to provide debt relief. “We have an economic programme that is an important element for the reform we are undertaking, but the second component, the restructuring, is delayed,” Nkulukusa said, on a public debt panel during the World Bank and International Monetary Fund spring meetings this week in Washington.Zambia was the first African country to default during the COVID-19 pandemic and is in talks for $18.6 billion of debt, according to official data at the end of last year. While the nation secured a $1.3 billion loan from the IMF in September, it is still in talks with bilateral creditors such as China and the Paris Club under the Group of 20’s Common Framework.Some 60% of low-income countries are in or near debt distress, but the platform set up to help has failed to deliver quick relief. Ghana is also negotiating its debt rework under this platform, while Sri Lanka talks are also dragging since it defaulted a year ago.The next IMF payout to Zambia from the loan is contingent upon its bilateral creditors reaching an agreement on the long-delayed debt restructuring. The country recently completed the first review of the programme, and the next one is expected in about three months.The country’s secretary added that the delay signals challenges and tests people’s patience with tough policies as “the population starts questioning what the government is doing.”Ceyla Pazarbasioglu, director of the IMF’s Strategy Policy and Review Department, was more optimistic about Zambia’s debt restructuring during the panel. “There is hope for good news next week”, she said, without providing any further details.The IMF official said that creditors have asked to share and exchange information “sooner” during debt restructuring talks, and added that the Washington-based lender is willing to do so. “We will definitely do that work with our teams,” she said. More

WASHINGTON (Reuters) – Kenya expects at least $1.2 billion in financing inflows between April and May and is in talks for new funding from the International Monetary Fund (IMF) to support falling foreign exchange reserves, its central bank governor said on Wednesday.Like much of Africa, Kenya has been hit hard by the economic fallout from the COVID-19 pandemic, the war in Ukraine and global monetary policy tightening. Its debt burden, compounded by a weakening local currency and international market turmoil, have led some market participants to speculate that Kenya could follow the likes of Zambia and Ghana into default, something the government rejects.”We are not very worried because we have significant inflows coming in,” Governor Patrick Njoroge told Reuters on the sidelines of the IMF and World Bank Spring Meetings in Washington.Kenya, along with other African frontier market nations, has been frozen out of international capital markets since early last year. However, it expects $250 million from syndicated loans this month and a $1 billion budgetary support loan from the World Bank in May, Njoroge said. “This compensates for the $1.2 billion we couldn’t get from the market last year.”Foreign external reserves stood at $6.4 billion as of April 5, according to the central bank’s latest data, enough to cover 3.6 months of imports. “Reserves have been lower than what we expected, but is this level adequate? The answer is yes,” the governor said.Njoroge said Kenya is also seeking a new loan under the Fund’s Resilience and Sustainability Trust (RST) to help countries ensure sustainable growth. “We have already started the work,” he said, without disclosing the loan’s potential size. RST funds are capped at 150% of a country’s IMF quota.DEBT AND INFLATION A staff mission, meanwhile, will travel to Nairobi in early May to continue discussing an RST loan and for the fifth review of a $2.4 billion programme agreed in 2021, with the possibility of negotiating extra financing after the IMF temporarily expanded access limits.”We could get an extra 163 million of special drawing rights with the disbursements of the fifth and the sixth review” of the 2021 programme, Njoroge said, referring to the unit of account for the Fund. That would be approximately $220 million. Tapping international debt markets has not been a problem across the board for emerging economies, but a combination of sticky high interest rates and lackluster global growth could push a number of weaker economies that are facing soaring refinancing needs into debt difficulties next year.Njoroge said that “the government is quite relaxed about” its own $2 billion eurobond maturing in June 2024. “The government has many options. They are keeping them close to their chest,” he said without providing further details. Inflation, meanwhile, was expected to ease to within the target zone of 2.5% to 7.5%, he said, as weather improves, lowering prices for locally produced food crops, though the price of imported maize could impact that.Stubbornly high inflation that provoked a larger than expected rate hike last month was largely due to high food prices. “We feel we have a pretty good chance of inflation coming down quickly and ending up in the zone say in the next three months,” he said. More

(Reuters) -Bank of England Governor Andrew Bailey said bank reforms enacted after the global financial crisis of 2007-09 worked during the recent banking turmoil, but there were questions about whether banks should set aside bigger cash buffers in future.The failure last month of Silicon Valley Bank and two other lenders in the United States, along with the forced takeover of Credit Suisse by UBS sent banking shares globally into a tailspin, but markets have since calmed.Regulators have said the episode represented the first big test of the tougher banking rules that were brought in after the global financial crisis, but debate is emerging over whether the rules need tweaking.”The post-crisis reforms to bank regulation have worked,” Bailey said in a speech on Wednesday to the Institute of International Finance in Washington where he is attending International Monetary Fund meetings.”Today I do not believe we face a systemic banking crisis. When I look at the UK banks, they are well capitalised, liquid and able to serve their customers and support the economy.”Bailey, however, echoed calls from his predecessor Mark Carney by saying there might be questions over the size of liquidity buffers required of banks in order to tide them over short-term shocks.”We can’t assume that, going forwards, the current answer on the total size of liquidity protection is the correct one,” he said.”We saw with Silicon Valley Bank that with the technology we have today – both in terms of communication and speed of access to bank account – runs can go further much more quickly. This must beg the question of what are appropriate and desired liquidity buffers that create the time needed to take action to solve the problem.”The speed at which depositors can withdraw cash with a click on their smartphone has become a factor for regulators.Data from the European Central Bank on Wednesday showed a slight weakening in liquidity buffers at banks it regulates, though they are still well above minimum requirements.NO HASTY CONCLUSIONSSpeaking at the same event, Pablo Hernandez de Cos, chair of the Basel Committee, whose members include the BoE and which sets global bank capital and liquidity standards, said regulators should not hastily jump to conclusions about the causes of banking turmoil or what reforms may be needed.Banks’ holdings of liquidity have more than doubled since the global financial crisis, helping to contain fallout from the recent banking turmoil, de Cos said.”We should not hastily jump to conclusions, nor should we close any doors. Nevertheless, once our stocktake is completed, remedial actions should be taken if deemed necessary,” de Cos said.Board members at some banks, however, have questions to answer about how they were monitoring risks on their books, added de Cos, who is also governor of the Bank of Spain.Separately, a top official at the U.S. Federal Deposit Insurance Corporation said on Wednesday that management failures lay behind the demise of Silicon Valley Bank, which stricter banking rules could not have prevented.Bailey said future size and make-up of banks’ liquidity buffers would influence how far central banks go in reducing the size of the bond holdings they have acquired since the financial crisis and which grew further during the coronavirus pandemic.”We don’t know yet where central bank balance sheet reduction will need to stop in terms of the necessary level of reserves,” Bailey said. More

“I do not see the evidence that we’ve got on our hands what I would call … the makings of a 2007/8 financial crisis. I really don’t see that,” Bailey said when asked about recent instability in the banking sector.”The system is in a much more robust condition,” he added. More

WASHINGTON (Reuters) -U.S. Treasury Secretary Janet Yellen on Wednesday called for the World Bank to implement further reforms this year to expand its ability to help developing countries meet global challenges such as climate change.Yellen hosted talks with global finance officials to discuss an initial spate of balance sheet changes that will allow the World Bank to lend an additional $50 billion over 10 years while maintaining its top-tier AAA credit rating, and how to deepen those efforts with it and other multilateral development banks.Yellen said the changes already approved had sharpened the mission of the World Bank to ensure it was striving to end extreme poverty, boost shared prosperity and build resilience, but more progress and “bold action” was needed.”We should use the rest of the year to undertake additional reforms through a staged implementation approach that can be agreed upon by the Board and implemented on a rolling basis.”Yellen said the changes were aimed at enhancing the bank’s work so it could better meet 21st century challenges like climate change, fragility and pandemics. Zambian women she met during her visit in January understood how climate change reduced agricultural yields, Yellen said, adding, “We’ve all seen how threats to global health can disrupt entire societies and economies, and how fragility and conflict can lead to significant displacement and migrant flows.”Yellen gave no specifics, but said upcoming events could be leveraged to keep momentum strong for the evolution of the World Bank. Those included the Summit for a New Global Financial Pact to be hosted by France in June, the Group of 20 Leaders’ Summit in India in September, the annual meetings of the World Bank and IMF in Morocco in October, and the United Nations COP28 climate conference to be held in Dubai in November and December.In addition to bolstering the bank’s financing capacity, Yellen said it was also working to systematically integrate regional and global challenges into its country diagnostic reports and country engagement, while focusing more on raising additional private capital.Outgoing World Bank President David Malpass, who will leave his post on June 1, said the bank had responded with “vigor and speed” to Yellen’s call for reforms.”There was … wide recognition that progress toward these goals requires a sharper focus on sustainability, resilience, and inclusiveness as part of our mission,” he said. More

WASHINGTON (Reuters) -Group of Seven (G7) finance leaders pledged on Wednesday to take action to maintain the stability of the global financial system after recent banking turmoil and to give low- and middle-income countries a bigger role in diversifying supply chains to make them more resilient.Their communique did not mention China by name, but the supply chain language fit in with “friend-shoring” efforts by industrial democracies to work with each other to become less reliant on the Asian manufacturing powerhouse for battery minerals, semiconductors and other strategic goods.”We commit to jointly empowering low- and middle-income countries to play bigger roles in supply chains through mutually beneficial cooperation by combining finance, knowledge, and partnership, which will help contribute to sustainable development and enhance supply chain resilience globally,” the G7 finance ministers and central bank governors said in the statement.The finance chiefs, meeting on the sidelines of International Monetary Fund and World Bank meetings in Washington, said they had discussed recent financial sector developments after the failure of two U.S. banks and the forced sale of troubled global lender Credit Suisse.Shunichi Suzuki, the finance minister of G7 host Japan, said that stability had returned to the financial system after strong action by policymakers”We will continue to closely monitor financial sector developments and stand ready to take appropriate actions to maintain the stability and resilience of the global financial system,” the G7 finance leaders said.’SHARED VALUES’ The ministers said that supply chains needed to achieve both efficiency and resilience, helping to maintain macroeconomic stability and make economies more sustainable. The statement cited the need to diversify the “highly concentrated” supply chains for clean energy technologies.”In this endeavor, we will stand firm to protect our shared values, while preserving economic efficiency by upholding the free, fair and rules-based multilateral system and international cooperation,” the G7 finance leaders said, using language often used to exclude China and other autocratic regimes.Suzuki said the language was not specifically aimed at China, but added that the G7 group views a high concentration of supply chains in a single country was not desirable, noting that many supply chains were highly concentrated in China. The G7 is made up of the United States, Canada, Britain, France, Germany, Italy and Japan.The International Monetary Fund has warned in its latest economic forecasts that fragmentation of the global economy into geopolitical blocs is a significant factor in reducing longer-term growth potential, with only 3% growth expected in 2028. That’s the lowest five-year projection since the IMF started issuing such forecasts in 1990.But French Finance Minister Bruno Le Maire, who participated in the G7 meeting, said such diversification away from China and alliances with allies were necessary.”As far as the production of green hydrogen is concerned, or artificial intelligence or semiconductor chips, or electric batteries, or other strategic goods, we need to be more independent,” Le Maire told reporters.JOINT RESEARCH In addition to working more closely with developing countries on supply chains, the G7 finance officials pledged to encourage joint research and development efforts among G7 members and other “interested parties.”    They said they would empower the private sectors in their own countries to diversify their supply chains, through transparent and predictable use of public finance tools that can catalyze private resources.    The ministers also pledged to support education, training and skills development, “underpinned by good governance and compliance with human rights” and to reduce greenhouse gas emissions and enhance environmental protections in their supply chains. More

WASHINGTON (Reuters) -Global creditors, debtor nations and international financial institutions on Wednesday agreed to improve data sharing, set clearer timetables and take other steps aimed at jumpstarting debt restructuring processes.The World Bank, International Monetary Fund and India, current president of the Group of 20 (G20) major economies, issued a joint statement after the first full-fledged meeting of the new Global Sovereign Debt Roundtable, held during the spring meetings of the IMF and World Bank in Washington.The statement, however, did not include mentions of any commitments by China, the world’s largest bilateral creditor, to speed the restructuring process.Reuters reported Beijing was poised to drop its demand that multilateral development banks share in debt restructuring losses, partly in exchange for the IMF and World Bank providing earlier access to their debt sustainability analyses for countries receiving debt treatments.But the statement only included the institutions’ part of that bargain, to share more information more quickly and for development banks to quantify “net positive flows” of concessional financing in restructuring cases.”The discussion focused on the actions that can be taken now to accelerate debt restructuring processes and make them more efficient, including under the G20 Common Framework,” the statement said.The meeting came amid ongoing delays in finalizing debt treatment agreements for Zambia, Ghana and Ethiopia under the G20 Common Framework, although IMF strategy chief Ceyla Pazarbasioglu on Wednesday said she hoped for “good news” on Zambia’s case next week.U.S. officials and others blame the delays largely on foot-dragging by China, now the world’s largest bilateral creditor, and reluctance by private-sector creditors to join in.Ghana, Zambia and Ethiopia are at various stages of the process, but debt experts say China’s agreement to provide financing assurances for Sri Lanka, a middle income country that was not eligible under the G20 framework, could provide fresh momentum for moving forward on those separate cases.The statement said the debt roundtable participants agreed on the importance to urgently improve information sharing on macroeconomic projections and debt sustainability assessments in debt treatment cases. It said the IMF and World Bank would rapidly issue staff guidance on data-sharing at each stage of the restructuring process, resolving a frustration voiced by China and other creditors about lack of sufficient information.Participants also discussed the role of multilateral development banks (MDBs) in debt restructuring processes through their provision of “net positive flows” of concessional finance, and welcomed the implicit debt relief provided by the World Bank’s International Development Association arm through low interest or zero-interest loans and grants.Participants agreed to organize a workshop in coming weeks on how to assess and enforce comparability of treatment of creditors, and said they would work on principles regarding cut-off dates, formal debt service suspension at the beginning of the process, treatment of arrears, and perimeter of debt to be restructured, including with regards to domestic debt.”This work will also help in clarifying potential timetables to accelerate debt restructurings,” the statement said.It said the IMF, World Bank and the G20 presidency will continue to work closely together and with other partners to further support the international response to current debt challenges.Separately, Japanese Finance Minister Shunichi Suzuki said Japan, France and India will announce a new platform for creditors to coordinate restructuring of Sri Lanka’s debt, adding it would be “very nice” if China were to join the effort. More