Economy

WASHINGTON/JOHANNESBURG (Reuters) – Zambia’s finance minister said on Saturday it is still unclear who will be leading talks for renegotiating its nearly $6 billion debt with China, the largest bilateral creditor of the first African sovereign default in 2020 after the COVID-19 pandemic hit.China co-chairs a committee of official bilateral creditors with France as part of a debt restructuring that Zambia is seeking under the Group of 20’s Common Framework, a platform for highly indebted countries to rework their debt with bilateral creditors.”It is up to the Chinese authorities to choose who they want to represent them,” Situmbeko Musokotwane said in an interview with Reuters on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington.”I don’t know at this particular moment,” he said, when asked who represents China on the official creditors committee.Western countries this week ratcheted up their criticism of China, the world’s largest bilateral creditor, as the main obstacle to moving ahead with debt restructuring agreements for the growing number of countries unable to service their debts.At the end of 2021, China held about a third of Zambia’s $17.27 billion international debt, according to Zambian government data. Since then, Zambia has cancelled $2 billion in undisbursed loans, many from Chinese lenders.Musokotwane said negotiating with bilateral creditors including China before private creditors had “worked fairly well”, but acknowledged there had been complaints from international investors who hold the country’s sovereign bonds. “It cannot be plain sailing because people approach it from different perspectives,” he added.Zambia secured a three-year $1.3 billion loan from the IMF in September. It is now seeking a present value $6.3 billion debt reduction, or 49% of the external debt being restructured. Some bondholders had previously said a 45% cut would be unacceptable.”There is no point of pretending that there is something that is better, when doing so means that you leave Zambia still with an unsustainable debt situation,” Musokotwane said.”Because it means we will conclude today, then a month later or three months later, we default again.”Zambian grain exports could help to address shortages caused by Russia’s invasion of Ukraine, Musokotwane said, adding that the government was hoping to host an overseas agriculture investors forum in the middle of 2023.”We are making preparations for investors not just in Zambia, but from outside to take advantage of the land resources that we have, to come and produce food to export,” he said. The country is ready to open up to 100,000 hectares for this investment plan, and will start using a $300 million World Bank approved loan to improve roads, electricity and dams to attract overseas investors.”Three or four” companies have expressed interest in acquiring Mopani copper mine, he said, including South Africa’s Sibanye Stillwater (NYSE:SBSW), adding the interest was “what gives me the confidence that by the end of this year probably we should have a solution”.A proposal for the government to have “golden shares” in mining companies would enable it to veto any investors known to not be credible, he said.The government is assuming an average copper price of $7,500 per tonne in 2023, with growing demand thanks to green technologies likely to support prices, Musokotwane said. More

Fed policy “has produced a stronger currency,” Bullard said at a monetary policy panel on the sidelines of the International Monetary Fund and World Bank annual meetings in Washington. That may ease once the Fed gets rates to a place “where the committee thinks we’re putting meaningful downward pressure on inflation,” so rates don’t need to continue rising, he said.At that point, as other central banks adjust their policy, “you might see other movements in the dollar.”The impact of Fed policies on global financial markets has been a major theme of the IMF and World Bank meetings this week.Bullard said that while the Fed’s rapid rate moves this year, with its target policy rate rising from the near-zero level in March to the current 3.00%-3.25% range and heading higher, has touched off a global repricing of currencies, stocks, bonds and other assets.But he said he regarded the amount of disruption as relatively low given the speed with which the Fed has lifted borrowing costs.The Fed has raised rates “with relatively low turmoil in financial markets,” Bullard said. “Not zero, but relatively low to what you might expect given the speed at which we’ve moved.” More

TUNIS (Reuters) – Tunisia has reached a preliminary agreement with the International Monetary Fund (IMF) for a $1.9 billion rescue package that could be finalised in December, the fund said on Saturday. Tunisia has been in urgent need of international help for months as it grapples with a crisis in public finances that has raised fears it may default on debt and has contributed to shortages of food and fuel, according to government critics. The agreement is also seen as critical to unlock bilateral aid from country donors that wanted the reassurance of an IMF programme that Tunisia would carry out reforms to put its finances on a more sustainable footing. Diplomats say many donors felt “burnt” by previous loan agreements in which Tunisia has taken billions of dollars without following through on promised reforms.”The agreement is an important step for Tunisia’s public finances and will allow Tunisia to borrow from some bilateral sources,” a senior Tunisian official said on condition of anonymity. This month the central bank governor told Reuters that bilateral financing talks were progressing with Saudi Arabia. Opposition politicians and Tunisia’s powerful UGTT labour union have warned of a possible “social explosion” if people’s needs are not met, with a petrol shortage causing long queues this week at fuel stations. The staff-level agreement is for a $1.9 billion 48-month package through the IMF’s extended fund facility to restore macroeconomic stability, strengthen social safety nets and tax equity and bring reforms to foster growth and create jobs. It is subject to the approval of the IMF board, which is scheduled to discuss Tunisia’s programme request in December, the fund said. GROWTH TO SLOWPolitical uncertainty and militant attacks had hit vital tourism revenues even before the challenges of the COVID-19 pandemic and global commodities squeeze from the Ukraine war. Increasing numbers of Tunisians have this year joined a surge of illegal migration across the Mediterranean to Italy, with dozens dying since January in shipwrecks. The IMF warned that in the near term growth would likely slow with more pressure on inflation and on the external and fiscal balances. The government negotiated for months with the IMF and had to also to sign an agreement with the UGTT to limit public sector wage increases over the next three years.The union, which says it has more than a million members, has historically been able to thwart economic reforms with threats of strike action, and it remains opposed to other parts of the package Tunisia has proposed to the IMF. The fund noted government steps to phase out “generalised wasteful price subsidies”, with petrol and electricity prices having risen several times this year. It said the agreed programme would include changes to expand the tax base and widen coverage of the social safety net to help poorer people cope with higher prices, as well as a law to govern reform of state-owned companies. More

WASHINGTON/JOHANNESBURG (Reuters) – Delays in restructuring Ethiopia’s debt due to the failings of a new global mechanism for resolving debt problems are “disappointing,” the east African nation’s state finance minister said on Saturday, adding that he planned to raise it with the head of the IMF later in the day.Africa’s second-most populous country requested a debt restructuring under the Group of 20’s Common Framework process in early 2021, but progress has been complicated by a civil war that broke out in November 2020 and has delayed progress with creditors on a debt workout.Ethopia’s state finance minister Eyob Tekalign Tolina acknowledged the war was a key factor in the delay as well, and said he hoped there would be peace talks in “the coming few weeks” in an interview with Reuters on the sidelines of the International Monetary Fund-World Bank annual meetings in Washington.The conflict pits Ethiopia’s federal government against regional forces led by a party that used to dominate national politics. Thousands of civilians have been killed and millions uprooted by the violence. “It’s completely disappointing that it has stuck,” Eyob said of the Common Framework. “We trusted the fund and we trusted G20 countries.”Ethiopia’s bilateral creditors co-chaired by France and the largest creditor China – which Eyob said was represented by China Eximbank – recommitted to granting debt relief in August, but further progress requires an IMF deal.France and China have “done a commendable job in navigating through this difficult journey,” said Eyob.He said Ethiopia was requesting “exceptional access” to IMF funding of more than 100% of its allowance, but declined to say how much exactly.”I think the (IMF) board would see that the government has done everything in its power to resolve this conflict peacefully,” he said. “As you know, we have been calling for the AU process, the AU-led peace talks, which is advancing now.”Peace talks that would have been the first formal negotiations between the two sides were scheduled last weekend, but delayed due to logistical reasons, diplomatic sources said.”Ethiopia does not have a solvency issue, it’s more of a short-term liquidity issue,” Eyob said, adding that there was no danger of it defaulting on its debts.He declined to specify how much debt relief the country requires, saying that the IMF still needs to finish a Debt Sustainability Analysis, which forms the basis of debt restructurings.Eyob said he expected the DSA to be finalised in November.The IMF did not immediately respond to a request for comment.Ethiopia’s government plans to finish working out how its banking sector will be liberalised this year, Eyob said, adding that about a dozen European and African banks had expressed interest.GDP growth was “over 6%” in the year to July 2022, he said, and the forecast is 9.2% for 2023, Eyob said.The east African country has long experienced foreign exchange shortages, with the IMF forecasting its reserves to fall from 1.5 months of import cover in 2021 to 0.7 this year.The birr was this week trading at 90 to $1 on the black market, compared to 53 in banks.”We’ve made it very clear, we want to reform our forex regime,” Eyob said. “So the exchange rate unification remains one important policy goal, but we are just doing it gradually.” More

The newspaper said Hunt would put off for a year a plan to reduce the basic rate of income tax next April, to save 5 billion pounds ($5.6 billion) a year. It said Hunt needed to plug a black hole in the public finances of 72 billion pounds. ($1 = 0.8953 pounds) More

SHANGHAI (Reuters) -China’s central bank may drain cash next Monday via a partial rollover of maturing medium-term loans, while keeping policy rates steady, a Reuters survey showed, as ample market liquidity and a sliding yuan reduce the need for imminent policy easing. But some still expect the People’s Bank of China (PBOC) to ease banks’ reserve requirements next month, to aid an economy hit by the COVID-19 pandemic and property market woes. Most of the 27 participants in the poll conducted this week said they predicted the PBOC will partially renew 500 billion yuan ($69.55 billion) worth of policy loans on Monday. Only three expected a full rollover, while another three anticipated cash injections.All of the poll respondents forecast that the interest rate on the one-year medium-term lending facility (MLF) will be kept unchanged, at 2.75%.Traders point out that China’s banking system is not short of cash – evidenced by the fact that market rates are lower than policy rates, curbing demand for central bank loans.The scope for easing is also limited by a weak yuan, which has lost more than 11% against the dollar so far this year.”We don’t expect policy rate cuts until pressure on the currency eases,” wrote Zichun Huang, an economist at Capital Economics.Zhou Maohua, analyst at China Everbright (OTC:CHFFF) Bank, said September’s robust credit expansion also made monetary easing less urgent.New bank lending in China nearly doubled in September from the previous month and far exceeded expectations. But some participants still expect the PBOC to step up liquidity injection into the banking system, in a bid to accommodate fiscal expansion. ($1 = 7.1895 Chinese yuan) More

The ECB has raised rates twice already this year, but at 0.75%, its deposit rate is still seen far below levels most consider to be appropriate when inflation is running at 10% and could hold above the bank’s 2% target for years to come. “Further interest rate hikes will be needed to bring the inflation rate back to 2% in the medium term – not just at the monetary policy meeting at the end of October,” Nagel said in a speech in Washington.”The ECB Governing Council must not let up too soon.”Markets currently price in a 75 basis point move on Oct. 27, the same as September’s increase, and few if any policymakers have pushed back publicly on these expectations. “As monetary policy continues to normalise, we will also need to look into scaling back Eurosystem asset holdings, which amount to almost 5 trillion euros,” Nagel added. While the ECB has provided no timeline for reducing its balance sheet, a process often called quantitative tightening, policymakers appear to be advocating a start only in 2023, arguing that the bulk of the rate hikes should take place before the ECB starts letting some of its debt pile expire. Monetary policy tightening is needed as inflation is likely to stay high, and Nagel predicted Germany’s rate would reach more than 7% next year.A complication in the process is that the 19-country euro zone faces a recession with Germany, its biggest economy, likely among the biggest losers.”GDP (in Germany) could decline significantly in the final quarter of 2022 and the first quarter of 2023,” Nagel said. “This would imply a recession, that is a significant, broad-based and longer-lasting decrease in economic output.” More

KFC’s U.S. Chief Operating Officer Monica Rothgery, Chief Financial Officer Trip Vornholt and Jeff Griffin, its director of national field operations will leave the company this year, the report said, citing company messages without specifying between whom.KFC and Yum Brands did not immediately respond to Reuters’ requests for comment.”Because of these interest rates, some associates across Yum! and its brands who qualify for pensions have decided to retire in 2022,” the report quoted one of the KFC messages as saying.Vornholt will leave at the end of November, the report said.The Federal Reserve has raised its policy rate from near-zero in March to the current range of 3.00% to 3.25% as it battles inflation. A fourth straight 75-basis-point interest rate hike is expected next month after data on Thursday showed inflation accelerating faster than expected in September. More