Restructuring Debt of Poorer Nations

According to International Momentary Fund (IMF), low-income countries face fewer debt challenges today than they did 25 years ago, thanks in particular to the Heavily Indebted Poor Countries initiative, which slashed unmanageable debt burdens across sub-Saharan Africa and other regions.

Although debt ratios are lower than in the mid-1990s, debt has been creeping up for the past decade and the changing composition of creditors will make restructurings more complex.

Improvements to the Group of Twenty Common Framework for Debt Treatments—from which the 73 countries that were eligible for the G20 Debt Service Suspension Initiative (DSSI) in 2020-21 can now benefit—could clear a path through this increasing creditor complexity.

So far only a handful of countries have requested to use the common framework, which was launched in November 2020, underscoring the need for change to build confidence and encourage participation at a pivotal moment for heavily indebted low-income countries.

Rising risks of debt distress

Spurred by low interest rates, high investment needs, limited progress raising additional domestic revenue and stretched systems for managing public finances, the debt ratios of DSSI countries have increased, partly reversing a decline seen in the early 2000s.

Now, the economic shocks from COVID-19 and the war in Ukraine are adding to the debt challenges faced by low-income countries, even as central banks start to raise interest rates.

About 60 percent of DSSI countries are at high risk of debt distress or already in debt distress—when a country has started, or is about to start, a debt restructuring, or when a country is accumulating arrears.

Among the 41 DSSI countries at high risk of or in debt distress, Chad, Ethiopia, Somalia (under the HIPC framework) and Zambia have already requested a debt treatment. Around 20 others exhibit significant breaches of applicable high-risk thresholds, half of which also have low reserves, rising gross financing needs, or a combination of the two in 2022.

On the domestic side, difficult trade-offs will exist between the need to restructure sovereign debt owed to domestic banks, in some cases, and the impact of such restructurings on financial sector stability and the capacity of domestic banks to finance growth.

Local currency debt for the median DSSI country doubled from 7% of gross domestic product in 2010 to 15% in 2021. For those DSSI countries with market access, the share more than tripled from 8 percent to 28 percent in 2021. Many of these DSSI countries have also experienced a tightening of sovereign-bank links, with larger holdings of domestic sovereign debt at domestic banks.

Coordination challenge

On the external side, increased diversity of creditors raises important coordination challenges.

In past decades, DSSI countries borrowed mainly from Paris Club official creditor nations and private banks, alongside multilateral institutions. Today, China and private bondholders play a much larger lending role.

The share of DSSI countries’ external debt owed to Paris Club creditors fell to 11% in 2020, from 28% in 2006. Over the same period, the share owed to China rose to 18% from 2% and the share of Eurobonds sold to private creditors increased to 11 from 3%.

The situation differs significantly across countries. Averages conceal a diversity of debt composition, from the shares of bilateral, multilateral and private creditors, to the composition of official bilateral creditors themselves.

China is now the largest official bilateral creditor in more than half of DSSI countries, including when counting all 22 Paris Club creditors as a single pool. China would therefore play a key role in most DSSI countries’ debt restructurings that would involve official bilateral creditors.

While the diversity of creditor compositions calls for greater attention to country specificities, appropriate coordination mechanisms will be the key in all cases.

Common framework

Putting in place mechanisms that ensure coordination and confidence among creditors and debtors has become urgent. Improvements to the G20 Common Framework could play an important role by ensuring broad participation of creditors with fairer burden sharing.

Experience so far shows that greater clarity on restructuring steps, earlier engagement of official creditors with the debtor and with private creditors, a standstill in debt service payments during negotiations, and specifying the mechanics of comparability of treatment is still needed.

Strengthening debt management and debt transparency should also be priorities. This would help countries manage debt risks, reduce the need for debt restructurings, and facilitate more efficient and durable resolution if debt becomes unsustainable.
 
It is in the interest of debtor countries as well as their creditors that debt restructurings, where necessary, are accomplished speedily, smoothly, and efficiently. This would support global stability and prosperity, too.

 

Bangladesh needs millions of tons of rice

There is a chance of record production of rice in Bangladesh in this year. As compared to last year, the rice production may increase by 2% to 36.320 million tons this year. 

Despite that, the country will have to import 1.500 million tons of rice, wheat and corn. However, it will be difficult for the country to import wheat amid the ongoing Russia-Ukraine war. The country might need to pay extra for that.

The US Department of Agriculture revealed this information in a report on the production of food grain in Bangladesh. The report, says that Bangladesh may face problems in importing phosphate fertilizer in the coming Aman season.

This is because Bangladesh usually imports 30% of its total demand for phosphate fertilizer from Russia. The country imports around 40% of the total wheat from Russia and Ukraine. However, it may not be possible to import these products from the two countries at the moment. If one looks for alternative sources in this regard, rising prices pose serious threats.

Lately, the Food and Agriculture Organization (FAO) published a report on the rise of food prices. It says after 1990, the price of food items worldwide was the highest in the month of March this year. The price of food may rise further in April. A huge number of people are going to be in trouble because of this. Another FAO report states that food prices are rising rapidly in Bangladesh as well.

The FAO director also feared a rise in food prices all over the world as an impact of the Russia-Ukraine war. He remarked that six countries, including Bangladesh and Egypt, are at the highest risk in this regard.

When asked about this, Agriculture Minister Abdur Razzaque said that the government is paying a huge subsidy for the collection of paddy and rice and the distribution of fertilizer. The amount of the subsidy is increasing with the rise of agricultural products. Essentials like fertilizer and wheat would be imported from alternative sources. The farmers of the country won’t face any problem.

According to the report of the FAO, the price of coarse rice in Bangladesh in March was Tk 47.5/kg which was one and a half per cent higher as compared to the previous year.

The price of medium quality rice was around Tk 66/kg on average which was around 5.6 per cent higher than the price in the previous year at the same time.

Citing local media, the report said that one of the main reasons for the high price of rice is that many big companies have embarked on rice business. the price has gone up as they hoarded huge amounts of rice.

Meanwhile, according to the daily food grain report of the Ministry of Food for April 07, 2022, the government warehouse has a stock of 1577,000 tons of food. In the last two months, it has decreased by about 500,000 tons. As a result of increasing the distribution of rice and wheat in the government’s social security program, stocks have decreased, which will decrease further in the coming days. However, these reserves are still considered to be sufficient.

Speaking regarding the issue, AMM Shawkat Ali, former Secretary of the Agriculture Ministry, said it was presumed that the Russia-Ukraine war would have an impact on the food market. Now the prices of wheat and fertilizer have gone up and it can increase further in the coming days. Therefore, Bangladesh will have to move towards alternative markets in the long run. For this we have to increase our diplomatic efforts.

According to the USDA report, Bangladesh might have to import 7.5 million tons of wheat, 2.3 million tons of corn and 700,000 tons of rice. Bangladesh will need a total of 37 million tons of rice this year which is one per cent higher than the last year.

The consumption of wheat and rice has also increased during the pandemic, the organization reported. It thinks that Bangladesh will import these products from India as an alternative to Russia and Ukraine.

 

State Department says no truth in claims of US involvement in regime change in Pakistan

The US State Department has said that there’s absolutely no truth in Imran Khan’s claim that Washington is behind an alleged conspiracy to overthrow his government.

Khan has been claiming that his independent foreign policy has annoyed foreign powers and they have financed the opposition’s no-trust move against him.

In an address to the nation on Friday, Khan had reiterated his allegations that a senior US diplomat threatened a regime change in Pakistan.

In another statement,Khan also named the official — Donald Lu, Assistant Secretary, Bureau of South and Central Asian Affairs in the Department of State — who allegedly threatened a regime-change in Pakistan during a meeting with the then Pakistani Ambassador Asad Majeed Khan.

Official says Washington supports Pakistan’s constitutional process

At a Friday evening news briefing in Washington, a journalist reminded Deputy State Department Spokesperson Jalina Porter that in his address to the nation, Khan renewed his allegation that the US had encouraged the no-confidence vote, saying that he had a diplomatic cable to prove it.

“Let me just say very bluntly there is absolutely no truth to these allegations,” said Ms Porter.

“Of course, we continue to follow these developments, and we respect and support Pakistan’s constitutional process and rule of law. But again, these allegations are absolutely not true,” she added.

A prestigious diplomatic news site, ‘Foreign Policy,’ noted in its latest report on Pakistan that the future of Islamabad’s fragile relationship with Washington remains foggy after Khan levelled serious allegations against the United States, making it a central part of their political crisis”.

The report, however, argued that Khan’s description of the alleged US involvement sounded more like “a US official complaining about the Pakistani prime minister, not plotting his ousting”.

The Washington-based news site noted that in Pakistan, public mistrust of the United States runs deep, in great part because there is a history of US meddling in Pakistan’s internal politics.

The report warned that Khan’s allegations have hurt US-Pakistan relations, especially after Khan publicly named the US official involved in the so-called plot.

The report pointed out that their ties were unsettled before this political crisis too as each country deepens relations with the other’s top rival — Washington with New Delhi and Islamabad with Beijing”.

The report warned that Khan’s allegation of the United States orchestrating regime change will make it more difficult to rein in the unmoored relationship.

Courtesy: Dawn

Imran Khan’s term comes to unceremonious end

In Pakistan, the opposition's no-trust motion against Prime Minister Imran Khan succeeded an hour past midnight on Sunday, with 174 members in the 342-strong house voting in favour of the resolution.

PML-N's Ayaz Sadiq, who was chairing the session after Asad Qaiser resigned as speaker, announced the result. As a result, Imran Khan ceased to hold the office of Prime Minister, according to Article 95 of the Constitution.

Imran Khan is the first prime minister in Pakistan's history to have been removed from office through a no-confidence vote. Before him, Shaukat Aziz in 2006, and Benazir Bhutto in 1989, survived the moves against them.

Before adjourning the session, Sadiq said the nomination papers for the new prime minister may be submitted by 2pm today (Sunday) and scrutiny would be done by 3pm. He summoned the session on Monday at 11am and said the new premier would be elected then.

Later, it was announced that the assembly would meet at 2:00pm instead.

Earlier, after announcing the result, Sadiq gave the floor to Shehbaz Sharif, who is the joint opposition's candidate for the post of prime minister. Shehbaz paid tribute to all leaders part of the joint opposition, and vowed that the "new regime would not indulge in politics of revenge".

"I don't want to go back to bitterness of the past. We want to forget them and move forward. We will not take revenge or do injustice; we will not send people to jail for no reason, law and justice will take its course," Shehbaz said.

After Shehbaz, Bilawal took the floor and congratulated the house for passing a no-trust resolution against a premier for the first time in history.

"On April 10, 1973, this house approved the Constitution. On April 10, 1986, Benazir Bhutto ended her exile and returned to Lahore for her struggle against Gen Ziaul Haq," Bilawal recalled.

"Today is April 10, 2022, and the one we had declared selected, the non-democratic burden this country was bearing for the past 3 years, today, April 10, 2022, welcome back to purana (old) Pakistan."

Minutes before voting began, National Assembly Speaker Asad Qaiser resigned from his post, saying he could not take part in a foreign conspiracy to oust the prime minister.

Qaiser's resignation came almost 15 minutes before midnight, which according to legal experts, was the deadline to implement the Supreme Court's orders to conduct voting on the no-trust motion.

Before announcing his resignation, Qaiser said that he had received "important documents" from the cabinet, which he invited the leader of the opposition and the chief justice of Pakistan to see.

"In line with our laws and the need to stand for our country, I have decided that I can't remain on the position of speaker and thereby resign," he said.

"Because this is a national duty and it is the Supreme Court's decision, I will ask the panel Chairman Ayaz Sadiq to run the session," Qaiser said.

After Sadiq took the chair, he paid tribute to Qaiser for remaining with his party and opting for an "honourable exit".

"He [Qaiser] had a very good relationship with all of us, a working relationship. He tried to conduct all these proceedings with dignity and together with the opposition."

Maritime security and rules based order

Maritime scholars and practitioners often grapple with a question, what should be the desirable architecture for maritime security, and how should this be implemented properly? 

It is a complex issue, because security may be best delivered in collective and cooperative settings, there is often a lack of clarity about how cooperation between multinational security agencies should be practically operationalized.

Two aspects seem particularly thorny. First, how does one account for the material and strategic costs of military cooperation? It is no secret that naval collaboration entails political costs.

India, which has long faced pressure from Russia to reduce strategic engagement with the United States is familiar with the costs of strategic cooperation. ASEAN, too, with a history of balancing between the United States and China, is conscious of the downsides of maritime collaboration.

There is also a second and more complicated dimension. If integrative frameworks are rooted in national security and national interest, can region-wide maritime cooperation ever be functionally effective?

Notwithstanding the acknowledgement of the need for collaboration in the maritime domain, the political leadership in many countries is unclear about the extent of acceptable cooperation. Navies broadly know they must work together, but to what degree, to what specific ends, and at what cost, remains unexplained.

The preference for balanced interactions is markedly high in the Indian Ocean region, where many states regard non-traditional security as the holy grail of maritime operations.

In the absence of clear guidance about how maritime cooperation is to be operationalised, navies engage in short-term arm’s length collaboration, which does not translate into much over the longer term.

Each side develops its own model of cooperative security, based entirely on the appreciation of national interests.

At times, the military interactions are robust – such as during constabulary and humanitarian missions – but for the most part, maritime forces avoid working together in formats that risk provoking powerful players and disturbing the strategic balance of power.

The preference for balanced interactions is markedly high in the Indian Ocean region, where many states regard non-traditional security as the holy grail of maritime operations. Particularly in South Asia, human security and livelihood challenges are accorded priority over traditional security threats.

Despite its record of aggression in the Indo-Pacific, China is widely regarded as an economic and security partner, and not as a threat to the rules-based order.

Members of the Royal Australian Air Force, Japan Maritime Self Defense Force, Indian Navy, and the Royal Canadian Air Force at the conclusion of exercise Sea Dragon, an annual multilateral anti-submarine warfare exercise that improves interoperability in the Indo-Pacific, 28 January 2021.

India, of course, is an exception to the consensus in South Asia. New Delhi recognizes the China challenge in ways its neighbors do not.

From an Indian standpoint, a Chinese maritime presence in the Indian Ocean has implications that go beyond naval confrontation.

The realists in New Delhi know that Chinese dual-use ports under the Belt and Road Initiative are meant to establish Chinese power and hegemony in India’s natural sphere of influence, and shift the regional balance of power away from Delhi.

Yet the Chinese threat in India’s backyard is qualitatively different from the challenge in the South China Sea. Unlike in Southeast Asia, where Beijing aspires to full-spectrum dominance, China’s strategy in the Indian Ocean is one of incremental stakeholdership. If India used force against China, New Delhi not Beijing would be seen as the aggressor.

In the Western Pacific, too, the picture is mixed. Southeast Asian states have resisted Chinese efforts to dominate the littorals, and even upped their collaboration to help fight irregular security challenges. But non-traditional security isn’t the low hanging fruit it was once assumed to be.

Despite successes in counter-piracy and humanitarian relief, law enforcement agencies remain reluctant to jointly tackle armed robbery at sea, illegal fishing and other crimes that occur in coastal spaces. For all their professed zeal for integrated operations, navies and coastguards remain unwilling to allow foreign partners access into coastal waters.

The imperative to forge issue-based coalitions in a post-Covid world – where resources are scarce and commitments diverse – is bound to draw likeminded states into tighter embrace.

Against this backdrop, can the AUKUS trilateral security pact, the Quad and ASEAN succeed in creating the conditions for sustained cooperation in the Indo-Pacific region?

The foregoing suggests it would be difficult. However, that should not dishearten avid proponents of vigorous strategic collaboration, for country priorities are wholly circumstantial and shaped by the vagaries of geopolitics. India, which has consistently advocated Security and Growth for All in the Region (SAGAR), is today more confrontational towards China (in the wake of the border crisis in Ladakh). Chinese aggression in Taiwan and Hong Kong has forced ASEAN also into hardening its Indo-Pacific posture.

But scholars and practitioners should beware of reducing maritime security to a simple contest of narratives. Those who insist the rules-based security order must focus on enforcement and red lines of acceptable conduct should recognize that order rather than strict rules animates the policy preferences of many Asian states.

Countries ought to be more creative in generating consensus around long-term cooperation. The aim should be to identify avenues for association and partnerships in areas where states may not necessarily agree on a way forward.

The imperative to forge issue-based coalitions in a post-Covid world – where resources are scarce and commitments diverse – is bound to draw likeminded states into tighter embrace.

The need of the hour is for maritime forces to improve interoperability, expand collaboration in hard and soft security, and share the burden of littoral security. The habits of cooperation they now foster will hold navies in good stead when the threats begin to crystallize in ways that few today imagine or anticipate.

Courtesy: The Bangladesh Chronicle

UN suspends Russia from human rights body over Ukraine

The UN General Assembly has suspended Russia from the UN Human Rights Council over reports of gross and systematic violations and abuses of human rights by invading Russian troops in Ukraine. 

It may be recalled that UNHRC had recently approved four anti-Israel and pro-Palestinian resolutions, including a call for a limited arms embargo against the Jewish state, as it wrapped up its 49th session. One may say is a tit for tat by the group of countries living under the US hegemony.

The US-led push garnered 93 votes in favor, while 24 countries voted no and 58 countries abstained. A two-thirds majority of voting members in the 193-member General Assembly in New York - abstentions do not count - was needed to suspend Russia from the 47-member Geneva-based Human Rights Council.

Suspensions are rare. Libya was suspended in 2011 because of violence against protesters by forces loyal to then-leader Muammar Gaddafi.

It was the third resolution adopted by the 193-member General Assembly since Russia invaded neighboring Ukraine on February 24. The two previous General Assembly resolutions denouncing Russia were adopted with 141 and 140 votes in favor.

The resolution adopted on Thursday expresses "grave concern at the ongoing human rights and humanitarian crisis in Ukraine," particularly at reports of rights abuses by Russia.

Russia says it is carrying out a "special military operation" that aims to destroy Ukraine's military infrastructure and denies attacking civilians. Ukraine and allies say Moscow invaded without provocation.

Russia had warned countries that a yes vote or abstention will be viewed as an "unfriendly gesture" with consequences for bilateral ties, according to a note seen by Reuters.

Russia was in its second year of a three-year term on the Geneva-based council, which cannot make legally binding decisions. Its decisions send important political messages, however, and it can authorize investigations.

Moscow is one of the most vocal members on the council and its suspension bars it from speaking and voting, officials say, although its diplomats could still attend debates. "They would probably still try to influence the Council through proxies," said a Geneva-based diplomat.

Last month the council opened an investigation into allegations of rights violations, including possible war crimes, in Ukraine since Russia's attack.

Speaking before the vote, Ukraine's UN Ambassador Sergiy Kyslytsya said a yes vote would "save the Human Rights Council and many lives around the world and in Ukraine," but a no vote was "pulling a trigger, and means a red dot on the screen - red as the blood of the innocent lives lost."

The United States announced it would seek Russia's suspension after Ukraine accused Russian troops of killing hundreds of civilians in the town of Bucha.

Russia's Deputy UN Ambassador Gennady Kuzmin said now was not the time for "theatrical performances" and accused Western countries and allies of trying to "destroy existing human rights architecture."

"We reject the untruthful allegations against us based on staged events and widely circulated fakes," Kuzmin told the General Assembly before the vote, defending Russia's record as a Human Rights Council member.

After abstaining on the previous two General Assembly votes, Russia's partner China opposed the resolution Thursday.

"Such a hasty move at the General Assembly, which forces countries to choose sides will aggravate the division among member states, intensify the confrontation between the parties concerned - it is like adding fuel to the fire," China's UN Ambassador Zhang Jun said before the vote.

 

It may be recalled that UNHRC had recently approved four anti-Israel and pro-Palestinian resolutions, including a call for a limited arms embargo against the Jewish state, as it wrapped up its 49th session. One may say is a tit for tat by the group of countries living under the US hegemony.

 

Can barter trade between Iran and Pakistan become a reality?

Despite close political relations and geographical proximity, sanctions by United States on the Islamic Republic have prevented Iran-Pakistan economic ties from realizing their full potential, solely because the Islamic Republic of Iran cannot access international banking.

To resolve the mentioned problem, the two countries inked a barter trade agreement during the meeting of their Joint Economic Committee in Tehran in November 2021.

According to the government officials of the two countries, under the framework of this agreement, the two countries aim at boosting annual trade to US$5 billion.

Although barter trade is clearly an effective tool for sidestepping economic sanctions on Iran, the question is, “will it be enough for Iran-Pakistan trade to get back on track?”

Sanctions and solutions

The trade between Iran and Pakistan has been overshadowed by the US sanctions. The two countries having great historical and cultural ties, have been stripped of opportunities for mutually beneficial business.

Bilateral trade between the two neighbors, which share a border of 960 kilometers, was reported at about US$300 million in 2021, while the value of Pakistan’s trade with China amounted to over US$27.8 billion in the same year.

Considering the significantly low level of trade between Iran and Pakistan, the two nations are going to use barter mechanisms as a solution that can remove some of the current barriers to trade and hopefully allow them to fully benefit from their mutual economic capacities.

Regulatory barriers

According to a Pakistani expert and Member of the Digital Economy Task Force in United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) Muhammad Anwar, although signing the barter trade agreement is a big step toward removing the barriers in the way of trade between the two countries, it is not enough for realizing the US$5 billion annual trade target.

In order for the barter trade agreement to be implemented effectively, the two countries should make several regulatory adjustments as well, Anwar stressed.

“There are regulatory matters that should be resolved as well]. Iran charges Pakistani trucks US$1 for each three kilometers distance in terms of the fuel price difference, despite that they need to buy fuel on open market rate in Iran,” Anwar said.

Iranian trucks carrying cargoes from Pakistan and going inside Pakistan don't need to pay any tax as per Pakistan government policy, he added.

Trading in national currencies

Anwar believes that another step that would help the two countries realize their economic potential is to use their national currencies for trade along with the barter trade mechanism.

“Current trade balance is in favor of Iran. Due to banking restrictions exports of Pakistan to Iran are less,” the official said.

Trading in national currencies will make the two sides able to diverse the variety of the exchange commodities and this way the trade between the two sides will be more balanced, Anwar stated.

Asked about the major items exchanged between Iran and Pakistan he said, “From Pakistan mostly foodstuff like rice, sesame seed, fresh fruits, minerals are being exported whereas from Iran side LPG, petrochemicals, consumer good, etc.”

According to the expert, Pakistan’s affordable agricultural products can meet the growing demand in Iran.

Developing Transit

Anwar, who is also the CEO of a transportation company called North South Transport Network (NSTN), further mentioned the transit capacities of the two countries as a perfect opportunity for the two sides to increase their trade balance.

Iran and Pakistan which are both members of the Economic Cooperation Organization (ECO), can also cooperate to improve transit trade corridors in Central Asia, he said.

“Pakistan and Iran are in the center of east and west. Pakistan is bordering with India and China the two largest populated countries in the world whereas Iran connects Turkey and CIS and beyond Turkey, Europe which is great consumer markets for Asian products,” the official explained, adding “Iran and Pakistan can play a great role in connecting east with west.”

Islamabad-Tehran-Istanbul train is an example of the works that can be done to fully realize the connectivity and capacity in this regard, the official mentioned.