Wednesday, 13 July 2022

Bangladesh: IMF team arriving on Thursday

A delegation from the International Monetary Fund (IMF) is scheduled to reach Dhaka on Thursday on a nine-day trip to discuss the government’s request for a US$4.5 billion support program.

Rahul Anand, Division Chief in the IMF’s Asia and Pacific Department, will lead the team during talks with the senior officials of the Finance Ministry, the central bank, the National Board of Revenue and the Economic Relations Division.

If everything proceeds smoothly, the loan deal could be finalized by October this year, said an official of the Finance Ministry yesterday.

The request for IMF support comes to shore up the precarious foreign currency reserves, which slipped to US$39.8 billion — the lowest since October 14, 2020. This is enough to cover about five months’ import bills.

Typically, the World Bank and the IMF prescribe an import cover of three months, but in times of economic uncertainty, they advise keeping sufficient reserves to meet 8-9 months’ imports.

Going forward, even though imports are slowly contracting, the elevated inflation levels around the world mean the odds of a slowdown in both remittance inflows and export orders, two sources of foreign currency for Bangladesh.

The IMF officials will look into the impacts of the Russia-Ukraine war and escalated global commodity prices on the Bangladesh economy, the status of recovery from the global coronavirus pandemic and the government’s large subsidy program.

They will see whether the subsidy spending is justified and compare it with the other countries. If it is deemed excessive, the IMF mission may suggest ways to trim it.

Subsidy spending in the just-concluded fiscal year is Tk 66,825 crore, 24.1% more than the original allocation thanks to the spiral in fuel and fertilizer prices in the global market.

In this fiscal year’s budget, Tk 82,745 crore has been earmarked for subsidy.

But considering the price trend of oil, gas, and fertilizer in the international market, the estimated spending can be 15-20% higher than the initial estimates, said Finance Minister AHM Mustafa Kamal in his budget speech in June.

The conditions could include measures to increase revenue, lower subsidy expenditure, market-based exchange rate and lending rate, and reforms in the banking sector and tax administration, the Finance Ministry official said.

Bangladesh has unveiled a relatively smaller budget for the current fiscal year, put on hold low-priority projects, suspended foreign tours of government officials, adjusted the prices of gas and diesel to some extent, and loosened the exchange rate policy.

The government has also signalled that it may raise the price of fuel oil and has proposed to the Bangladesh Energy Regulatory Commission to increase the electricity tariff to cut the subsidy burden.

Surjit Bhalla, Executive Director of the IMF for India, Bangladesh, Bhutan and Sri Lanka, who represented Bangladesh on the board of the Washington-based lender, is also set to visit Bangladesh separately.

 

Israel to push Biden on trade corridor connecting Israel and Gulf

“Corridors for Economic Integration”

A new highway and railway system throughout Israel, Jordan and Saudi Arabia could facilitate tens of billions of dollars in trade, according to a special paper prepared by the Finance Ministry ahead of US President Joe Biden’s visit to Israel.

The paper was drafted by Shira Greenberg, the ministry’s chief economist, under the direction of Finance Minister Avigdor Liberman. Government officials said that Liberman met in recent days with Prime Minister Yair Lapid to ensure that its main points would be brought up in talks with Biden during his visit to Israel, which begins on Wednesday and will end on Friday.

The paper – obtained by The Jerusalem Post and prepared in English so it could be shared with the Biden administration – pushes for a new plan called “Corridors for Economic Integration” that would create a regional transportation network including railways and highways linking Israel with Jordan, Saudi Arabia and the Gulf.

“By creating a direct connection between the Gulf and the Mediterranean, the network will allow for dramatically shorter shipment times between East and West,” the paper claims. “The project thus has the potential to facilitate trade on both a regional and global level, in addition to enhancing regional economic cooperation.”

Some sections of the network are already in stages of development, according to the paper. In Israel, a railway runs from the port of Haifa to Beit She’an, which is only 10 km. from the border with Jordan.

In Saudi Arabia, the North-South Railway links the east and center of the country with the north, all the way up to the border with Jordan.

In the Gulf, a railway under development there is being planned to connect those of all Gulf countries, in particular railways in Saudi Arabia, the United Arab Emirates and Bahrain.

“By creating a direct connection between the Gulf and the Mediterranean, the network will allow for dramatically shorter shipment times between East and West.”

The distance, the paper said, of the “missing link” – between the Saudi-Jordanian border and the crossing between Israel and Jordan where the railway almost reaches – is just 200 kilometers.

The network, the paper claims, could facilitate trade between the Gulf, Europe, North Africa and the east coast of the Americas. “The existence of numerous relevant and significant trade flows is expected to provide the project with robust demand – as traders in all relevant countries will seek to take advantage of reduced shipment times and direct access to regional markets,” it says.

In the paper, the Finance Ministry calls on the Biden administration to take the reins of the initiative and to bring all of the relevant stakeholders together to facilitate its success.

“While preliminary analyses have shown the project’s potential, a full cost-benefit analysis carried out on behalf of all involved parties by an experienced international partner could also help the sides decide on the next steps,” it says. “We believe that the current positive atmosphere of regional cooperation will allow us the opportunity to move forward in these regards.”

 

 

 

Saturday, 9 July 2022

Biden visit to Middle East: What is more important Israel or Saudi Arabia?

Forty-nine years since making his first trip to Israel, US President Joe Biden is scheduled to arrive in the country on Wednesday on the first leg of his first presidential visit to the Middle East.

For years he has regaled Jewish and Israeli audiences with an account of a meeting he had during that trip with then-prime minister Golda Meir, who told him that Israel’s secret weapon in dealing with Arab hostility was, “We have no place else to go.”

He later termed the meeting one of the most “consequential” of his life.

At that meeting, however, he complained to Meir about the Labor Party’s platform which he said was leading to “creeping annexation” of the territories. He also relayed to Meir that in Egypt he heard how the Egyptian officials believed in “Israel military superiority.” He concluded, as a result, that Israel should initiate the first step toward peace by unilateral withdrawals from nonstrategic areas.

A half-century breeds enormous changes. The US has changed dramatically, as has its position in the Mideast. Israel, too, has changed dramatically, as has its position in the world. But two things from that meeting remain constant, Biden is still opposed to Israel’s policies in the territories, and Israel’s sense that it has no place else to go infuses much of its strategic thinking – including Iran.

On Biden’s upcoming visit, both in Israel and in Saudi Arabia, Iran issue is going to take up much more room than the occupied territories.

Another issue, which came to the fore only a few months after Biden’s initial visit, will also feature prominently, oil. His visit in the late summer of 1973 came just before the Arab countries discovered oil as a strategic weapon, and began to use it.

Biden is the seventh sitting US president to visit Israel. It took 26 years before the first presidential visit to Israel, with Richard Nixon taking that leap in 1974. Since then, there have been 10 other presidential visits, including a one-day visit by Barack Obama in 2016 to attend Shimon Peres’s funeral. Nixon, Jimmy Carter and Donald Trump all visited once, George W. Bush and Obama visited twice, and Bill Clinton came here four times.

This will not be the first time a US president comes during an election campaign. Clinton came here in March 1996 – after organizing a “Summit of Peacemakers’’ in Sharm e-Sheikh – and made clear his preference for Peres, rather than the Likud leader running against him at the time, Benjamin Netanyahu.

Clinton’s support didn’t help, as Netanyahu eked out a razor-thin victory over Peres in elections held two months later. This should be a cautionary tale for Prime Minister Yair Lapid, who is hoping that Biden’s visit will give him a boost.

Historically, nods from US Presidents – though the optics are often powerful – have not necessarily translated into huge bonuses at the polls. Ask Netanyahu how much he was helped by the hug then-president Donald Trump gave him before the two elections in 2019, and the one in 2020. Trump was all-in for Netanyahu, yet Netanyahu didn’t get the votes he needed to form a coalition.

What Biden’s visit will do for Lapid is make him look prime ministerial. Photos of Lapid meeting and greeting Biden, and even audio of Biden praising the new acting prime minister, may help remove lingering doubt among those who believe that the onetime television journalist is not yet ready for the political prime time.

It is not, however, going to move voters from the pro-Netanyahu camp to the anti-Netanyahu camp headed by Lapid.

What is the goal? Beyond Lapid, what does Israel want from the Biden visit?

First of all, it just wants the visit itself. Presidential visits are still important for Israel because they reinforce the impression – an important one for Jerusalem in projecting power throughout the region and beyond – that its alliance with the US is steadfast and solid, and that it continues to enjoy a close and special relationship with Washington.

This not only deters those who might want to harm Israel, realizing that the US stands firmly behind it, but also encourages those who might want to get closer to Israel, because of Israel’s closeness to America. Presidential visits demonstrate that closeness.

Such a demonstration is especially important now, amid a constant drumbeat of stories about how Israel’s support in the US is on the decline, especially among Biden’s own Democratic Party, and especially among young voters in that party.

Secondly, Israel wants coordination on the Iranian dossier to come from this visit. It wants to coordinate with Biden regarding policy toward the Islamic Republic if there is no new nuclear agreement, and it wants to know what type of security architecture the US plans for the Mideast in that eventuality. Israel doesn’t only want to listen; it wants to give its input. Furthermore, Israel also wants to hear from Biden what the US plans to do if an agreement is signed, and Iran violates it.

Biden is scheduled to arrive Wednesday afternoon and will be leaving for Saudi Arabia on Friday. He will also be spending a few hours in the Palestinian Authority with PA President Mahmoud Abbas.

There, too, there will be meetings with interlocutors who want something. The Palestinians will want to hear Biden talk about a two-state solution, and provide concrete steps toward working toward a “diplomatic horizon.” They will want commitments regarding opening a consulate in east Jerusalem, reopening the Palestinian Liberation Organization’s office in Washington, and pledges of more financial support for the PA.

They are likely to be disappointed, as – unlike other presidents on trips to Israel and the Mideast – the Palestinian issue, resolving this issue, is nowhere near the top of the president’s agenda for this trip.

When discussions about a possible presidential visit became public a few months ago, Naftali Bennett was prime minister – the government was shaky, but still held. Even though the government has since fallen, a new prime minister is in office, and elections are four months away, the Americans proved very determined to go ahead with the visit.

Why visit Jerusalem at a time when the prime minister is not going to be able to make any significant promises, since in four months he may not be able to act on them. Why risk being seen as meddling in internal Israeli politics?

Israel is only a sidelight on this visit. Had Biden been coming only to Israel, he probably would have canceled and come next year, after the US midterm elections and when a new government would be in place in Jerusalem. But Israel is just the appetizer on this presidential voyage. Saudi Arabia is the main course.

Ironically, Biden is actually using the appetizer to explain to critics why he is moving on to the main course. He is using Israel to deflect criticism at home about visiting Saudi Arabia, despite that country’s human rights violations, despite its involvement in the killing of Saudi journalist Jamal Khashoggi, and despite Biden’s having said in the 2020 presidential campaign that it is a country that should be treated like a “pariah.”

One of the main purposes of this visit to the region, Biden said at a press conference in Spain last month, is to “deepen Israel’s integration in the region.”

“I think we’re going to be able to do that, which is good – good for peace and good for Israeli security,” he said. “That’s why Israeli leaders have come out so strongly for my going to Saudi Arabia.”

Biden is going to Saudi Arabia, where he will join a meeting of the Gulf Cooperation Council plus Iraq, Egypt and Jordan, and is expected to see Saudi Crown Prince Mohammed bin Salman, whom he has pointedly snubbed since becoming president. In Saudi Arabia, both Biden and the Saudis have their wants.

Biden wants, in fact he desperately needs, the Saudis to increase oil production to make up for shortfalls in supply caused by Russia’s invasion of Ukraine. This has led to skyrocketing prices in the US, with the average cost per gallon now standing at $4.79 a gallon (still well below the $8.96 Israelis pay per gallon at the pump).

The president is making his Mideast trip as the US economy is in the doldrums, sending his popularity numbers to new lows. Biden’s approval rating (39% on June 30) was almost 3 points lower than Trump’s at the same stage of his presidency. Low popularity isn’t because he has not put enough energy into the Mideast peace process, but, rather, primarily because of the economy – inflation and gas prices.

He hopes that in Saudi Arabia he can find a cure, at least, for gas prices, but this may be too high of an ask.

The Saudis, smarting from what they feel is the shabby way they were treated by Biden and this administration, are in no great rush to come to the president’s aid.

Lowering gas prices will help the Democrats – poised to get clobbered in five months in the US midterm election. But the Saudis aren’t interested in the Democrats doing well at the polls. If anything, they would prefer a Republican Congress and – in another two years – a Republican president.

Saudis also have their wants. They want the US to acknowledge that Riyadh has been a loyal strategic partner for 80 years; they want the US to acknowledge that the country has suffered from Houthi attacks; they want the Houthis reinstated on the American list of terrorist organizations; they want respect from Washington, and not to be viewed merely as America’s gas station.

In addition, they want assurances from Biden that they can count on the US in the future. The Saudis are looking for assurances that the US is not withdrawing from the region and is still willing to use its vast military power, and they want to hear how the US plans to protect them from Iran.

Biden will be flying into a region this week where a lot of different parties have a lot of different asks and expectations. Inevitably, some people are going to be disappointed, Biden himself may be among them. 

Iranian non-oil trade with neighbors up 18% during March-June 2022 quarter

The value of Iran’s non-oil trade with its neighboring countries increased 18% during the first three months of the current Iranian calendar year (March-June), as compared to the same period last year, the spokesman of Islamic Republic of Iran Customs Administration (IRICA) announced.

Ruhollah Latifi put Iran’s non-oil trade with its neighbors at 20.973 million tons worth US$12.363 billion in the three-month period.

He said trade with the neighbors accounted for 49% of the value and 59% of the weight of Iran’s non-oil trade during the period under review.

The country exported 16.05 million tons of non-oil goods worth US$6.736 billion to the neighboring countries in the three-month period of this year, indicating 20% rise in value, while 10% drop in weight, as compared to the same period last year, the official stated.

He named Iraq, Turkey, United Arab Emirates (UAE), Afghanistan, and Oman as the five top export destinations.

Latifi further announced that Iran imported 4.433 million tons of goods worth US$5.627 billion from its neighbors during this period, with 15% growth in value and one percent rise in weight YoY.

He named UAE, Turkey, Russia, Pakistan, and Oman as the five top sources of imports.

As previously announced by the IRICA head, the value of Iran’s non-oil trade with its neighbors during the previous Iranian calendar year 1400 was reported at US$51.875 billion, an increase of 43% YoY.

Alireza Moghadasi put the weight of non-oil trade with the neighboring countries at 100.131 million tons in the said year, stating that trade with the neighbors also increased by 23% in terms of weight.

The official put the annual non-oil exports to the mentioned countries at 75.445 million tons valued at US$26.29 billion, with a 29% rise in value and a 12% growth in weight.

Major export destinations of the Iranian non-oil goods were Iraq with US$8.9 billion, followed by Turkey (US$6.1 billion), United Arab Emirates (US$4.9 billion), Afghanistan US$1.8 billion) and Pakistan with (US$1.3 billion) in imports from the Islamic Republic, others countries included Oman, Russia, Azerbaijan, Turkmenistan, Armenia, Kazakhstan, Kuwait, Qatar, Bahrain, and Saudi Arabia, according to the official.

Moghadasi further stated that Iran imported 24.686 million tons of non-oil commodities worth over US$25.846 billion in the previous year, with a 60% growth in value and a 68%YoY increase in weight.

The United Arab Emirates was the top exporter to Iran during the period exporting US$16.5 billion worth of goods to the country, followed by Turkey, Russia, Iraq, and Oman, he stated.

Pakistan, Kazakhstan, Azerbaijan, Turkmenistan, Afghanistan, Armenia, Kuwait, Qatar, and Bahrain were other top neighboring countries that supplied goods to Iran in 1400, respectively.

Increasing non-oil exports to the neighboring countries is one of the major plans that the Iranian government has been pursuing in recent years.

Iran shares land or water borders with 15 countries namely UAE, Afghanistan, Armenia, Azerbaijan, Bahrain, Iraq, Kuwait, Kazakhstan, Oman, Pakistan, Qatar, Russia, Turkey, Turkmenistan, and Saudi Arabia.


Lift sanctions against Russia, urges Bangladesh Prime Minister

Sheikh Hasina, Prime Minister of Bangladesh has urged the Western countries to lift the sanctions on Russia, saying that millions of people across the world were suffering as the sanctions impacted global supply chains and increased prices food and other commodities.

Because of the US-led sanctions, food prices are skyrocketing and people are suffering everywhere.

“Punishing the people of the world, while trying to punish one country tantamount to human rights violation. This is why I think it is imperative that the US step away from this. I think everybody will want this,” she said while inaugurating a new building of the Ministry of Foreign Affairs in Dhaka.

The comments came at a time when people in Bangladesh are bearing the brunt of rising food, fuel and fertilizer prices and the government is being forced to take austerity measures that include limiting fuel use and electricity generation.

In late February, the Russia-Ukraine war started, bringing more miseries to the world still reeling from the pandemic.

The Western nations led by the United States have frozen about US$400 billion of Russian central bank’s assets and at least US$240 billion belonging to oligarchs. However, Moscow has roughly US$300 billion in foreign currency and gold reserves, and the ruble has now hit a seven-year high against the US dollar.

The UN has warned that Russia’s war in Ukraine could push up to 49 million people into famine or famine-like conditions because of its devastating impact on global food supply and prices.

According Europmonitor.com, global inflation may reach 7.9% in 2022. The average annual global inflation between 2001 and 2019 was 3.8%.

Hasina said the US-imposed sanctions have reduced the availability of goods, including those imported by Bangladesh, while the shipping costs have gone up. Not only in Bangladesh, but people in the US, Europe, UK and the rest of the world are also affected by the sanctions.

People in developing and developed countries are affected by the restrictions, and the US should understand this, she said, questioning if sanctions were effective at all in hurting a particular country.

“The developed countries should think about it.”

She said the Ukraine war and sanctions came just when Bangladesh was recovering from the shock of the pandemic. “This has become a great challenge for Bangladesh to overcome.”

The war should not affect shipping of goods from one country to another and international trade must be uninterrupted, she said.

Bangladesh is trying to increase food production. “But to boost food production, we need fertilizer, diesel and other related materials. We are not getting those.”

 

Friday, 8 July 2022

United States slaps new oil sanctions on Iran

 

The United States Department of Treasury this week imposed more oil and petrochemical industry sanctions on Iran amid stalled nuclear negotiations.

"While the United States is committed to achieving an agreement with Iran that seeks a mutual return to compliance with the Joint Comprehensive Plan of Action, we will continue to use all our authorities to enforce sanctions on the sale of Iranian petroleum and petrochemicals," said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson.

In a news release, the Treasury said it would sanction an international network of companies and individuals involved in the marketing of Iranian crude oil and petroleum products in East Asia.

Secretary of State Anthony Blinken said in a tweet that the US is imposing the sanctions "absent a commitment from Iran to return to the JCPOA."

The latest round of talks between Iran and the US facilitated by the European Union ended inconclusively last week, with participants saying they would resume soon.

Meanwhile, Iran has stepped up its demands on the US side, according to the US Special Envoy for Iran—demands that have nothing to do with the nuclear deal.

"They have, including in Doha, added demands that I think anyone looking at this would be viewed as having nothing to do with the nuclear deal, things that they've wanted in the past," Robert Malley told NPR this week.

"The discussion that really needs to take place right now is not so much between us and Iran, although we're prepared to have that it's between Iran and itself, that they need to come to a conclusion about whether they are now prepared to come back into compliance with the deal, if we're prepared to do the same, and we've said we are," the Special Envoy for Iran also said.

Iran's Foreign Minister, who led the latest talks with the EU, said, as quoted by Reuters, "We are prepared to resume talks in the coming days. What is important for Iran is to fully receive the economic benefits of the 2015 accord."

 

Pakistan: Business leaders term hike in interest rate ‘disastrous for fragile economy’

According to a Dawn newspaper report, the business community of Pakistan has strongly condemned the decision of the State Bank of Pakistan (SBP) to increase the interest rate to 15%.

Trade and industry representatives said the move would prove highly disastrous for industries and the SME sector. They demanded that the government intervene and get the central bank’s decision withdrawn with immediate effect.

Irfan Iqbal Shaikh, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said he did not understand SBP’s logic in raising the interest rate to 15% at a time when power, gas and petroleum prices, along with looming uncertainty, have already reached new highs.

“The interest rate in Pakistan is three to four times higher than in the region, and in such circumstances, no stakeholder would dare to set up any new industries or go for any vertical expansion of their units,” he said.

“It seems that the government is more focused on dealing with political issues rather than showing any seriousness in tackling the issues of the business community. No planning is being done while the economic situation is getting out of control,” said Shaikh.

FPCCI President urged the government to listen to stakeholders and implement policies that will help the country recover from its economic crisis.

Abdul Rasheed, President, Site Association of Industry (SAI) said while the industry was already perturbed over the interest rate, the SBP has continued to crawl up the policy rate, bringing more trouble in the functioning of the industries.

He said many industries, including the textile sector, have invested billions of dollars in importing machinery in the last three years at a 4 to 4.5% markup rate after obtaining loans from the banks. At the 15% policy rate, industrialists and exporters would stop importing machinery, leading to a suspension in industrial activities besides creating unemployment and a law and order situation.

Muhammad Idrees, President, Karachi Chamber of Commerce and Industry (KCCI) said the SBP has increased the policy rate under some pressure, which would plunge many industries into a default situation. “The government can make borrowing, but the industries will be unable to take loans,” he added.

“What is the government doing? Will it put the economy on track by taking such decisions? “deplored Ijaz Khokhar, Chief Coordinator, Pakistan Readymade Garments Manufacturers and Exporters questioned the rationale.

“In Sialkot alone, a huge cottage industry (SMEs) comprising around 7,000 small units has been in operation for a long time. So they all would be no more gradually due to the increase in the interest rate at 15% which is already too much higher than our neighbouring countries,” he explained.

In a statement, Haris Ateeq Vice President, Lahore Chamber of Commerce & Industry (LCCI) also condemned the decision, expressing concern that further increases in discount rates would raise the cost of doing business.