Tuesday, 24 January 2023

Sri Lanka: China offers debt moratorium

The Export-Import Bank of China has offered Sri Lanka a two-year moratorium on its debt and said it will support the country's efforts to secure a US$2.9 billion loan from the International Monetary Fund (IMF), according to a Reuters report.

India wrote to the IMF earlier this month, saying it would commit to supporting Sri Lanka with financing and debt relief, but the island nation also needs the backing of China in order to reach a final agreement with the global lender.

China's January 19, 2023 letter sent to the finance ministry may not be enough for Sri Lanka to immediately gain the IMF's approval for the critical loan, a Sri Lankan source with knowledge of the matter said.

Regional rivals China and India are the biggest bilateral lenders to Sri Lanka, a country of 22 million people that is facing its worst economic crisis in seven decades.

According to the letter, the Export-Import Bank of China said it was going to provide an extension on the debt service due in 2022 and 2023 as an immediate contingency measure based on Sri Lanka's request.

At the end of 2020, China EXIM bank had loaned Sri Lanka US$2.83 billion which is 3.5% of the island's debt, according to an IMF report released in March 2022.

"...you will not have to repay the principal and interest due of the bank's loans during the above-mentioned period," the letter said.

"Meanwhile, we would like to expedite the negotiation process with your side regarding medium and long-term debt treatment in this window period."

Sri Lanka owed Chinese lenders US$7.4 billion, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative showed.

"The bank will support Sri Lanka in your application for the IMF Extended Fund Facility (EFF) to help relieve the liquidity strain," the letter said.

The Sri Lankan source, who asked not to be identified because of the sensitivity of the confidential discussions, said the island nation had hoped for a clear assurance from Beijing on the lines of what India provided to the IMF.

"China was expected to do more," the source said, "This is much less than what is required and expected of them."

Sri Lanka's central bank chief P. Nandalal Weerasinghe said on Tuesday that the country hoped for assurances from China and Japan, another major bilateral lender, soon and complete debt restructuring in six months.

 

Pakistan Black Monday: Electricity Outage Mystery

On Monday January 23, 2023 almost the entire country plunged into darkness. While supply has been restored partially, many areas are still without electricity.

The official sources say it may take 48 to 72 hours to restore supply to all the consumers due to some technical reasons.

Even a person with ordinary wit fails to accept ‘official statements’ at face value due to confidence deficit. This has switched on rumor mill because whatever officials is being termed ‘dubious’.

The overwhelming perception is that it was a preamble of default and reminds the situation in Sri Lanka. A little before officially announcing default, the government ran out of funds to import fuel.

At late night there was a rush at petrol pumps because there were rumors that Pakistan has been left with 7 days petrol.

One of the opinions was that the incumbent government stopped power plants which have helped in saving US$ one billion in less than 24 hours.

However, many analysts question this saving because markers, offices, factories ran on standby generators which used millions of gallons of diesel etc.

If one adds to this the value of production loses the amount goes much higher to the saved foreign exchange.

With each passing day the situation is getting from bad to worse. Banks are refusing to extend foreign exchange for opening up lf letters of credit as well as refusing to negotiate documents.

Demurrages are mounting and goods are becoming stale.

 

 

Monday, 23 January 2023

Pakistan: Textile exports down 16.5%YoY

According to data released by Pakistan Bureau of Statistics (PBS), textile exports for the month of December 2022 were reported at US$1.36 billion, down by 4.6%MoM while lower by 16.5%YoY.

The sequential decrease can be attributed to across the board slowdown with disposable income dropping in export destinations, along with operational challenges in the form of heightened input costs and increased finance costs. To note, the SBP has also increased the rates under the EFS and LTFF programs to 13% in December 2022.

Cumulative textile exports were recorded at US$8.7 billion in 1HFY23, lower by 7.1%YoY. For the month of December 2022, the 6.7%MoM dip in value-added textiles was offset by an 8.3%MoM growth in the non-value added segment.

Within the non-value-added exports, the brunt of the growth was driven by cotton yarn, wherein exports increased by 24.4%MoM, with a substantial increase of 39%MoM in the quantities exported.

As for the value added segment, exports of Knitwear dipped by 11.6%MoM to US$353.7 million, with volumes dropping by 11.2%MoM to 15 million dozens in December 2022.

Moreover, data indicates that exporters may have had to offer lower prices in a bid to increase volumes. Wherein, average prices of Knitwear during the month were down by 0.5%MoM and 3.3% lower than the 6MFY23 average realized price.

The same is true in the non-value added segment, with cotton yarn exports averaging realized price ofUS$3,076 per ton during the month, lower by 10.6%MoM and down by 14.3% as compared to 6 month average during December 2022 Cotton prices receding in the local market

Cotton prices in the local market have dropped in the recent past, from recent highs of PKR24,649/40kg reached in August 2022 to PKR21,434/40kg currently—depicting a drop of 13%.

On the international front, recently, prices have rebounded from recent lows of USc89.2/lb reached in Nov’22, to currently trade at USc100.6/lb.

On an FYTD basis, prices have dropped by 27.8%. While the local prices are lower than international prices (equivalent to PKR20,221/40kg at prevalent interbank rate of PKR228/US$).

Moreover, the harvesting of local cotton is challenging amid devastating floods and declining cotton crop cultivation.

As evident by the 6MFY23 numbers thus far, down by 7.1%YoY, textile exports are expected to remain lackluster for the remainder of the year. Going forward, textile exports are expected to remain under pressure owing to weak macros of key export markets.

Analysts expect 10-15% dip in textile exports in FY23 predicated on the less-than optimal economic situation brewing elsewhere in the world, with inflationary pressures remaining elevated in the developed world.

For example, CPI inflation in the US clocked in at 6.5% last month, which while lower than earlier readings, remains significantly higher than the target of 2%-- which would lead to reduced disposable incomes, in turn leading to a dip in demand in the medium term. Furthermore, expected increases in gas prices would lead to a contraction in the margins of textile industry.

Sunday, 22 January 2023

Israel: Netanyahu fires Aryeh Deri

Israeli Prime Minister Benjamin Netanyahu dismissed a senior cabinet member with a criminal record on Sunday, complying with a Supreme Court ruling even as he pursues contested judicial reforms that would curb its powers.

Pledging to find every legal means of keeping Aryeh Deri in public office in future, Netanyahu told him during a weekly cabinet session he was being removed from the interior and health ministries, according to an official transcript.

A Deri confidant, Barak Seri, told Army Radio earlier on Sunday that the portfolios would be kept by other members of the ultra-Orthodox Jewish party Shas as it remains in the coalition.

The Supreme Court last week ordered Netanyahu to dismiss Deri, citing his 2022 plea-bargain conviction for tax fraud.

That ruling stoked a stormy debate in Israel - accompanied by nationwide protests - over reform proposals that Netanyahu says will restore balance between the branches of government but that critics say will undermine judicial independence.

A poll in Israel Hayom newspaper found 35% support for Netanyahu's bid to shake up the system for bench appointments, with 45% of respondents opposed. There was just 26% support for his government's bid to enable parliament, with a one-vote majority, to override some Supreme Court decisions.

In his cabinet statement, Netanyahu described the Deri ruling as regrettable and indifferent to the public will.

The less than month-old religious-nationalist coalition creaked elsewhere as a far-right partner boycotted the cabinet session in protest at the demolition on Friday of a small settler outpost that had been erected in the occupied West Bank.

Israeli Defence Minister Yoav Galant, a member of Netanyahu's conservative Likud party, ordered the outpost to be razed as it had no building permit - over the objections of the Religious Zionist party, which had sought to delay the decision.

The incident pitted Galant against Religious Zionism leader Bezalel Smotrich, who wields some cabinet responsibilities for West Bank settlements under a coalition deal with Netanyahu.

A group of settlers tried on Sunday to rebuild the outpost but they were blocked by Israeli security forces. Seven people were detained, said a border police spokesman.

"This settlement is a capstone issue for our participation in the government," National Missions Minister Orit Strock of Religious Zionism told Israel's Kan radio. She declined to elaborate on what steps the party might take next.

In solidarity with Religious Zionism, fellow far-right coalition party Jewish Power said it would demand that Israel implement a long-delayed evacuation of Khan al-Ahmar, a Bedouin Palestinian encampment in a key West Bank area near Jerusalem.

World powers have urged Israel not to demolish Khan al-Ahmar, worrying about another potential blow to efforts to negotiate the creation of Palestinian state alongside Israel. Most countries deem Israel's West Bank settlements illegal.

 

Saturday, 21 January 2023

Iran: Container shipping line from Chabahar to Indian ports

Spokesman of Iran’s Valfajr Shipping Company says his company is operating a regular container shipping line from Chabahar port to various ports in India.

According to Abbas Kabousi, 15 voyages have been conducted along the mentioned line over the past three months, ISNA reported.

“The first vessel with a full capacity of 550 TEU arrived in Chabahar from Indian ports a few weeks ago and its cargo has been completely unloaded,” Kabousi said, adding that his company is ready to transport more goods between Indian ports and Chabahar port.

The official noted that his company has also been operating some direct lines from Persian Gulf Arab countries to Chabahar port.

“Valfajr Shipping Company has reduced the time of cargo transportation on the route from the southern ports of the Persian Gulf to Chabahar while reducing the freight rate and improving the schedules,” he said.

Kabousi further said the shipping company is ready to launch a direct line from Oman to Chabahar port.

Back in May 2022, Iran’s Ports and Maritime Organization (PMO) announced that three direct container shipping lines were launched from Chabahar Port to Nhava Sheva and Kandla ports in India as well as Jebel Ali Port in United Arab Emirate.

Iran and India had previously launched shipping lines between Chabahar and the Indian ports of Mumbai, and Mundra.

The first shipping route between the two countries was put into operation in 2017 between Iran’s Chabahar port and Mumbai.

In January 2019, Iran and India inaugurated the second direct shipping route which passes through Mumbai, Mundra, Kandla, Chabahar, and finally Bandar Abbas in southern Iran.

India is using the mentioned shipping routes to transit goods to Afghanistan and Persian Gulf nations as well as the countries in Central Asia.

Through Chabahar port India bypasses Pakistan and transport goods to Afghanistan and Central Asia, while Afghanistan can get linked to India via sea.

Iran has awarded India the project for installing and operating modern loading and unloading equipment including mobile harbor cranes in Shahid Beheshti Port in Chabahar.

The strategic Chabahar port in southeastern Iran is the only ocean port on the Makran coast and it has a special place in the country’s economic affairs.

Back in September 2021, Indian Prime Minister Narendra Modi had called on Central Asian countries to benefit from Chabahar Port capacities for expanding their trade in the region.

 

Israel: Protests against Netanyahu

Tens of thousands of Israelis joined demonstrations on Saturday against judicial reform plans by Prime Minister Benjamin Netanyahu's new government that protesters say will threaten democratic checks and balances on ministers by the courts.

The plans, which the government says are needed to curb overreach by activist judges, have drawn fierce opposition from groups including lawyers, and raised concerns among business leaders, widening already deep political divisions in Israeli society.

"They want to turn us into a dictatorship, they want to destroy democracy," the head of the Israeli Bar Association, Avi Chimi said. "They want to destroy judicial authority; there is no democratic country without a judicial authority."

Netanyahu has dismissed the protests, now in their third week, as a refusal by leftist opponents to accept the results of last November's election, which produced one of the most right-wing governments in Israel's history.

The protesters say the future of Israeli democracy is at stake if the government succeeds in pushing through the plans, which would tighten political control over judicial appointments and limit the Supreme Court's powers to overturn government decisions or Knesset laws.

As well as threatening the independence of judges and weakening oversight of the government and parliament, they say the plans will undermine the rights of minorities and open the door to more corruption.

"We are fighting for democracy," said Amnon Miller, 64, among crowds of protesters, many bearing white and blue Israeli flags. "We fought in this country in the army for 30 years for our freedom and we won't let this government take our freedom."

Saturday's protests, which Israeli media said were expected to draw more than 100,000 people to central Tel Aviv, come days after the Supreme Court ordered Netanyahu to fire Interior Minister Aryeh Deri, who leads the religious Shas party, over a recent tax conviction.

The new government, which took office this month, is an alliance between Netanyahu's Likud party and a clutch of smaller religious and hard-right nationalist parties which say they have a mandate for sweeping change.

Netanyahu, who is himself on trial on corruption charges which he denies, has defended the judicial reform plans, which are currently being examined by a parliamentary committee, saying they will restore a proper balance between the three branches of government.

Likud politicians have long accused the Supreme Court of being dominated by leftist judges who they say encroach on areas outside their authority for political reasons. The court's defenders say it plays a vital role in holding the government to account in a country that has no formal constitution.

A survey released by the Israel Democracy Institute last week showed trust in the Supreme Court was markedly higher among left-wing Israelis than among those on the right, but that there was no overall support for weakening the court's powers.

German caution on Ukraine arms rooted in political culture

Germany became one of Ukraine’s leading weapons suppliers in the 11 months since Russia’s invasion, but Chancellor Olaf Scholz also gained a reputation for hesitating to take each new step — generating impatience among allies.

Berlin’s perceived foot-dragging, most recently on the Leopard 2 battle tanks that Kyiv has long sought, is rooted at least partly in a post-World War II political culture of military caution, along with present-day worries about a possible escalation in the war.

On Friday, Germany inched closer to a decision to deliver the tanks, ordering a review of its Leopard stocks in preparation for a possible green light.

There was still no commitment, Defense Minister Boris Pistorius rejected the suggestion that Germany was standing in the way and said, “We have to balance all the pros and contras before we decide things like that, just like that.”

It’s a pattern that has been repeated over the months as Scholz first held off pledging new, heavier equipment, then eventually agreed to do so.

Most recently, Germany said in early January that it would send 40 Marder armored personnel carriers to Ukraine — doing so in a joint announcement with the US, which pledged 50 Bradley armored vehicles.

That decision followed months of calls for Berlin to send the Marder and stoked pressure for it to move up another step to the Leopard tank.

“There is a discrepancy between the actual size of the commitment and weapons deliveries — it’s the second-largest European supplier — and the hesitancy with which it is done,” said Thomas Kleine-Brockhoff, a Berlin-based senior analyst with the German Marshall Fund of the United States think tank.

Scholz, an unshakably self-confident politician with a stubborn streak and little taste for bowing to public calls for action, has stuck resolutely to his approach. He has said that Germany won’t go it alone on weapons decisions and pointed to the need to avoid NATO becoming a direct party to the war with Russia.

As pressure mounted last week, he declared that he wouldn’t be rushed into important security decisions by excited comments. And he insisted that a majority in Germany supports his government’s calm, well-considered and careful decision-making.

Speaking at the World Economic Forum in Davos, Switzerland, on Wednesday, Scholz listed some of the equipment Germany has sent to Ukraine, declaring that it marks a profound turning point in German foreign and security policy.

That is, at least to some extent, true. Germany refused to provide lethal weapons before the invasion started, reflecting a political culture rooted in part in the memory of Germany’s own history of aggression during the 20th century — including the Nazi invasion of the Soviet Union.

“No German chancellor, of no party, wants to be seen out front in pushing a military agenda — you want to try all other options before you resort to that,” Kleine-Brockhoff said. “And therefore for domestic consumption, it is seen as a positive thing for a German chancellor not to lead on this, to be cautious, to be resistant, and to have tried all other options.”

Scholz does face calls from Germany’s center-right opposition and some in his three-party governing coalition to be more proactive on military aid; less so from his own center-left Social Democratic Party, which for decades was steeped in the legacy of Cold War rapprochement pursued by predecessor Willy Brandt in the early 1970s.

“Scholz decided early on that he does not want to lead militarily on Ukraine assistance,” Kleine-Brockhoff said, though “he wants to be a good ally and part of the alliance and in the middle of the pack.”

But the cautious approach drives allies crazy and raises questions over whether they can count on the Germans, Kleine-Brockhoff acknowledged.

Berlin kept up its caution on the Leopard tank even after Britain announced last week that it would provide Ukraine its own Challenger 2 tanks.

The hesitancy isn’t just an issue between Berlin and Kyiv, since other countries would need Germany’s permission to send their own stocks of German-made Leopards to Ukraine. On Wednesday, Polish Prime Minister Mateusz Morawiecki said Warsaw would consider giving its tanks even without Berlin’s permission.

“Consent is of secondary importance here. We will either obtain it quickly, or we will do the right thing ourselves,” Morawiecki said.

British historian Timothy Garton Ash wrote in The Guardian and other newspapers this week that to its credit, the German government’s position on military support for Ukraine has moved a very long way since the eve of the Russian invasion.

But he argued that the tank issue has become a litmus test of Germany’s courage to resist (Russian President Vladimir) Putin’s nuclear blackmail, overcome its own domestic cocktail of fears and doubts, and defend a free and sovereign Ukraine, and that Scholz should lead a European Leopard plan.

Whether that will eventually happen remains to be seen. Scholz’s government has insisted on close coordination with the United States, a possible reflection in part of the fact that Germany — unlike Britain and France — relies on the US nuclear deterrent.

On Friday, Scholz’s spokesman, Steffen Hebestreit, denied reports that Germany had insisted it would only deliver Leopard tanks if the US sends its own Abrams tanks. He rejected the notion that Berlin is trailing others and insisted it is taking the right approach.

“These are not easy decisions, and they need to be well-weighed,” he said. “And this is about them being sustainable, that all can go along with them and stand behind them — and part of a leadership performance is keeping an alliance together.”