Sri Lanka to receive first tranche of IMF bailout funds in two days

Sri Lanka will get the first $330 million tranche of the International Monetary Fund's bailout in the next two days, the global lender said on Tuesday, putting the onus on the cash-strapped nation to rein in its debt to sustainable levels.

Economic mismanagement coupled with the impact of the COVID-19 pandemic left Sri Lanka severely short of dollars for essential imports at the start of last year, tipping the island nation into its worst financial crisis in seven decades.

The IMF's Executive Board on Monday approved a nearly US$3 billion bailout for Sri Lanka with the endorsement expected to catalyze additional external support for the country to the tune of US$3.75 billion from the likes of the World Bank, the Asian Development Bank and other lenders.

The office of the country's president, Ranil Wickremesinghe, said the program will enable it to access up to US$7 billion in overall funding.

"Sri Lanka is no longer deemed bankrupt by the world," Wickremesinghe said in a video statement released by his office. "The loan facility serves as an assurance from the international community that Sri Lanka has the capacity to restructure its debt and resume normal transactions."

The IMF funding will, however, not immediately help millions of Sri Lankans, who are being squeezed by soaring costs of living, high income taxes of up to 36% and a 66% increase in power tariffs. The economy is expected to shrink by 3% this year after contracting 7.8% in 2022.

Half of the families in Sri Lanka have been forced to reduce the portions they feed their children, according to a survey by Save the Children released this month.

Shehan Semasinghe, Sri Lanka's state minister of finance, said the IMF bailout was absolutely essential for the country.

"But now we have to patiently focus on very difficult reforms going ahead. We have to continue to work together to rebuild Sri Lanka's economy and move it towards recovery," he said in a statement late on Monday.

The Colombo Stock Exchange All-Share index was down 0.6% as of 0629 GMT, while the Sri Lankan rupee strengthened 6.45% against the dollar.

Bonds were up by 0.73 cents to 1.50 cents across tenors, with the March 2029 bond leading the gains.

Peter Breuer, Senior Mission Chief for Sri Lanka, Asia and Pacific Department at IMF, said debt sustainability was one of the key criteria for the IMF to approve a bailout for any economy.

Going forward, Sri Lanka's disbursements from the bailout package would be tied to reviews that take place every six months, Breuer said, adding that the IMF has not set any growth target but has put in place an inflation band of 12-18% for the country to achieve by end of 2023.

Sri Lanka's retail prices have eased from last year's peaks but still hover over 50%.

Securing financing assurances from China and India and all its major bilateral creditors was key to Sri Lanka's efforts of unlocking the IMF bailout and putting its economy back on track.

The island nation aims to announce a debt-restructuring strategy in April and step up talks with commercial creditors ahead of an IMF review of the bailout package in six months, its central bank governor told Reuters earlier this month.

"We need to keep in mind that it's still going to be a difficult road no matter how much potential funds or support is being thrown at Sri Lanka," Katrina Ell, senior economist at Moody's Analytics, told Reuters.

"Ultimately, it comes down to them being able to successfully address some of the systemic problems in terms of economic management, fiscal management."

 

 

 

 

Al-Qasabi meets with Iraqi Prime Minister

Minister of Commerce and Chairman of the Board of Directors of the General Authority for Foreign Trade Dr. Majid Bin Abdullah Al-Qasabi, who is also the head of the Saudi side of the Saudi-Iraqi Coordination Council, is visiting Iraq to strengthen economic relations between the two countries and follow up on the outcomes of the Saudi-Iraqi Coordination Council.

During the visit, Al-Qasabi met with the Iraqi Prime Minister Mohammed Shia Al-Sudani, conveying greetings and appreciation from Custodian of the Two Holy Mosques King Salman and the Crown Prince, wishing Iraq further progress and prosperity.

The minister also met with Iraqi Deputy Prime Minister and Minister of Planning Dr. Muhammad Ali Tamim (Head of the Iraqi side of the Saudi-Iraqi Coordination Council), the Iraqi Minister of Trade Atheer Al-Ghurairy, and the President of the Supreme Judicial Council Dr. Faiq Zaidan.

The meetings dealt with ways of consolidating the strategic partnership within the framework of the Saudi-Iraqi Coordination Council.

The Coordination Council aims to enhance communication between the two countries and to elevate bilateral relations in various fields, including economics, development, security, investment, tourism, culture, and media.

Washington denounces Xi visit to Moscow

According to Reuters, Vladimir Putin and his dear friend Chinese leader Xi Jinping planned more talks on Tuesday after a Kremlin dinner where the isolated Russian president showcased his most powerful ally in the face of Western opposition to the war in Ukraine.

Washington denounced Xi's visit, saying the timing just days after an international court accused Putin of war crimes indicated Beijing was providing Moscow with diplomatic cover to commit additional crimes.

It was Xi's first trip abroad since he obtained an unprecedented third term last month. The Chinese leader has been trying to portray Beijing as a potential peacemaker in Ukraine, even as he deepens economic ties with his closest ally.

Putin and Xi greeted one another as dear friend when they met in the Kremlin on Monday, and Russian state news agencies later reported they held informal talks for nearly 4-1/2 hours, with more official talks scheduled for Tuesday.

In televised comments, Putin told Xi he viewed China's proposals for resolution of the Ukraine conflict with respect. He confessed to being slightly envious of China's very effective system for developing the economy and strengthening the state.

Xi, for his part, praised Putin and predicted Russians would re-elect him next year.

Moscow has been publicly promoting plans for a visit by Xi for months. But the timing gave the Chinese leader's personal support new meaning, after the International Criminal Court issued an arrest warrant on Friday accusing Putin of war crimes for deporting children from Ukraine.

Moscow denies illegally deporting children, saying it has taken in orphans to protect them. It opened a criminal case against the court's prosecutor and judges. Beijing said the warrant reflected double standards.

The West says the warrant should make the Russian leader a pariah.

"That President Xi is travelling to Russia days after the International Criminal Court issued an arrest warrant for President Putin suggests that China feels no responsibility to hold the Kremlin accountable for the atrocities committed in Ukraine," US Secretary of State Antony Blinken said.

"Instead of even condemning them, it would rather provide diplomatic cover for Russia to continue to commit those grave crimes.”

White House spokesman John Kirby said Xi should use his influence to press Putin to withdraw troops from Ukraine, and Washington was concerned that Beijing might instead call for a ceasefire that would let Russian troops stay.

China has released a proposal to solve the Ukraine crisis, largely dismissed in the West as a ploy to buy Putin time to regroup his forces and solidify his grip on occupied land.

Russia and China do not have the same network of friends and partners around the world as the United States, and that's why they are tightening their relationship now, Kirby said.

"It's a bit of a marriage of convenience, I'd say, less than it is of affection," Kirby told reporters.

Washington has said in recent weeks it also fears China might arm Russia, which Beijing has denied.

 

 

Is the United States being isolated?

Despite all the doubts, ifs and buts the recent agreement between Iran and Saudi Arabia is considered a significant diplomatic achievement not just for the two sides, but also for the entire region. For the United States which has long thrived on the war economy, consolidation of this era equals eternal isolation. The United States is being isolated. 

The agreement was welcomed by many countries inside and outside the region, but shortly after the news broke out, a very strong and loud trend started to emerge and that was the notion of credibility.

It is not hard to read the intentions of China to act as a mediator to bring peace back to a region which is of significant importance, especially for those who are familiar with China’s economic ambitions and its race with the US to win the title of first economic power. To economically grow bigger, a safe West Asia is vital for China. And so is for Iran and Saudi Arabia.

But the open arms of many countries to embrace the reconciliation between Iran and Saudi Arabia speaks volumes about the changing nature of international relations.

The truth is, the world is tired of settling disputes in an old fashion which involves a violent militaristic approach. And this is the core of the multipolar world order notion.

For decades, since WWII, the US along with NATO had made it clear that every country in the world has to choose between two and only two options, either you are with us, or before you know, democracy will be marching in the streets of your capital.

But this mentality has changed unprecedentedly even amongst the most loyal allies of the US against the background of some rather surreal incidents in world in recent years, the most important of which is the war in Ukraine.

The war in Ukraine proved that once the US prescribes war as a solution, peace will not even have a dog door to get into the room, even if it requires sabotaging the daily life of all nations in the Continental Europe.

The biggest state-sponsored act of terrorism against the European Union since the world wars, namely blowing up the Nord Stream pipelines, which the Western mainstream media have been struggling to drag into margins by pointing fingers at different/irrelevant suspects, has opened Europeans’ eyes wide to the bitter truth, there is no coming back from what has already started.

No effort to achieve peace gained support from the US, no diplomatic endeavor was sponsored, not even the call for a proper investigation into the explosion of the pipelines met with praise. And today, Ukraine which is nothing but a shadow of its former self, explains the reasons behind all that by openly speaking about how it’s fighting a war on behalf of the US and NATO.

The obvious victims of this historical fiasco are the citizens of Ukraine and Europe who have to live through a symphony of inflation and fear on a daily basis. The recent anti-war and anti-NATO movements in the US and Europe indicates the partial awareness in Western societies which puts a dreamlike image of a Europe without a war in the horizon, but in this tireless political/militaristic scam that every minute counts, it seems the Europeans do not care about time at all.

This is not the first time the self-centered actions of the US and European politicians raise eyebrows in the West. The US lied about the weapons of mass destruction (WMDs) in Iraq. It lied about the tyranny of Assad’s government in Syria. It lied about Afghanistan hosting terrorists who carried out the 9/11 attacks. It withdrew from Iran’s nuclear deal (JCPOA) without even asking the opinion of its European partners. The United States even lied about the mRNA vaccines it had produced to combat Coronavirus. It lied about the possible origins of Covid-19 in order to deflect attentions and not saying one single word about the Fort Detrick military-based bio-lab complex in its soil while keeping the WHO investigators outside the country’s doorsteps. The list goes on, but what was presented as the backgrounds of the war in Ukraine was the latest in the long line of shameless lies of the US to its allies.

What was said above, although not being comprehensive, takes us back to where we started: credibility. And the United States seems to be suffering a deepening crisis.

It is true that almost everyone is watching the turn of events in West Asia with pessimism and caution, but the frame which was recorded on March 10 can neither be undermined nor ignored, because it represents a new era with unique tendencies and characteristics.

The new era is based on securing the most possible advantages for all sides of every deal, without giving an uncontrollable higher hand to one side. In this era, maintaining peace will be the first and foremost in the list of international priorities of countries even when it comes to their national interests, because competitions will be of economical nature.

 

 

Pakistan: Agriculture Strongest Forte

Agriculture is the strongest forte of Pakistan’s economy. Over the years, the sector has played a key role in achieving food security, boosting exports and ushering foreign direct investment in the country. It provides raw material to two of the large scale manufacturing industries i.e. textiles and clothing and sugar.

The sector contributes around 20% to country’s GDP, accounts for more than 60% of total export-proceeds earned by the country and provides employment to nearly 45% of the total labour force. Pakistan ranks eighth worldwide in farm output - it is among the leading producers of Wheat (7th), Rice (11th), Cotton (4th), Sugarcane (5th) and Mango (4th).

The most important crops are wheat, sugarcane, cotton, and rice, which together account for more than 75% of the value of total crop output. Lately Pakistan joined the Club of wheat exporting countries by achieving over 25 million tons of the staple food grain per annum.

Over the years the government introduced agriculture assistance policies, including increased support prices for many agricultural commodities and expanded availability of agricultural credit.

Much of the Pakistan's agriculture output is utilized by the country's growing processed-food industry. The value of processed retail food sales has grown considerably over the years.

Lately Pakistan joined the Club of wheat exporting countries by achieving over 25 million tons of the staple food grain per annum. During the outgoing financial year Wheat output was a little below 25 million tons. Rice production was around 7.5 million tons. Maize crop size was reported around 7.3 million tons. Cotton and Sugarcane production remain below the target.

Wheat is staple food grain and many bakery products are made from it. This year due to some issues faced during wheat procurement, the quantity bought by the government remained below target. However, private sector purchased substantial quantity. It is necessary to point out that due to the shortage of modern gain storage silos; nearly 15% of the wheat produced goes stale before reaching the market.

Rice is the second main staple food crop and also another major exportable commodity. Pakistan produces different verities of rice, but Basmati enjoys a unique preference because of grain size and its aroma. Traditionally, Pakistan has been exporting rice in bulk which used to fetch lower price. Lately, many brand of rice have attained global recognition, but India continues to give tough competition in the global markets.

Red Chilli is a major crop of Pakistan as also exported in large quantity. Chilies are one of the largest traded spices in the International market. In Sindh, Chilies are mainly grown in Kunri, a small town of Umer Kot district. The area contributes around 85% of Pakistan’s red chili production and it is also known as one of the largest production centers for red chilies and also known as the red chilli capital of Asia. Export of red chilli can help in earning substantial foreign exchange.

Maize is also an important crop that can be cultivated on average quality soil. It is said that each and every part of the plant is consumed by human beings and animals. Two of the most consumed forms are oil and flour. It is also an important source of non-animal protein for chicken feed. At an average the country produces about 7 million tons of maize.

Soybean is an important source of edible oil. Seed is processed to extract oil for human consumption and its meal is a rich source of protein, primarily used as feed for poultry, dairy, beef and fish industry. Currently, soybean cultivation in Pakistan is highly negligible. Owing to its nutritional value and multiple uses, it is also called the “Golden bean”. Interestingly, all the soil and climatic conditions of all the four provinces are suitable for soybean. As the soybean can help cut edible oil imports to a significant extent, the Ministry of National Food Security and Research needs to launch a massive awareness drive at federal level in close coordination with provincial agricultural departments.

The contribution of agriculture in economy of the country can be further enhances by exercising better crop management, containing post-harvest losses by constructing modern storage and logistic facilities and achieving greater value addition. Developing a robust rural economy will also contain influx of people in search of job to cities, from rural areas.

Pakistan is among the top five largest cotton producing countries of the world. Pakistan is also known as ‘Cotton Country’. Cotton is the basic raw material for country’s largest industry, Textiles and Clothing, which contributes more than 60% to Pakistan’s total export proceeds. Bulk of the Textile and Clothing exports now comprises of value added products. Major buyers of made in Pakistan Textiles and Clothing are United States, European Union, China and some oil-rich Middle Eastern countries. Cotton seed-oil contributes a significant quantity of total edible oil produced in the country and oil-cake being used to feed mammals.

Sugarcane is the second largest cash crop of Pakistan. It is being cultivated in Punjab, Sindh and KPK. There are about 85 sugar mills operating in the country, producing over 4.2 million tons sugar annually, sufficient to meet the local demand. Two by-products of sugarcane are molasses and baggase. Bulk of the molasses is exported but lately many mills have also started producing and exporting alcohol, which is used in the production of biofuel. Baggase is commonly used in the production of chip board, an efficient alternative for wood. It is also used as fuel in brick kilns.             

 

 

 

Black Sea Grain Initiative extended

According to Saudi Gazette, the Black Sea Grain Initiative, a UN-brokered deal aimed at supplying markets with food and fertilizer amid global shortages and rising prices, exacerbated by the Ukraine war, was extended on Saturday, the day it was due to expire.

The announcement was made in a Note to Correspondents, released by the UN Secretary-General’s spokesperson’s office, which emphasized that the Initiative allows for the facilitation of the safe navigation for the exports of grain and related foodstuffs and fertilizers, including ammonia, from designated Ukrainian seaports.

Following the invasion of Ukraine by Russian forces in February 2022, the Initiative has been one of the few areas in which the Russian and Ukrainian governments have been able to reach agreement.

It came about in response to the sharp increase in prices for food and fertilizers around the world, Russia and Ukraine are the main suppliers of these products to world markets, and their ability to export was significantly curtailed once hostilities began.

Since the signing of the Initiative in July 2022, some 25 million metric tons of grains and foodstuffs have been moved to 45 countries, and the initiative has been credited with helping to calm global food prices, which reached vertiginous highs in March 2022.

Following the implementation of the Initiative, prices began to fall and, a year later, had dropped some 18 percent.

The deal was mediated by the UN and the government of Türkiye, which was thanked in the statement for its diplomatic and operational support, as part of the agreement, a Joint Coordination Centre (JCC) was established in Istanbul, to monitor the implementation of the Initiative.

The Note to Correspondents reaffirmed the UN’s strong commitment to both agreements, and described the Black Sea Grain Initiative, alongside the Memorandum of Understanding on promoting Russian food products and fertilizers to the world markets, as critical for global food security, especially for developing countries.

 

UBS takes over Credit Suisse

Moves by authorities to avert a global banking crisis appeared to have lifted market confidence on Monday as investors welcomed emergency dollar liquidity from top central banks and a historic Swiss-backed acquisition of troubled Credit Suisse by UBS Group.

In a package orchestrated by Swiss regulators on Sunday, UBS Group AG will pay 3 billion Swiss francs (US$3.23 billion) for 167-year-old Credit Suisse Group AG and assume up to US$5.4 billion in losses.

Major central banks, faced with the risk of a fast-moving loss of confidence in the financial system, also scrambled on Sunday to bolster the flow of cash around the world with a series of coordinated currency swaps to ensure banks have the dollars needed to operate.

The Swiss banking marriage is backed by a massive government guarantee, helping prevent what would have been one of the largest banking collapses since the fall of Lehman Brothers in 2008.

Financial markets staged a modest relief rally in Asia on Monday but are wary about a range of risks including contagion, the fragile state of US regional banks, and moral hazard.

"Policy makers will be hoping that the weekend's UBS buyout of troubled Credit Suisse will draw a line under recent market stresses," said Brian Martin, ANZ head of G3 economics in London.

Central banks were already facing the conundrum of how much is enough? in the face of resilient labour markets, given the lags with which their policy decisions affect economies. They now have a new conundrum, 'how much is too much?' for financial stability?

Pressure on UBS helped seal Sunday's deal.

"It's a historic day in Switzerland, and a day frankly, we hoped, would not come," UBS Chairman Colm Kelleher told analysts on a conference call. "I would like to make it clear that while we did not initiate discussions, we believe that this transaction is financially attractive for UBS shareholders," Kelleher said.

UBS CEO Ralph Hamers said there were still many details to be worked through.

"I know that there must be still questions that we have not been able to answer," he said. "And I understand that and I even want to apologize for it."

In a global response not seen since the height of the pandemic, the Fed said it had joined central banks in Canada, England, Japan, the EU and Switzerland in a coordinated action to enhance market liquidity. The European Central Bank vowed to support euro zone banks with loans if needed; adding the Swiss rescue of Credit Suisse was instrumental in restoring calm.

Problems remain in the US banking sector, where bank stocks remained under pressure despite a move by several large banks to deposit US$30 billion into First Republic Bank, an institution rocked by the failures of Silicon Valley and Signature Bank.

On Sunday, First Republic saw its credit ratings downgraded deeper into junk status by S&P Global, which said the deposit infusion may not solve its liquidity problems.

US bank deposits have stabilized, with outflows slowing or stopping and in some cases reversing, a US official said on Sunday, adding the problems of Credit Suisse are unrelated to recent deposit runs on US banks and that US banks have limited exposure to Credit Suisse.

The US Federal Deposit Insurance Corp (FDIC) is planning to relaunch the sale process for Silicon Valley Bank, with the regulator seeking a potential breakup of the lender, according to people familiar with the matter.

There are also concerns about what happens next at Credit Suisse and what that means for investors and employees.

UBS chairman Kelleher told a media conference that it will wind down Credit Suisse's investment bank, which has thousands of employees worldwide. UBS said it expected annual cost savings of some US$7 billion by 2027.

The Swiss central bank said Sunday's deal includes 100 billion Swiss francs (US$108 billion) in liquidity assistance for UBS and Credit Suisse.

Credit Suisse shares had lost a quarter of their value last week. The bank was forced to tap $54 billion in central bank funding as it tries to recover from scandals that have undermined confidence.

Under the deal with UBS, some Credit Suisse bondholders are major losers. The Swiss regulator decided that Credit Suisse bonds with a notional value of US$17 billion will be valued at zero, angering some of the holders of the debt who thought they would be better protected than shareholders in the takeover deal announced on Sunday.

(US$1 = 0.9280 Swiss francs)