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(Bloomberg) — The International Monetary Fund is close to agreeing a new loan to Egypt, IMF chief Kristalina Georgieva said, as the North African country seeks to shore up an economy hit by Russia’s invasion of Ukraine.
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“We have resolved the big issues,” Georgieva told reporters in Washington on Friday, ahead of talks the following day with an Egyptian delegation. “It is really at the finish line to be crossed virtually within days.”
Egypt, a major food importer, has turned to international lenders for support after struggling with the impact of a spike in commodity prices this year. The country, which previously bought most of its wheat from Ukraine and Russia, has also seen tourism revenues dry up as fewer Russian visitors arrive.
The IMF is holding its annual meetings in Washington this week, bringing global finance and central bank chiefs — along with its development and banking counterparts — to the US capital at a fragile moment for the global economy.
Even after the misery of this year — surging inflation, war in Ukraine, China’s slowdown — Bloomberg Economics expects next year could be even worse. The IMF on Tuesday cut its forecast for worldwide growth in 2023 and said that policies to tame high inflation may add risks to the global economy. Even President Joe Biden said this week that the US, the world’s biggest economy, could suffer a “very slight” recession.
(All times Eastern)
G-20 Chiefs Split on Ukraine, Oil as Growth Falters (4:03 p.m.)
Finance chiefs of the world’s biggest economies clashed in Washington over a variety of issues, including Russia’s invasion of Ukraine, complicating efforts to coordinate policies to cope with rising risks to global growth.
At a gathering of finance ministers and central bankers on Thursday from the Group of 20, which represents 80% of the global economy and includes the US, China, Russia and Saudi Arabia, among others, how to address the war became a topic of disagreement, according to people familiar with the situation.
During the G-20 session, countries including Germany pushed for stronger language condemning the war, but the meeting broke up without an agreement, the people said.
Russia Blocks IMFC Communique Consensus Over War (3:39 p.m.)
Russia prevented the International Monetary Fund’s advisory body from reaching consensus over a communique following its meeting in Washington, the committee’s leader said, the second straight meeting without an official readout.
“I regret very much that due to Russia’s blocking any chance of consensus we don’t have unanimity on our communique,” Spanish Economy Minister Nadia Calvino — who currently chairs the International Monetary and Financial Committee — told reporters in Washington Friday. She issued a statement in her name that includes the text that was agreed by all countries participating except for Russia.
Noting that the global recovery is slowing amid high uncertainties, Calvino said appropriate domestic policies and intensified multilateral cooperation are essential to safeguard macroeconomic and global financial stability, shore up resilience, limit negative spillovers, and overcome the current food crisis.
The IMFC reiterated its call for greater international cooperation and strengthened multilateralism to prevent fragmentation and safeguard global economic integration, according to Calvino.
It also reaffirmed its commitment to a quota-based, and adequately resourced IMF at the center of the global financial safety net.
Canada Favors Broad Ban on ‘Arsonist’ Russia (2:35 p.m.)
Canadian Foreign Minister Chrystia Freeland suggested excluding Russia from international meetings including the International Monetary Fund, the World Bank and the Group of 20 for its invasion of Ukraine.
“The IMF and World Bank meetings are meetings of the firefighters — of ministers and central bank governors, whose jobs is to protect the global economy,” Freeland, who is of Ukrainian heritage and is also Canada’s deputy prime minister, said in response to questions from reporters in Washington.
“Russia right now is the arsonist,” she said. “Russia shouldn’t have been at the IMF meetings. Arsonists have no place in meetings of the firefighters.”
Yellen Says US Won’t Back a Fresh SDR Injection (2:32 p.m.)
Treasury Secretary Janet Yellen says the US — the International Monetary Fund’s biggest shareholder — doesn’t support a fresh allocation of IMF reserves known as special drawing rights to member countries.
“We do not see another SDR allocation as appropriate at this time,” she told reporters at the IMF Friday.
Calls have mounted for the crisis lender to issue more SDRs after it allocated a record $650 billion last year to help its members weather the effects of the pandemic.
The IMF’s new Resilience and Sustainability Trust, which provides funds for to prepare for future pandemics, energy security and climate change, “is an appropriate way to address some of the issues that low-income countries face,” Yellen said.
She said the Biden administration has asked Congress to allow it to lend $21 billion to the IMF for the RST and the fund’s Poverty Reduction and Growth Trust, but has yet to receive a response.
Lending Jumps to Record, $700 Billion Firepower Left (1:16 p.m.)
Financial support to nations by the International Monetary Fund has surged to a record this year and the crisis lender has about $700 billion available to deploy as recession risks rise, according to its chief.
Disbursements this year through Sept. 30 totaled 106.5 billion in special drawing rights, the equivalent of about $135.9 billion, according to data on the Washington-based lender’s website. That the most for any year on IMF records.
In August and September, the fund sewed up or inched toward loan agreements with some of the most vulnerable nations — Pakistan, Sri Lanka, Zambia, Egypt and Chile — after months of negotiations. With financial markets extremely volatile and less liquid amid elevated inflation and aggressive central bank tightening, fears of a global recession are rising and the dangers of debt defaults are increasing as interest rates rise.
“We still have slightly over $700 billion available,” IMF Managing Director Kristalina Georgieva told reporters Thursday. “We do need to step into our counter cyclical role proactively and I do encourage our members not to hesitate. If you think that you need a buffer, we’re here for you and that particularly applies to the innocent bystanders — countries with strong fundamentals, hit by exogenous shocks, we have precautionary lending facilities for you.”
Middle-Income Nations Face Market-Access Issues (12:30 p.m.)
Middle-income countries are on their way to being left without access to capital markets, which is going to generate difficulties in paying debt maturities, said Argentina’s economy minister, Sergio Massa.
“It’s key to capitalize multilateral institutions so middle income countries have more access to credit,” he said at an event hosted by the Atlantic Council in Washington Friday, saying few institutions stepped up to help nations in regions such as the Caribbean to deal with the spillover effects from Russia’s war in Ukraine.
“The design of the policies that these multilateral institutions have for poor and middle-income countries has to be part of the discussion in the next 60 days,” Massa said.
G-20 Head Calls Rate Hikes a Blunt ‘Antibiotic’ (12:06 p.m.)
The current head of the Group of 20 called monetary policy through interest-rate changes a “wide-spectrum antibiotic” that is effective in curing inflation but carries side effects.
“It’s like a real medicine to cure inflation but has a huge excess negative,” not only for major countries such as the US where the Federal Reserve is aggressively raising interest rates, but for other nations too, Indonesian Finance Minister Sri Mulyani Indrawati said. “It’s becoming so strong that the medicine to curb the inflation can have huge side effects for many other countries.”
Speaking at an event at the IIF Friday, she urged developing and emerging nations to do all they can to strengthen their domestic economies.
“Try to create a cushion,” because the dynamics currently pressuring economies are going to intensify in 2023, Indrawati said. Coordinating fiscal and monetary policy with other facets such as trade and investment policy “is going to create more credibility and effectiveness in managing” the situation “without worsening the inflation,” she said.
IMF Calls for ‘Nimble’ Policy Making, Fiscal-Monetary Alignment (11:50 a.m. ET)
The IMF is calling for European countries to align their monetary and fiscal policies and be ready to quickly change their course of action if the global economic situation were to deteriorate further.
“Our recommendation on the monetary policy side is the normalization has to continue,” Alfred Kammer, the director of the fund’s European department, said on Bloomberg Television. “There is also a likelihood that there is tightening required in 2023, however I should say the policymakers need to be very nimble and be ready to change course if downside risks were to materialize — if the economy were to weaken much more than what we are forecasting.”
Kammer also said he expects “shallow” recessions in Italy and Germany next year and is looking forward to seeing the calibrated details in the UK’s new fiscal package.
“The UK has very strong institutions,” he said, adding that 2023 “is going to be a very difficult year and we have been advocating very strongly that monetary policy and fiscal policy need be aligned. When monetary policy tightens, it shouldn’t be undermined by an expansionary fiscal policy.”
Countries in Europe need to have appropriate debt levels and fiscal space for the next economic shock, which is “just around the corner,” said Kammer.
BNP Paribas Head Sees EU Firms Adapting to Inflation (10:45 a.m.)
The economic situation in Europe is a “challenge, not a crisis,” according to the chairman of French lender BNP Paribas SA.
While inflation is increasing pressure on businesses, they are “working very hard to adapt” to higher prices and interest rates, Jean Lemierre told a panel at the Institute of International Finance conference. “They go through difficult months, it is challenging, but they will get it done.” Meanwhile, European Central Bank policymakers are “doing what they need to do,” said Lemierre, a former member of the European Monetary Committee.
China Hurting Itself With Zero Covid, Rajan Says (10:30 a.m.)
The Chinese are “hurting themselves” with their Zero Covid policy, former India central bank Governor Raghuram Rajan said.
“The question is how they move on, given that it is so closely associated with President Xi,” he said in an interview with Bloomberg Television. “The real question is — what happens with China after this? How do they find a way out of this or do they buy western vaccines and start vaccinating the population with effective vaccines? That’s the real question for them because they cannot continue this strategy forever.”
While many larger emerging markets have built up foreign-exchange reserves in the era of easy money, smaller developing nations are “on the brink” of default amid rising food and energy prices, Rajan also said. “They simply cannot service their debt and help their people at the same time,” he said.
Gopinath Sees Rocky Ride on Dollar, No Plaza 2.0 (9:14 a.m.)
Nations are in for a “rocky ride” as they adjust to dollar strength, the International Monetary Fund’s First Deputy Managing Director said, adding that she doesn’t see a new currency plan along the lines of the 1985 Plaza Accord.
“There are fundamentals that are driving these large movements,” Gita Gopinath said on Bloomberg Television Friday, citing tighter monetary policy and high energy prices. “This is going to be a bit of a rocky ride for countries, but they will have to adjust to it so they have to use their own monetary policy tools to be able to keep inflation restricted.”
The US currency has soared almost 15% this year, on course for the biggest gain since the early 1980s. Nations across Asia and Latin America have been tapping their foreign reserves in an effort to shore up their currencies, prompting a caution from the IMF about the need to be prudent and preserve resources for potentially worse turmoil to come.
Gopinath said she doesn’t foresee a repeat of actions in 1985, when the world’s top industrial powers came together to rein in the dollar in what became known as the Plaza Accord.
“That’s not where we are. Frankly, when the Plaza Accord worked at all, it was not just because there were announcements on currencies, but there was more signaling of coordination of other kinds of fiscal and monetary policies. So no, I don’t think we’re going to have a Plaza Accord any time soon.”
IMF Urges FX-Reserve Preservation on Dollar Surge (8:36 a.m.)
Governments need to hold on to their foreign exchange holdings for potentially worse bouts of outflows and market volatility in the future even as the dollar surges, according to the International Monetary Fund.
The warning came in a blog post by the IMF’s Gopinath and the fund’s chief economist, Pierre-Olivier Gourinchas, who urged governments to reinstate swap lines with advanced economy central banks or avail of the IMF’s precautionary lines to ensure they have liquidity. While temporary interventions can be appropriate, other reforms will be needed, the duo said.
“Those with large foreign-currency debts should reduce foreign-exchange mismatches by using capital-flow management or macroprudential policies, in addition to debt management operations to smooth repayment profiles,” the IMF officials wrote. Around half of all cross-border loans and international debt securities are denominated in dollars, they wrote.
IMF Urges Africa Oil Producers to Ready for ‘Shock-Prone World’ (7:10 a.m.)
Oil producers in sub-Saharan Africa should target fiscal surpluses to buffer themselves against large price shocks, lower their debt risks and manage the transition away from fossil fuels, according to the International Monetary Fund.
“We are in a much more shock-prone world,” Catherine Pattillo, the deputy director of the lender’s African Department, said in an interview in Washington.
To better prepare for sharp price swings — the cost of crude fluctuated from lows of $23 per barrel to a peak of $115 over the last two years alone — countries should “during good times think about saving and aiming for manageable fiscal surpluses,” Pattillo said.
Morocco Set to Scrap Bond Market Return, May Tap IMF Credit Line (5:48 a.m.)
Morocco is set to shelve a planned issue of a sovereign bond this year and may draw instead on its credit line with the International Monetary Fund, according to a person with knowledge of the matter, as the government looks for a cheaper way to repay debt maturing in December.
The kingdom is considering tapping around $1 billion from the IMF because the surging cost of dollar debt makes borrowing unattractive this year, according to the person, who is directly involved in the discussions but not authorized to speak publicly.
Morocco was previously planning its first issuance abroad since 2020 around the time its $1.5 billion bond comes due in December. The central bank and the Finance Ministry didn’t reply to emailed requests for comment.
IMF Sees China Covid Zero Exit in 2023, Calls for More Stimulus (11:01 p.m. Oct. 13)
China may not move away from its stringent Covid Zero policy until the second half of next year, according to the International Monetary Fund’s top official in the country, who also called for more monetary and fiscal stimulus to support the economy.
The IMF assumes conditions for lifting the zero-tolerance approach to combating Covid infections will be in place by the latter half of next year, Steven Barnett, the senior resident representative in China, said in an interview on Friday with Bloomberg TV’s Shery Ahn and Haidi Lun.
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Wall Street stocks went into reverse after initially gaining at Friday's open while the dollar was rising in a volatile session as investors digested Russia' suggestion it would ease attacks against Ukraine, the British Prime Minister's firing of her finance minister and the start of U.S. earnings season. Sterling fell sharply against the greenback after UK Prime Minister Liz Truss fired Kwasi Kwarteng and scrapped parts of their economic package, which had caused uproar in financial markets. Meanwhile, after escalating attacks on Ukraine in recent days, Russian President Vladimir Putin said his call-up of Russian reservists would be over within two weeks and there were no plans for a further mobilisation and no need for massive new strikes on Ukraine as most designated targets were hit.
Instead, their focus should be on appropriate policy adjustments, IMF First Deputy Managing Director Gita Gopinath and economic counselor Pierre-Olivier Gourinchas wrote in a published blog. "Specifically, foreign exchange intervention should not substitute for warranted adjustment to macroeconomic policies," the two wrote as global finance officials gathered in Washington for the IMF and World Bank's annual meetings. The IMF economists said that economic fundamentals are the major factor in the dollar's rise: rapidly rising U.S. interest rates and more favorable terms of trade — a rise in the prices for U.S. exports relative to its imports — caused by higher energy prices.
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