India’s Rice Exports Ban

India’s Rice Exports Ban To Fuel Volatility In Global Food Prices: IMF

IMF’s Chief Economist and Director, Pierre-Olivier Gourinchas, has said restrictions imposed by India on exports of certain varieties of rice are likely to exacerbate volatility on food prices in the rest of the world.

“And they (the ban on rice exports) can also lead to retaliatory measures. So, they are certainly something that we would encourage the removal of these type of export restrictions, because they can be harmful globally,” Gourinchas said in a press conference after it launched World Economic Outlook on Tuesday.
He was asked in the press conference on what would be the impact on the global inflation after India’s decision to restrict export of certain categories of rice.

Notably, India’s rice exports ban came soon after Russia’s announcement of pulling out from the United Nations and Turkey-brokered Black Sea grain deal.

The IMF chief economist noted that the Black Sea Grain Initiative was very instrumental in making sure that there would be ample grain supply to the world in the last year.

“And there are estimates of about 33 million tons of grain that were shipped from Ukraine to the rest of the world. And it helped keep price pressures on food and grain prices lower,” Gourinchas said.

“…now that this grain deal has been suspended, the same mechanics works in reverse, and it’s likely to put upward pressure on food prices,” he added.

Grains prices are estimated to rise 10-15 per cent, the IMF economist said.

The central government last Thursday amended the rice export norms putting the non-basmati white rice in “prohibited” category.

The export policy relating to non-basmati white rice (Semi-milled or wholly milled rice, whether or not polished or glazed: Other) was revised from “free” to “prohibited” and it came into force immediately.

However, export will be allowed on the basis of permission granted by the government to other countries to meet their food security needs and based on the request of their government.

West African country Benin is one of the major importers of non-basmati rice from India. Other destination countries are Nepal, Bangladesh, China, Cote D’ Ivoire, Togo, Senegal, Guinea, Vietnam, Djibouti, Madagascar, Cameroon Somalia, Malaysia, Liberia, and UAE.

India in September 2022 banned the exports of broken rice and imposed a 20 percent duty on exports of non-Basmati rice, except for parboiled rice amid concerns about an estimated low production due to a fall in area under the paddy crop. It later lifted the ban in November. (ANI)

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China Acting As An Impediment To Sri Lanka’s IMF Deal

The uncertainty and lack of clarity regarding the extent and time frame of China’s restructuring of its debt to Sri Lanka are delaying Sri Lanka’s bailout package from the IMF, according to Asian Lite.

Debt restructuring is one of the prerequisites of the IMF’s bailout package for Sri Lanka. The process is, however, getting delayed due to Sri Lanka’s dire situation and a delay in concrete commitment from China, the island nation’s largest bilateral lender. Sri Lanka seems to be missing its December deadline.

According to the Opposition legislator from the Tamil National Alliance, Shanakiyan Rasamanickam, China is acting as an impediment to Sri Lanka’s IMF deal and has been paying bribes to force down unnecessary projects.

“If China is truly Sri Lanka’s friend, ask the Chinese to help with the [debt] restructuring and the IMF programme.” Referring to Rajapaksa-era mega infrastructure projects in Hambantota and Colombo funded by the Chinese, the Batticaloa MP, as quoted by Asian Lite, said: “That is not China being Sri Lanka’s friend, that is China being Mahinda Rajapaksa’s friend.”

The Chinese Embassy refuted the allegations and claimed that bilateral negotiations are on after working teams of different Chinese banks visited the island nation. Rasamanickam’s allegations are incorrect, said the embassy.

The Chinese investments under the BRI and bilateral projects with other countries have always been seen with suspicion for their lack of economic feasibility as well as debt-creating potential. Now as Sri Lanka is negotiating with China for debt restructuring and China has claimed to have shown readiness for restructuring its debt to Sri Lanka, “It will be the first time a major Asian Belt and Road Initiative borrower is going through the process… China’s approach to Sri Lanka’s debt restructuring and the extent of debt relief offered will set a precedent for China’s role and behaviour in other countries as well,” said the research report, according to Asian Lite.

Another country, Djibouti, at the heart of China’s multibillion-dollar “Belt and Road Initiative,” is struggling under mounting financial pressure and has suspended debt repayments to China, its main bilateral creditor, reported European Times.

Djibouti, a tiny nation at the intersection of the Red Sea and the Gulf of Aden, owed a total of USD 2.68 billion to external creditors at the end of 2020, according to the World Bank.

The African country struggling to repay Chinese loans has brought criticism to the Chinese model of project financing for creating dept traps for developing countries.

In its latest report on Djibouti, the World Bank stated that in 2022, Djibouti’s debt servicing costs tripled to USD 184 million from USD 54 million in 2021. A further increase to USD 266 million has been predicted for 2023.

The International Monetary Fund (IMF) after considering the sharp projected increase in Djibouti’s external debt servicing, in late 2021, declared Djibouti’s debt as being unsustainable. (ANI)

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Pakistan's total debt

Pak’s Debt Surges To Rs 12 Trill In First Quarter

Pakistan’s total debt and liabilities spiked by Pakistani Rupees (Rs) 12 trillion or 23.7 percent in the first quarter of the current fiscal year, the loan trance from the International Monetary Fund and the devaluation of the rupee pushed the numbers up significantly, The News International reported citing analysts.

In the fiscal year, 2022-2023, in July-September the debt and liabilities stood at Rs 62.46 trillion which is more than the same period of last fiscal year, accounting for Rs 50.49 trillion.
The country’s debt rose 24.7 percent to Rs59.37 trillion, while total liabilities increased 23 percent to Rs3.56 trillion.

Fahad Rauf, head of research at Ismail Iqbal Securities said the increase in the debt was mainly by external sources. “Mostly the IMF [International Monetary Fund] loan tranche of USD 1.2 billion and the impact of the rupee depreciation on overall external debt.”

The government’s domestic debt increased by 18.7 percent to Rs 31.40 trillion. The foreign debt stood at Rs 17.99 trillion in July-September FY2023, 30.2 percent up from a year earlier, according to the figures from the State Bank of Pakistan (SBP), according to The News International.

Total external debt and liabilities jumped 33.4 percent to Rs 28.94 trillion.

“Managing debt obligations is one of the biggest challenges facing the government,” said Mustafa Mustansir, head of research at Taurus Securities.

However, there are concerns about the conclusion of the ninth review of the IMF’s bailout package.

Although the date has not yet been set, the IMF staff mission is anticipated in Islamabad by the end of this month because the Fund needs Pakistan to make necessary modifications first.

The government is requesting some exceptions on performance criteria due to flood losses and the Fund’s insistence on maintaining the agreed tax-to-GDP ratio of at least 11 percent.

The delay in the IMF’s review is making foreign investors more anxious, reported The News International.

Meanwhile, Pakistan’s risk of default, measured through the five-year currency default swap (CDS) index, on Monday increased by 4.2 percentage points reaching a new high at 64.2 percent. The development indicates that Pakistan did not have the resources to make the growing import payments and foreign debt repayments in time, The Express Tribune reported.

Pakistan is due to repay USD 1 billion against a five-year Sukuk (Shariah-compliant bond) which is scheduled to mature on December 5, 2022. According to Topline Research, the yield (rate of return) on the Sukuk increased by 964 basis points in a day to 69.96 percent. The increase in the yield is hinting that investors were thinking that Pakistan might default on the $1 billion Sukuk.

State Bank of Pakistan (SBP) Governor Jameel Ahmad has said that Pakistan had foreign exchange reserves of “over USD 9 billion, which are more than enough” for paying imports and repaying foreign debt.

The five-year CDS indicated a high risk of default after Pakistan announced that Saudi Arabia’s Crown Prince Mohammad bin Salman had postponed his visit to Islamabad, as per reported by The News International. (ANI)

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Bright Spot In A Dark Horizon'

IMF MD Congratulates Modi On India’s Economic Recovery From COVID

Ahead of India’s upcoming G20 presidency, International Monetary Fund (IMF) Managing Director Kristalina Georgieva on Thursday thanked Prime Minister Narendra Modi for a great meeting and congratulated on India’s strong economic recovery from the COVID-19 pandemic.

Taking to Twitter, Georgieva wrote “Thank you @PMOIndia @narendramodi for a great meeting. Congratulations on India’s strong economic recovery from the pandemic and its remarkable advances, especially the incredible success in digitalization,” and congratulated India’s robust economic recovery from the pandemic.
The IMF chief also applauded the incredible success of the digitalization of India during the talks with Prime Minister Modi and assured full support for India to protect macroeconomic and financial stability.

“As India takes the helm of G20, you can count on @IMFNews full support to protect macroeconomic & financial stability, advance cooperation on debt resolution & promote financial inclusion,” the IMF Chief tweeted.

Georgieva also counted on India’s strong leadership to further strengthen a strong multilateral system and advance IMF reforms.

The Managing Director of IMF, Kristalina Georgieva also met Union Finance Minister Nirmala Sitharaman to discuss India’s upcoming G20 presidency and IMF’s support for it.

During the meeting Sitharaman and IMF Managing Director shared concerns on “key downside risks to the global economy and the cross-border effects due to the geopolitical situation and tighter financial conditions,” the Union Ministry of Finance tweeted.

The two leaders recognised that the effect of an increase in global inflation due to the rise in food and energy prices and international debt has impacted low-income countries the most.

Sitharaman reiterated the importance of coordinated policy measures and multilateralism for mobilising adequate financial resources for climate action, emphasising that committed funds by the developed economies are yet to become available.

During the meeting, IMF Managing Director stated that despite the global uncertainty and headwinds, India continues to be a bright spot in the global economy. (ANI)