IMF Latest: Debt Deal Talks Stuck Between China, Private Lenders

Global creditors are at odds over how to level the playing field among lenders when governments default, jamming up efforts led by the International Monetary Fund to expedite sovereign debt restructurings.

(Bloomberg) — Global creditors are at odds over how to level the playing field among lenders when governments default, jamming up efforts led by the International Monetary Fund to expedite sovereign debt restructurings. 

Among the issues are questions about whether private creditors should take the same level of losses as bilateral lenders when countries default, and how the various types of loans provided by China should be treated, the people said. 

Closely watched talks set for Thursday at the IMF’s annual meeting in Marrakech, Morocco, between various groups involved in restructurings — including China and private creditors — are unlikely to produce any breakthroughs, according to people who will be attending the session. 

The discussions come as the guardians of world finance gather for the annual meetings of the two Washington-based lenders against the backdrop of ongoing fighting after Hamas attacked Israel from the Gaza Strip. 

All times are for Morocco.

Kenya Weighs Range Options for $2 Billion Eurobond (6:57 p.m.)

Kenya is weighing borrowing from multilateral and bilateral lenders to help repay $2 billion of eurobonds due in June and may dip into reserves if the funding can’t be arranged in time, Treasury Secretary Njuguna Ndung’u said.

The East African nation can’t consider refinancing the debt in capital markets because of the current high level of interest rates, Ndung’u said in an interview. Instead, the authorities are talking to multilateral and bilateral institutions, and development finance institutions for support, he said.

China Getting More Vote Heft at IMF Is Inevitable, Villeroy Says (6:05 p.m.)

A revision of the International Monetary Fund’s voting shares that benefits emerging countries including China will at some point be inevitable to ensure fairness in global financial institutions, said France’s central bank chief, Francois Villeroy de Galhau.

“We need to move toward unquestionable fairness in the governance of the international financial institutions,” Villeroy said at a meeting of the Emerging Markets Forum on the sidelines of the meetings in Marrakech.

Yellen Ignores Threat at Home to Ukraine Aid in Support Pledge (5:58 p.m.)

Yellen said the US remained committed to supporting Ukraine and punishing Russia through sanctions without acknowledging forces that could undermine both efforts.

“The United States will support Ukraine alongside our allies for as long as it takes,” Yellen said at a meeting in Marrakech devoted to the embattled eastern European nation.

Japan, World Bank Announce $40M for Green Supply-Chain Project (2:33 p.m.)

Japanese Finance Minister Shunichi Suzuki and World Bank President Ajay Banga announce financing for a program to help developing nations diversify energy supply-chains.

Japan, Canada, Italy, South Korea and the United Kingdom have pledged an initial contribution of more than $40 million in total to the Resilient and Inclusive Supply-Chain Enhancement program, they said.

Yellen to Meet China Central Bank Chief in Marrakech (1:23 p.m.)

US Treasury Secretary Janet Yellen plans to meet with China’s central bank Governor Pan Gongsheng this week while the two are attending multilateral meetings in Morocco.

Yellen said Wednesday that she’s also hoping that there can be progress on debt relief talks that include China, the biggest creditor to developing economies. She didn’t say when she might meet Pan. The two are attending the annual meetings of the International Monetary Fund and World Bank in Marrakech. 

IMF Sees Inflation, Growth Risks If Israel-Hamas War Widens (12:17 p.m.)

The International Monetary Fund’s No. 2 official says that the war between Israel and Hamas could spur inflation and hamper global growth if it turns into a wider conflict that causes a significant increase in oil prices.

Modeling by the organization, whose mandate includes global economic surveillance, shows that a 10% increase in oil prices leads to inflation being 0.4 percentage points higher a year later, said Gita Gopinath, the fund’s First Deputy Managing Director.

Peru’s Velarde Cautious on Policy (12:03 p.m.)

Latin America’s longest-serving central bank chief, Julio Velarde, said he needs to be sure inflation has been brought under control before he can be more assertive with monetary policy in Peru.

“We have to be sure inflation is defeated before we can be more aggressive,” Velarde said. “We are going to see numbers, core inflation and expectations.” 

Citigroup on Capital Buffers (11:45 a.m.)

Citigroup Inc. Chairman John C. Dugan said US plans to hike capital buffers for the biggest Wall Street banks are unwarranted and will push lending and intermediation away from the banking sector. 

“We believe it really will have a material impact on the amount of lending that US companies can do generally, which is not a good thing when the economy is more or less in a precarious position,” Dugan said.

Kganyago Says More Work to Do (11:45 a.m.)

South Africa’s central bank has more work to do to rein in inflation that remains elevated, with higher food and oil costs posing risks to the outlook for price-growth, central bank Governor Lesetja Kganyago said.

“The job on the inflation front is not yet done,” he said. “We remain vigilant and we stand ready to deploy our tools as necessary.” 

Yellen on Sanctions (11:40 a.m.)

US Treasury Secretary Janet Yellen said the Biden administration hasn’t ruled out new sanctions against Iran in relation to renewed conflict in the Middle East, but no decisions have been made.

“I wouldn’t take anything off the table in terms of future possible actions, but I certainly don’t want to get ahead of where we are now,” Yellen said Wednesday during a press conference. 

Higher Rates May Be Needed (11:32 a.m.)

Federal Reserve Governor Michelle Bowman said interest rates may need to rise further and stay higher for longer than previously expected to get inflation down to the central bank’s goal.

Higher-for-Longer Rates Worry (11:17 a.m.)

The prospect that high interest rates will keep constricting the global economy is worrying World Bank officials as they look to the impact on nations nursing large debts.

Bigger, Better World Bank (11:04 a.m.)

Ajay Banga, the World Bank’s new president, said the lender must become bigger as well as better at measuring its impact so it can help fund some of the trillions of dollars in global development needs. 

US Treasury Debt Dynamics (10:30 a.m.)

The forces underlying the Treasury debt market are extremely adverse as the US is on an unsustainable fiscal path, a senior International Monetary Fund official said.

IMF Caught Off Guard as China Strikes Sri Lanka Debt Deal (6:04 a.m.)

China reached a tentative debt agreement with Sri Lanka, front-running separate talks the International Monetary Fund and other creditors are holding with the South Asian nation and catching them by surprise. 

The deal between Export-Import Bank of China and Sri Lanka was reached late last month, China’s Foreign Ministry said, without providing details of the pact.

–With assistance from Jana Randow, Ekow Dontoh and Mirette Magdy.

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