Archive for IMF

Debt Crisis in Mozambique

The government of Mozambique has issued a stark warning to it’s creditors warning that a debt restructure was essential in order for the country to recover.  It revealed last week that the country would simply be unable to repay or even fully service it’s loans until the gas revenues it was expecting was available sometime after 2021.

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It’s a grim picture for the South Eastern African nation – which expects public debt to reach an unsustainable level of 130% of GDP by the end of this year.  The International Monetary Fund has offered it’s assistance in negotiating new terms with it’s creditors however direct aid was suspended after they discovered hidden loans of over $2 billion which were not declared.

As hidden debts go this was pretty spectacular, most of it had been built up by various state firms primarily to purchase various security and military equipment.  These were ironically supposedly needed to protect the purchase from a previous secret loan which was used to buy a Tuna fishing fleet.  All of these purchases and loans were kept secret from both investors and creditors alike.

The total of Mozambique’s debt doesn’t sound that much in the context of some Western countries but the total of almost $10 billion is way outside Mozambique’s ability to service.  It is estimated that the country is able to manage a maximum repayment schedule of about $25 million a year, unfortunately it’s current liabilities require repayments of around $38 million dollars every single month.

Many analysts have previously promoted Mozambique as one of the safest investment opportunities in Africa for a variety or reasons.  It’s politically very stable and has some good mineral reserves particularly a large amount of natural gas.   The country had been experiencing some good growth levels however violent clashes in the North and the worldwide drop in commodity prices have stalled both inward investment levels and the overall economic growth which does still stand at about 3.7% however.

The debt crisis though threatens to halt the economic progress being made in Mozambique.  Much of the country has benefited greatly from both the growth and the political stability.  You’ll see a new professional middle class emerge in the cities, who purchase luxury good and utilize the improving internet infrastructure.  Large media firms like Hulu and Netflix are available there although you’ll need a working Netflix VPN to access properly.

It’s a worrying time for the citizens of this beautiful African country, once more the promise of a better life and economy has been threatened by reckless mismanagement by the State. Hopefully the debt can be restructured in some way in order to allow the country to continue it’s growth story.

Does Britain Risk a Debt Filled Future?

Among the corridors of economists and financial analysts, there has been largely quiet praise for the UK’s approach to the global recession, the banking crisis and the high levels of debt which have resulted.  The cut backs in Government spending are of course not everyone’s prescription for the troubles and equally many suspect it has hindered and slowed the recovery.

The reality is that much of the UK Government’s spending levels were simply unsustainable and austerity although unpopular would have been inevitable at some point in time.   Increased growth obviously impacts these figures too and a healthy growing economy can also be used to reduce debt levels in tandem with any spending cuts.

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For several years this reduction in Government debt levels has been the main focus for the economy, however the Brexit decision seems to have thrown these goals up to the winds of political expediency.   If you watch the UK news and political reports, austerity now rarely get’s a mention – apart from the brief distraction of the Olympics, the talk is all about leaving the European Union.   The reality is that this decision is likely to have a much bigger effect than any trimming of welfare payments or cutting back government departments.

The most urgent problem though is the uncertainty, the simple fact that no-one seems to know what is happening. The protagonists who promoted the leave campaign now seem to have stepped into the background, leaving a variety of pledges and promises in the dust.  The truth was none of these were ever guaranteed and indeed many simply contradicted themselves, and in truth will probably be set aside mostly by the new government entrusted to deliver some sort of Brexit result.

It looks like nothing much is happening soon, and the uncertainty looks likely to continue for months and possibly years to come.  There is a suspicion that something is happening behind closed doors, in the corridors of power some sort of workable compromise is happening but we may just have to wait and see. Until then it’s almost certain that economy will start to shrink, maybe slowly but the current situation is not conducive to growth.

Business investment has already hit a 10 year low, as companies wait for direction.  There are lots of rumours of impending trade deals and agreements, but none of these can actually be implemented until the country leaves the European Union so all the talk is very premature.

Many seem to see the ‘free trade deals’ as a passage to huge prosperity and a sales fueled bonanza for a UK freed from the shackles of the EU.  The problem is that ‘free trade’ can also be extremely detrimental to an economy as well as being beneficial.  It’s why these agreement sometimes take a decade to negotiate, a bad deal can be much worse than no deal at all.  International trade, even is you simply use the base economic model of comparative advantage can be a complex and difficult area. Establishing a ‘free trade’ agreement sounds like a simple, beneficial thing to establish however it’s implication is that you offer trade advantages over other countries, which can have huge knock on effects in an economy.

The worry for the UK economy is on many fronts – the indecision, the confusion and what is actually going to happen.  Sometimes no decisions are actually worse that ‘bad decisions’ – government debt is only going to increase while the confusion remains.

Jim Harvey

Author of Online IP Changer

Brazil’s Economic Downturn Deepens

It doesn’t seem so very long ago that we were discussing the economic successes of emerging nations like Brazil.  From Europe we looked across at huge growth rates, rising living standards and a vibrant economy with a sense of extreme jealously.

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However Brazil is now facing much bleaker economic prospects and it is a prime example of how quickly market sentiment can turn against an economy. The risks were always there, in this blog we highlighted here the fact that much of the success in Latin American countries was due to US economic policies – which meant that there was always a lack of genuine fundamentals underlying the growth. Much of the investment in these emerging countries was simply driven out of the US and Europe by very low interest and bond rates, when stability returned then the investment dried up in places like Brazil too.

The economic prospects for Brazil continued on a downward slope with this weeks decision for the credit rating agency Moody downgrading Brazil’s sovereign debt status to junk. The decision in itself will have little consequence, partly because it was anticipated and had largely been already priced into the markets. That’s not likely to be much relief though, more simply a confirmation of the bleak prospects of the Brazilian economy as a whole.

The reality is that Brazil has simply been spending too much with huge levels of debt and an ongoing fiscal deficit making it even bigger. As always in these situations, the talk is of a debt default which could be the catalyst for even more pressure on the country’s currency and a deepening recession.

Only a few years ago Brazil’s economy was growing at over 4% a year, whilst many other economies in the world were basically stagnant. Now that growth has been reversed and this year it is expected that it will contract by around 3-4% this year. This would represent Brazil’s worse recession in more than a hundred years, and with little indication of a turnaround the deficit is likely to increase.

The political situation is also unlikely to offer any relief for Brazilians, which desperately needs strong policies to deal with the economic crisis. However if you invest a few short minutes in looking at the Brazilian media online, possible with an online IP changer then you’ll see that there’s little sign of this happening. As one correspondent highlighted, the report by Moody’s is like a medical report which states the patient is sick yet is maintaining the same lifestyle which caused the problem.

Technical Citation

Will Greece Start a Euro Collapse?

Well today is Sunday the 5th July, the day after the anniversary of US independance but certainly today was an event of much more importance to the future of a European Union.  The Greeks have voted no to the current offer from the EU of more money based on specific austerity measures.

It’s a difficult one to call, at the moment I’m watching the news on the BBC and there are pictures of Greeks dancing in the street at the result. I’m watching from a cafe in Western Paris known for it’s fast internet access even with a VPN to help watch BBC News live – available here.

Greek Exit From Euro

Greek Exit From Euro?

So what’s next? Does the Greek Government now have a mandate to negotiate real change in the debt restructure? Well the reality is probably not, Greece is unable to function for more than a few days without a serious cash injection. It is certainly not a position of strength, although many would argue that a democratic mandate from a few million Euro citizens should count for something.

There are many Euro officials, probably not easy to find now, that stated that a ‘No’ vote was basically a vote to leave the Euro and rejecting the terms of the creditors. The problem is that when the amounts are this large creditors are not really acting from a position of strength.

You can’t send in a firm of bailiffs to a country to recover a few billion euros, after all where will sell a few hundred thousand flat screen TVs with all the settings set to Greek. The reality is that a default and exit for Greece will be devastating for both sides, so I feel that a compromise will definitely happen. You can get really upset about someone not paying you back 50 billion euros, but losing another 200 billion euros as your currency and economy crashes is not going to cheer you up.

Time will tell on what happens, at the moment I’m treated myself to buy IP address, so that I could watch all the different News sites and listen to experts across the world. There seems to be little common consensus, but the reality is that the amount that will be wiped off Euro stocks, the economies of the Eurozone and many other areas, will be many times more that the Greek debts will mean that someone will give ground. My money says that Greece have played a very shrewd game and will benefit from this no vote, however I could be completely wrong.

Trade Figures Point to UK Recovery

At any given time, for most of the European economies you can find a positive economic story and a negative one.  It’s particularly valid for the United Kingdom where speculation and predictions veer widely from one extreme to another.

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This week we’ve seen a lot of positive news around increasing trade and negative ones warning of credit problems caused by  the spectre of the European Referendum whenever that might occur.  However it’s best not to dwell on the fears of the market as they are largely overblown so far into the future.

So what about the trade news?  Well the positive signs are coming from the size of the UK’s trade deficit which finally seems to be heading downwards.  In fact it’s falling a significant amount with the March figures falling from 3.1 billion pounds to a little over 1 billion.  A huge fall in one of the UK’s problem areas – the trade deficit is estimated to knock nearly a percentage point from the quarterly economic growth forecast.  So it is expected that this good news should filter through to the economic growth indicators for the second quarter of 2015.

It is the April figures that outshone the rest, and some optimists have predicted that instead of net trade being a drag on economic growth, they might in fact contribute to them in the future.    This would be a huge surprise for most economists and perhaps point to a great increase in confidence particularly in manufacturing and their export markets.

UK growth will likely still be reliant on domestic demand, the improvement in most Eurozone economies over the last quarter will hopefully bring some positive benefits to the UK too.  There are many signs that export volumes are increasing at a pace, this will partly be fueled by the increase in confidence in British companies over the last couple of years and some would suggest the shock Conservative majority.

The overall figures suggest that imports are falling rapidly and the exports are climbing. The fall in imports was largely due to other factors though particularly the falling commodity prices particularly oil – this also helped cut manufacturers costs and make British exports more affordable.

For further information on the UK economy, see the UK press and media.

Resources:

UK Proxy Service – http://www.youtube.com/watch?v=7VYyV0vrTfM

USA VPN – http://www.proxyusa.com/usvpn

IMF States Economic Recovery at Risk

It seems like these comments come along every week, in fact you’d probably manage to find IMF comments to support most divergent policies if you looked hard enough.  Although their latest statements regarding the economy rings very true with us on Jubileesouth.org.

It’s focussed not on our national debt for once, but on the household debt figures – the amount of debt that an average British household has to cope with.  Just like any sort of debt, it has to be serviced and can have a huge effect on our daily lives and the economy in general.  It’s quite simple really, an economy grows if it can stimulate demand and keep it’s output growing.  However domestic demand is obviously going to be related to our spending power, of which Britain has a problem.

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Families in the UK simply have more debt than the vast majority of developed countries, in fact the only comparable country is Portugal.  This is a country which has already sought emergency funding because it nearly ran out of money, it’s not a club that the UK wants to be a member of.

IMF suggests that household debt is 87% of GDP in the UK, compared with 82% in Portugal, 72% in Spain, 55% in Germany and less than 40% in France and Italy.

So are UK families excessive consumers?  Do we wander around on credit fuelled spending sprees and consistently live beyond our means?  Well the answer is no, not particularly our debt levels are largely due to our obsession with home ownership.

Houses are expensive in the UK, largely due to the laws of supply and demand.  The UK simply doesn’t have enough houses and demand is always very high. it’s simply hard coded into our identity – own your own home at all costs. Prices are unlikely to fall in the short term at least until some serious increases in supply are undertaken which also seems unlikely.

Just take a look at the UK media, get yourself a subscription to a proxy service like this and have a look at the BBC and other UK TV services.  You’ll see evidence of the UK’s obsession with home ownership pretty quickly, thousands of hours every week with buying, selling and upgrading property.

The problems is that this particular desire is extremely expensive, house prices are amongst the highest in the world and even the process of buying a house is expensive. Yet we all try and do this, an inevitably take on huge levels of debt in order to own our own home. Never mind property costs, first you have to deal with estate agent fees, removal costs, and stamp duty – average cost of moving or buying – about £12,000 currently.

UK consumers are unlikely to be able to either save enough or spend to fuel a domestic demand driven recovery with these sort of costs to contend with.  But until we change our outlook about owning property then it is likely that household debt is likely to stay extremely high.

Jennie Calwood

http://www.uktv-online.com/

The Bank of England Election Blackout

Over the last few governments, there has been a move to distance the Bank of England from the political process. Successive governments have given it more power to act independently from the ruling party.  It’s a process which has been a success and we will see another aspect  of this during the election process in the UK over the next few weeks.

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Although it may be more accurate to say ‘ you won’t see’ as the Bank of England is now in blackout mode until the election is over.  The ‘purdah’ rules came into place at  the dissolution of parliament on the 30th March and  they state that no BoE officials can make public statements until May 7th when the election takes place.

It’s likely to be a frustrating time for business and those in the financial sectors, as the announcements from Mark Carney or any other officials on a host of important committees are an extremely important source of information.  They’ll hear nothing from the Monetary policy committee, the Financial Policy Committee or any of the other bank regulation units that reside under the Bank of England.

Of course, all these functions will still be busy working as normal.  There will still be neutral updates and releasing monthly figures as normal.  The Bank of England will still make all the decisions it needs to such as controlling inflation, setting interest rates and all the other policies it controls.

These ‘purdah’ rules are an important part of the UK’s democratic systems which are designed to maintain the political impartiality of several important sectors of the UK.  They include the UK Civil Service, who are the huge sector of officials that keep the State machinery running.  The idea is that no-one in any of these important sectors can influence the result by making any sort of statement which could have political connotations.

This election might involve an even longer blackout this time as there is a distinct possibility that no single party will win control.   Most of the opinion polls are pointing to a ‘hung’ result which means that some negotiation will be required to form a government with an operating majority.  This would require an even longer blackout than normal as it might be required until a Government is put into place.

The election promises to be hugely exciting with no-one really knowing what will happen.  The pollsters seem genuinely unsure about how it will all unfold, there will though be a huge amount of media coverage.  If you want to follow the various parties and economic implications then the main media company to follow is the BBC.  The British Broadcasting Corporation is renowned for it’s political coverage and you can access it all from their web site and the BBC iPlayer application.  If you are based outside the United Kingdom though you will need to use a UK based VPN such as this one, in order to access the coverage.  It effectively hides your location and routes through a secure UK server in order to access any content only available in the United Kingdom.

Joseph Benyon

Further Information

The European Economy

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European economy is still a booming market. Europe remains a perfect partner for anyone, when it comes to business here in 2015. Even with the trouble in Greece, most of the other EU countries are doing really well. The economy in Europe fluctuates at the moment, and it is still a growing market. Germany turned out as Europe’s largest national economy that ranks as the fourth globally in GDP (nominal) and fifth in (PPP) purchasing power parity GDP. France follows after Germany that ranks fifth globally in GDP (nominal). After France, United Kingdom follows that ranks sixth globally in GDP (nominal), Italy followed as rank seventh globally in GDP (nominal), Russia followed that ranks as tenth globally in GDP (nominal). These 5 countries rank in the world’s top 10. Therefore, the European economies account for ½ of the 10 wealthiest ones. And right now this economy is just growing. According to the latest data from Paul Kostumer, the is a trend that seems to continue far into the year. European countries become closer together by the end of World War II, culminating in the formation of European Union. By the year 1999, it was the introduction of unified currency that is called “euro”. European Union turned out as the largest and wealthiest economy all around the world. By the year 2009, Europe was still claimed as the wealthiest region around the world. A lot of European companies have also gained a large increase in their econony over the last year. This goes for both large and small companies. One example is karnevalsshoppen.dk which is a danish company selling udklædning and tyroler kostumer. They have in 2014 increase their budget with over 13% compared to 2013, which also showed an increase compared to 2012. This is just one of many examples, and you will see similar cases all over Europe.

With the top 500 largest corporations measured by revenue, 184 have their headquarters in the nation of Europe, 161 are situated in EU, 15 in the country of Switzerland, there are 6 in Russia, 1 in Turkey and 1 in Norway. Manuel Castel was a Spanish sociologist who noted that the average standard of living in Western Europe is very high. As you can see, European economy turned out as breaking news, according to Paul Kostumer. Many countries get alarmed and being jealous because of the success of European countries’ economy. In the year 2008 until present, European country are not having a problem on their economy. They continue to progress and continue to build corporations. A lot of nations envied the wealth of European countries and tried to look out on European’s financial system. With a high and competitive economy in Europe, European people don’t really experience hardship even the poor. Although there are poor people in the nation, they never experience hardship on their standard of living. They can easily look for a source of income. With many commercial building built in Europe, people can easily find jobs.

For the record of unemployed people in Europe, you would find out that it has low percentage of jobless applicants. A lot of applicants are hired and find job easily. The European economy never left behind from any other nations. Although United States is known as largest national economy, European economy will always be on the top of it. In comparison to European economy, it is not just known as largest national economy but wealthiest nation as well. People who wish to work in Europe would surely not be frustrated on the salary they would receive. Many foreigners are enticed to work in Europe. European economy has a very good feedback when it comes on foreign workers. European economy doesn’t only claimed as largest economy but a wealthy nation as well. The economic sectors of Europe are generally highly developed as well.

Source:
tyrolerudklaedning.dk
web: http://www.tyrolerudklaedning.dk/