Samson: Venezuela Defaults Again
10th December, 2017
Crisis-wracked Venezuela has defaulted on two bonds, failing to make a $183 million coupon payment, ratings agency S&P said.
The agency said OPEC-member Caracas failed to make the payment within a 30-day grace period on global bonds due in 2023 and 2028, AFP reported. “In line with our criteria for timeliness of payments, we are lowering the issue ratings on these bonds to “D” from “CC,” the agency said. Falling oil prices and corruption have decimated the economy under socialist President Nicolas Maduro, leading to hyperinflation and chronic food and medicine shortages in the oil-rich but cash-poor South American nation.
Global ratings agencies already had declared Venezuela and state-owned oil company PDVSA to be in “selective default” due to late payments on multiple bond issues. PDVSA is Venezuela’s primary source of income. Key bosses at the oil company have been sacked and arrested on corruption charges in what analysts see as a purge by Maduro to consolidate power ahead of next year’s elections. https://goo.gl/WwH42r
Samson: Zimbabwe Moving Slowly Toward Open Economy
10th December, 2017
In the budget presented after the end of Robert Mugabe’s era of 37 years of ruling the country, Zimbabwe has taken a few positive steps in order to liberate the economy and make it more open.
Finance Minister Patrick Chinamasa has presented a budget having a few very crucial measures and changes making the economy more tempting an inviting for foreign investors. These measures also include curbing the laws which require businesses to be 51% owned by domestic businesses or local people, Reuters reported.
He also said that the country is considering the privatization of some of the state owned firms too. Apart from opening the doors of the economy to changes, the budget paid attention to restricting unnecessary costs and hence the decision of the closure of some diplomatic missions.
Plus all civil servants above the age of 65 years would have to get retired as at present 90% of the government expenditure is spent on the salary of civil servants.
Presenting the national budget in parliament, Chinamasa announced a $5.1 billion budget for 2018, up from $4 billion in 2017. He said total expenditure for 2018 was projected at $5.8 billion, giving a budget deficit of $672.3 million which constitutes 3.5% of gross domestic product. This is markedly down from the 2017 budget deficit of $1.7 billion, constituting 9.4% of GDP.
The minister said measures contained in the 2018 budget were aimed at restoring market and investor confidence, ensuring discipline in management of public finances and ensuring policy consistency, clarity, credibility and predictability.
The measures were also aimed at addressing current cash and foreign currency shortages in the economy, Xinhua quoted him as saying.
Among the major reforms proposed in the budget to attract foreign direct investment is the amendment of the indigenization and economic empowerment law promulgated during Mugabe’s government.
The finance minister said the controversial law will be reviewed such that the 51-49% threshold will only apply to two minerals—platinum and diamond—while the rest of the minerals will be exempted from the law.
“The 51-49 threshold will not apply to the rest of the extractive sector nor will it apply to other sectors of the economy which will be open to any investor regardless of nationality,” Chinamasa said.
There will be sectors reserved for locals and foreigners will only participate in these sectors through special dispensation granted by government, the minister said.
Samson: Vietnam Reports Trade Surplus
10th December, 2017
Vietnam recorded a trade surplus of $2.76 billion in the first 11 months of the year, or 1.4% of total export turnover, according to the ministry of industry and trade, VNA reported. This marks a slight decrease against the $2.9 billion surplus seen in 2016. The total export value during the reviewed period was $193.75 billion and that of imports was $190.99 billion, up 21.1% and 21% year-on-year, respectively.
The ministry says that agriculture and seafood exports during this period rose 16.9% year on year to reach $23.5 billion, accounting for 12.1% of total export turnover. Export of crude, coal, petrol and minerals is estimated at $3.94 billion, up 26.4% year-on-year, accounting for 2% of total export turnover.
The export of processed goods reached $157.3 billion, up 22.4% over the same period last year, accounting for 81.2% of total export turnover. Asia has emerged the main importer of Vietnamese goods, with a year-on-year increase of 30.8%, accounting for 52.1% of total exports.
Samson: With the participation of Iraq .. The meeting, “OAPEC” starts in Kuwait
14:00 – 10/12/2017
The 99th meeting of the Council of Ministers of the Organization of Petroleum Exporting Countries (OAPEC), hosted by the State of Kuwait, kicked off Sunday.
OAPEC Secretary-General Abbas Al-Naqi said during the meeting that “the ministers of the Organization have a draft agenda which includes several topics in which the Secretariat will review the activities and work done during 2017.”
Al-Naqi added that “the agenda of the meeting also includes the draft budget of the Organization (the Secretariat and the judiciary) for 2018”.
The meeting was attended by Iraqi Oil Minister Jabbar al-Luaibi, Saudi Minister of State for Energy Affairs Prince Abdulaziz bin Salman Al Saud, Minister of Oil and Water and Minister of Electricity and Water of the State of Kuwait Essam Al-Marzouq and Energy Ministers of the OAPEC member states.
Samson: Lagarde: you cannot build a house on rotten foundation
10th December, 2017
Why does the IMF care so deeply about corruption? The reason is simple. The job of the IMF is to protect global economic stability and promote strong, sustainable, balanced and inclusive economic growth. And this becomes difficult, if not impossible, to achieve in the presence of entrenched and institutionalized corruption.
Fundamentally, corruption impairs the ability of the government to do its job. It undermines the ability to raise needed revenue, and it also distorts spending decisions—in the sense that governments might be inclined to favor projects that generate kickbacks over projects that generate economic and social value, Managing Director of the International Monetary Fund, Christine Lagarde wrote for imf.org.
This is bad for growth and bad for economic opportunity. It is bad for equity and fairness, as the poor lose out most from the diminished social spending and investments in sustainable development. And it is bad for economic stability, as the toxic combination of a low revenue take and wasteful spending lets deficits run too easily out of control.
More generally, broad-based corruption can weaken the foundations of a healthy economy by degrading social norms and undermining civic virtues. When the wealthy do not pay their taxes, the entire tax system loses legitimacy. When cheating is rewarded, and when elites are seen to play by different rules, trust will give way to cynicism and social cohesion will fragment. In a worst case, this can lead to civil strife and conflict.
Bottom line: if the foundation of your house is “rotting”—another meaning of “corruption”—then how can you build a strong and sustainable economy? You cannot.
All of this is especially debilitating for youth. When corruption is deeply embedded, far too many young people find that they have no prospects, no sense of purpose, no ability to participate, to make their mark, to flourish, and to contribute to society. They lose the motivation to pursue an education, knowing that getting ahead depends on connections rather than ability. They become disillusioned, disengaged, and disenchanted. They lose hope. At a visceral level, corruption can be soul-destroying.
So, it is really no surprise that the absence of widespread corruption is one of the key factors explaining differences in well-being across countries.
It is also no surprise that tackling corruption is central to the success of the Sustainable Development Goals. It is certainly central to Goal 16 of the SDGs, which calls on the global community to: “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels.”
Goal 16 incorporates specific targets relating to reducing corruption, bribery and illicit financial flows. But more than that, the success of all other SDGs depends crucially on getting to grips with the corrosive cancer of corruption. Again, you cannot build a house on a rotten foundation.
Dealing with corruption is especially important in the current global context. I am thinking here about the pervasiveness of tax evasion, as documented by recent scandalous revelations; rising skepticism among some toward traditional institutions, which are seen to favor insiders and elites; and the need to prioritize challenges such as uncertain job prospects, rising inequality and magnified environmental stress.
The IMF’s Role
So, how can the IMF help? Right now, we are in the middle of a major review of our policy on dealing with corruption, to make our policy more effective in the current global context.
I do not want to pre-judge this ongoing review. But a few things are clear. First, while the IMF has a policy for dealing with corruption, dating from 1997, this policy could be applied more rigorously and consistently, backed up with concrete and specific policy advice. In this context, it is especially important to be evenhanded.
Corruption can be a serious problem in rich countries and poor countries, big countries and small countries, stable countries and fragile countries. Wherever and whenever it is deemed a serious threat to inclusive growth and macroeconomic stability, we will need to conduct careful analysis and discuss policy messages candidly with governments.
Second, we all need to recognize that corruption is a “two-handed” problem. For every bribe taken, a bribe is given. Untangling corruption requires officials to—as the saying goes—“follow the money”. This includes tackling issues of impunity and malfeasance in the private sector, including large corporations housed in major capitals engaged in bribery of officials in foreign countries.
The IMF needs to engage with members whose citizens and corporations are frequently implicated in this kind of bribery and whose institutions facilitate the laundering of proceeds from tax evasion, financial fraud, and corruption. This is one of the dark underbellies of globalization, and we need to shine a light on it. It is especially important to the legitimacy of a globalization that I am convinced can—and indeed must—work for all.