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Sept 24, 2013

UN: Sri Lanka


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On Thailand IMF Cites Global Trade Tensions and Money Laundering After Inner City Press Asks of Corruption

By Matthew Russell Lee, CJR PFT NY Post

NEW YORK CITY, Oct 7 – When the International Monetary Fund held its biweekly embargoed media briefing on September 26, Inner City Press submitted questions including on Turkey and Sri Lanka, see below.

 Now on October 7 on Thailand from the IMF, this: "On September 30, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Thailand.  Growth lost momentum over the last 12 months, while inflation remained subdued. Real GDP growth reached 4.8 percent year-on-year in 2018:H1 but declined to 3.4 percent in 2018:H2; and 2.8 percent and 2.3 percent in 2019:Q1 and 2019:Q2 respectively. Although private consumption held up, global trade tensions impacted Thai exports, particularly electronics, through the global value chains. Headline inflation averaged 1.1 percent in 2018 and declined to 0.5 percent in August 2019 on the back of food and energy prices, and core inflation remains subdued at 0.5 percent. The output gap seems to be closing by some measures, although the combination of low inflation and a large current account surplus suggest a still negative gap.  Credit and housing markets are also cooling. Total credit growth moderated in 2019:Q1, led by declines in corporate borrowing. In contrast, loans to households picked up in 2018 and remained buoyant through 2019:Q1, driven by auto loans and new mortgages. Following the tightening of LTVs in April 2019, housing loan demand softened, and condo prices declined by 1¾ percent (y/y) also reflecting weaker foreign demand. The housing market is already going through a period of adjustment consistent with the broad-based cooling of the Thai economy.  The current account surplus narrowed sharply in 2018. The decline of the surplus to 6.4 percent of GDP in 2018 from 9.7 percent in 2017 was driven partly by the U.S.-China trade tensions, which weighed on exports. Data as of end-June 2019 reveal the continued impact of trade tensions, as exports contracted by 2.2 percent y-o-y, driven by electronics and computer parts, with a 14.9 percent decline in China-bound goods and a 2.2 percent decline in U.S.-bound goods. Imports declined by 9.4 percent y-o-y, with lower capital goods, raw materials, and intermediate goods imports. Tourism receipts have also softened, led by a slowdown in Chinese tourists.  The continued strong external position and looser global financial conditions have contributed to the recent appreciation pressures. Since December 2018, the baht has appreciated by about 5.5 percent against the U.S. dollar, making it one of the best performers in the region. The level of reserves increased by nearly US$11 billion by end-June 2019 to US$250.3 billion, well above Fund adequacy metrics. Since May 2019, capital inflows have further accelerated, contributing to a sharper appreciation of the baht. On July 12, 2019, the Bank of Thailand announced measures aimed at curtailing short-term speculative capital inflows (a reduction in the limit of the outstanding balance for non-resident baht accounts) and the tightening of the reporting requirements for of non-resident holdings of debt securities issued in Thailand.  With respect to the outlook, growth is projected to slow down to about 3 percent in 2019–20 reflecting external and domestic headwinds. On the external side, the projected slowdown in global demand and uncertainty about trade tensions are expected to weigh on exports throughout this year. Domestic factors include a weakening in consumption growth—as the debt overhang weighs on credit growth and the drought depresses farm incomes. Over the medium term, private consumption and investment are expected to strengthen, supported by dissipating political uncertainty and a scale-up in public investment. This would also contribute to external rebalancing as demand feeds into higher imports. Risks to the outlook are tilted to the downside emanating most notably from the ongoing escalation of protectionism threatening the global trading system.   Executive Board Assessment [2]   Executive Directors noted that Thailand’s robust policy framework and ample buffers, created through the authorities’ judicious management of public finances, continue to underpin its resilience to shocks. Directors also welcomed the progress in improving the coverage and effectiveness of financial supervision and macroprudential policies which has enhanced financial stability. They noted, however, that external and domestic headwinds are challenging near term growth prospects, and that risks are tilted to the downside stemming from the impact of the global economic slowdown, ongoing trade tensions, and weak domestic demand... Directors took note of the authorities’ ongoing efforts to strengthen anti-corruption institutions and called for improving the operational aspects of the procurement law and addressing AML/CFT deficiencies." Anti-corruption? We'll have more on this.

On September 26 Spokesperson Gerry Rice, now for new Managing Director Kristalina Georgieva, on Turkey said "this is also from Matthew, he has asked ' On Turkey, what is the IMF's response to ruling AKP deputy chair Numan Kurtulmuş criticizing a meeting between IMF & opposition parties, saying Turkey has "closed the topic with the IMF."'

  Then Rice said it is normal to meet with opposition - except in Cameroon, apparently - and that there has been no indication from the Turkish authorities they are looking for a program.

 On September 24 on Sri Lanka the IMF cited the Easter terror attacks but remained silent on the suspected war criminal put atop the country's army, Shavendra Silva which Inner City Press has been asking the UN system about since February: "A staff team from the International Monetary Fund (IMF) led by Manuela Goretti visited Colombo during September 10-25, 2019 to conduct the sixth review under Sri Lanka’s economic reform program supported by a four-year Extended Fund Facility (EFF) arrangement. At the end of the visit, Ms. Goretti made the following statement: “The team reached understandings at the staff level with the Sri Lankan authorities on the sixth review of the EFF-supported program. The authorities are taking steps to complete all the pending actions and structural benchmarks for this review over the next few weeks. “The team welcomed the authorities’ efforts to normalize the security situation in the country after the tragic terrorist attacks in April and mitigate the impact of the shock on the economy. Real GDP growth was revised to 2.7 percent in 2019 and is projected to improve to 3.5 percent in 2020, as tourist arrivals and related activities gradually recover. Inflation is expected to remain stable at around 4.5 percent during 2019-20. Despite the recent fall in tourist arrivals and remittances, the current account balance is projected to improve to 2.6 percent of GDP in 2019 on the back of lower imports and stronger exports supported by the exchange rate correction in late 2018.  “Sustaining prudent policies and implementing institutional reforms remain critical to preserve macroeconomic stability, given the weak global outlook and Sri Lanka’s sizable public debt. “The protracted impact of the 2018 political crisis and the Easter attacks are significantly impacting fiscal performance. The end-June fiscal target was missed by a large margin, due to frontloading of spending from the clearing of arrears and externally-financed capital projects carried over from 2018 as well as a sharp fall in indirect revenues following the terrorist attacks. While the program targets agreed at the time of the fifth review are no longer within reach, the authorities are committed to achieve a primary fiscal surplus of 0.2 percent of GDP in 2019, through implementation of remaining revenue measures in the 2019 budget and prudent expenditure management. “The mission welcomed the authorities’ commitment to advance revenue-based fiscal consolidation in 2020 and over the medium term to preserve the gains achieved under the program, put the high public debt on a downward path, and provide space for better-targeted social and capital spending. Sustained efforts are needed to mobilize revenues, by broadening the tax base and enforcing compliance, and strengthen spending efficiency. To anchor public debt sustainability, the mission welcomed the authorities’ plans to revamp fiscal rules and establish an independent public debt management agency over the medium term, in line with international best practice. Improving the financial performance of SriLankan Airlines and advancing energy sector reforms, including by tackling cost inefficiencies and subsidies in the electricity sector, remain critical steps to reduce fiscal risks. “The mission supported the Central Bank of Sri Lanka (CBSL)’s prudent and data-dependent monetary policy approach and their renewed commitment to strengthen reserve buffers in line with program understandings. The CBSL should continue to allow for exchange rate flexibility and limit FX intervention to smooth excess volatility, in the event pressures from tighter global financial conditions were to intensify. The new Central Bank Act will be a landmark reform in the roadmap towards flexible inflation targeting by strengthening the CBSL’s mandate, governance, accountability, and transparency, in line with international best practice. “The CBSL adopted temporary measures to support the tourism sector and ease credit conditions in the aftermath of the terrorist attacks, including a debt service moratorium and caps on bank interest rates. These exceptional measures should be lifted as soon as credit conditions stabilize to avoid distortions to the financial system, amid weaker credit quality and falling profitability. The mission welcomed the ongoing efforts to strengthen the regulatory and supervisory regime for banks and non-bank financial institutions.... The team met with Prime Minister Wickremesinghe, Minister of Finance Samaraweera, State Minister of Finance Wickramaratne, Governor of the Central Bank of Sri Lanka Coomaraswamy, Secretary to the Treasury Samaratunga, Senior Deputy Governor Weerasinghe, other public officials, representatives of the Parliamentary Opposition, business community, civil society, and international partners."

  On September 12 Inner City Press asked the IMF: "On Zimbabwe, please confirm or deny IMF's Patrick Imam saying that "it is clear, compared to the projections of the original SMP, which did not foresee the severity of the drought and its secondary impact, nor the electricity shock, that growth is almost certainly going to be revised downwards and inflation upwards compared to the original SMP forecasts." And what is the IMF's view of the (economic) impact of the crack down on protest and human rights defenders?"

  Spokesperson Gerry Rice said that the IMF team is in Harare, from September 5 to 17. On human rights, he said the IMF "focuses on economics" and that such questions should be directed to... bilateral creditor. At least he didn't say the UN, which doesn't care. Here are Inner City Press' other questions to the IMF:

On Somalia, please provide a read out or response to reports that Somali Minister of Finance Abdirahman Duale Beyle met officials from the IMF  Addis Ababa to discuss the fourth phase of the Somali pardon program.

On Sri Lanka, what is the IMF's response to Independent Expert on foreign debt and human rights, Juan Pablo Bohoslavsky, sayins that in Sri Lanka, there are concerns at the significant rise in the value added tax, given that the brunt of such taxes is often borne by the poorest?

More generally, what is the IMF's response to Bohoslavsky saying as to the IMF that "even though austerity can be a useful tool of administration against the squandering of resources, it is essential to keep in mind that austerity impacts the most vulnerable and marginalised"?

On crypto-currency what is the IMF's response to Marshall Islands Minister David Paul saying the country is moving forward with its plans. According to the post, Minister Paul will provide further details about the Marshall Islands’ crypto, the Sovereign, next week at the Invest: Asia 2019 conference?  Within months, the IMF began putting pressure on the Marshall Islands to not forego the U.S. dollar in favor of its own digital currency. The Fund issued a 58-page report in September 2018 and warned against the "potential costs arising from economic, reputational, AML/CFT, and governance risks" associated with the issuance of the Sovereign.

On the DR Congo, what is the IMF's knowledge of, and comment on, that all the big-name advisory banks are laying siege to the presidential palace in the hope of winning the contract to advise the DRC on its relations with the IMF?" Inner City Press also asked, again, for "any updates on Cameroon or Haiti or Yemen." Watch this site.

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