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World Bank urges G20, China to urgently give debt relief to poor nations

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The poorest countries face $35 billion in debt service payments to official bilateral and private creditors, with over 40 percent of that due to China.

Poorer developing nations need faster G20 debt relief, the World Bank has said, redoubling its calls for China, the world’s largest creditor, and private sector creditors, to reverse course and participate fully in debt relief efforts.

The pandemic-induced recession in 2020 left around 60 percent of low-income countries in or at high risk of debt distress, and many emerging economies were struggling as well, World Bank President David Malpass told reporters on Tuesday as the bank unveiled its latest Global Economic Prospects report.

Debt levels in emerging market and developing economies had risen at the fastest pace in three decades, the report said, and while growth in low income economies is projected to strengthen in 2022 to 4.9 percent and in 2023 to 5.9 percent, income per capita is forecast to remain below pre-pandemic levels this year in half of them.

In 2022 alone, the poorest countries faced $35 billion in debt service payments to official bilateral and private creditors, with over 40 percent of that due to China, after a freeze in debt payments ended last year, Malpass said.

“Risks of disorderly default are growing; the tightening of monetary policy in advanced economies will have a ripple effect,” he said, repeating his call for reforms to the common framework launched by the Group of 20 major economies and the Paris Club of official creditors in November 2020.

Deep debt relief

The framework aims to provide debt relief chiefly through maturity extensions and interest rate reductions for countries eligible for repayment moratoriums under the Debt Service Suspension Initiative (DSSI), but progress has been sluggish.

“Deep debt relief is much needed for the poorer countries. If we wait too long, it will be too late,” Malpass said, calling for an end to non-disclosure agreements often demanded by China and other creditors, as well as clear rules for assessing and enforcing comparable treatment among all creditors.

READ MORE: G20 agrees debt framework to help virus-hit poor countries

Quick action needed

Malpass said adding an aggregated collective action clause to all new official and private sector debt instruments could help rebalance the power between debtor and creditor countries.

He said quicker work was needed on debt restructurings, noting that Chad, the first country that requested treatment under the framework one year ago, was still waiting to complete the process. Only three countries have asked for debt restructuring so far, but others needed help.

Malpass said he was cautiously optimistic about progress on the debt issue under Indonesia’s leadership of the G20, recent conversations with Chinese officials, and great interest in investment in countries like Chad, Zambia and Sri Lanka, if their debt structure could be stabilised.

Debtor countries also needed to shore fiscal frameworks and increase debt transparency, the report said.

High and rising debt levels left markets and institutions increasingly vulnerable to financial stress, especially in countries where weak fiscal positions and high sovereign debt left much less scope for an effective response.

The World Bank highlighted China, where financial stress could trigger a disorderly deleveraging of the property sector.

“A turbulent deleveraging episode could cause a prolonged downturn in the real estate sector, with significant economy-wide spillovers through lower house prices, reduced household wealth, and plummeting local government revenues,” it said.

READ MORE: Can developing countries avoid a ‘climate debt trap’?

Source: TRT

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UK inflation hits almost three-decade high as living costs soar

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The cost of living in Britain is forecast to increase even higher in April owing to a tax hike and further planned increases to domestic energy bills, analysts say.

The annual rate of inflation in Britain has risen to a near 30-year high in December, stoking fears about a cost-of-living squeeze as wages fail to keep pace.

Inflation accelerated to 5.4 percent in the 12 months through December, up from November’s 5.1 percent, the Office for National Statistics said on Wednesday.

Last month’s annual figure is the highest since March 1992, when inflation stood at 7.1 percent.

“Food prices again grew strongly while increases in furniture and clothing also pushed up annual inflation,” said ONS chief economist Grant Fitzner.

The Bank of England (BoE), whose chief task is to keep inflation close to 2.0 percent, is now expected to raise rates again at its next meeting in February amid easing concerns over economic fallout from the Omicron coronavirus variant.

On Wednesday, the pound hit a near two-year peak versus the euro on increased expectations of another rate rise, while the European Central Bank has yet to follow the BoE in tightening monetary conditions.

READ MORE: Explained: Europe caught in highest inflation in nearly 30 years

Surging costs

Economies worldwide are battling decades-high inflation that is forcing central banks to lift interest rates, including the BoE which last month raised its key borrowing cost — to 0.25 percent from a record-low level of 0.1 percent — for the first time in more than three years .

The cost of living in Britain is forecast to soar even higher in April owing to a tax hike and further planned increases to domestic energy bills, according to analysts.

National insurance, paid by workers and employers, is being increased to help fund social care for the elderly. Analysts expect more painful tax increases to foot the vast bill for Covid.

In addition, electricity and gas prices are set to rocket higher when the UK government shortly lifts a cap on energy bills amid record-breaking wholesale costs.

“With consumer prices rising at their fastest rate for three decades and wage growth slowing, Britons are being squeezed ever harder by the cost of living,” said Jay Mawji, head of trading provider IX Prime.

Consumers and businesses are struggling with surging costs, ongoing pandemic turmoil and supply chain problems.

At the same time, real wages in November fell on the year for the first time since mid-2020, official data showed on Tuesday.

“More pain lies ahead in the form of tax rises in April and a likely 50-percent jump in energy bills,” said IX Prime’s Mawji.

READ MORE: US consumer prices hit four-decade high in December

Source: TRTWorld and agencies

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Turkiye, UAE central banks sign swap deal

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The agreement aims to enhance bilateral trade and to further strengthen financial cooperation between the two countries.

Central banks of the United Arab Emirates and Turkiye have inked bilateral currency swap agreement.

According to a statement by the Turkiye’s Central Bank on Wednesday, the nominal size of the deal is mutually 18 billion UAE dirham and 64 billion Turkish liras.

The agreement aims to enhance bilateral trade and to further strengthen financial cooperation between the two countries.

“It will stand for a period of three years, with the possibility of an extension through mutual agreement,” the statement noted.

This agreement demonstrates the two central banks’ commitment to deepen bilateral trade in local currencies in order to advance economic and financial relations between our countries, Sahap Kavcioglu, the Turkiye’s Central Bank governor, said after signing the deal.

READ MORE: A new dawn: Turkey and the Arab world choose cooperation over conflict

Enhancing bilateral cooperation

The chief of UAE Central Bank Khaled Mohamed Balama also said: “Signing this agreement with the Central Bank of the Republic of Turkiye reflects each nation’s desire to enhance bilateral cooperation in financial matters, particularly in the fields of trade and investments between the two countries.”

With this latest agreement, the Turkiye’s Central Bank’s total swap figure with foreign central banks reached $28 billion.

Turkiye and the UAE signed a total of 10 agreements on energy, environment, finance, and trade during a visit by Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed Al Nahyan to Ankara last November.

The UAE has also allocated a $10 billion fund for direct investment in Turkiye, the Abu Dhabi Developmental Holding Company also announced.

As of November, the bilateral trade volume stood at $7.1 billion. Turkiye’s imports from the UAE totaled $2.2 billion, while its exports to the country stood at $4.9 billion.

READ MORE: Erdogan vows to fight inflation, higher interest rates

Source: TRT

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Airlines worldwide change flights over US 5G problem

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The 5G issue appeared to particularly impact the Boeing 777, a long-range, wide-body aircraft used by carriers worldwide.

Airlines across the world have rushed to cancel or change flights heading into the US over an ongoing dispute about the rollout of 5G mobile phone technology near American airports.

Dubai-based Emirates, a key carrier for East-West travel, announced it would halt flights to Boston, Chicago, Dallas-Fort Worth, Houston, Miami, Newark, New Jersey, Orlando, Florida, San Francisco and Seattle over the issue beginning Wednesday. It said it would continue flights to Los Angeles, New York and Washington.

The issue appeared to particularly impact the Boeing 777, a long-range, wide-body aircraft used by carriers worldwide. Two Japanese airlines directly named the aircraft as being particularly affected by the 5G signals as they announced cancellations and changes to their schedules.

In its announcement, Emirates cited the cancellation as necessary due to “operational concerns associated with the planned deployment of 5G mobile network services in the US at certain airports.”

“We are working closely with aircraft manufacturers and the relevant authorities to alleviate operational concerns, and we hope to resume our US services as soon as possible,” the state-owned airline said.

The United Arab Emirates successfully rolled out 5G coverage all around its airports without incident, like dozens of other countries.

But in the US, the Federal Aviation Administration worries that the C-Band strand of 5G could interfere with aviation equipment.

READ MORE: AT&T, Verizon delay 5G implementation at some US airports

Interfere with aircraft altimeters

Of particular concern in the 5G rollout appears to be the Boeing 777, a major workhorse for Emirates, which only flies that model and the Airbus A380 jumbo jet. Its Mideast competitor, Qatar Airways, anticipates “minor delays” on return flights from the US but says otherwise its dozen US routes are operating as scheduled.

Japan’s All Nippon Airways Co. Ltd. said in a statement that the FAA “has indicated that radio waves from the 5G wireless service may interfere with aircraft altimeters.” Altimeters measure how high a plane is in the sky, a crucial piece of equipment for flying.

“Boeing has announced flight restrictions on all airlines operating the Boeing 777 aircraft, and we have cancelled or changed the aircraft for some flights to/from the US based on the announcement by Boeing,” ANA said. It cancelled 20 flights to the US over the issue to cities such as Chicago, Los Angeles and New York.

Japan Airlines Co. Ltd. similarly said that it had been informed that 5G signals “may interfere with the radio altimeter installed on the Boeing 777.”

“We will refrain from using this model on the continental United States line until we can confirm its safety and we regret to inform you that we will cancel the flight for which the aircraft cannot be changed to the Boeing 787,” the airline said. Eight of its flights were affected Wednesday — three passenger trips and five for cargo.

Chicago-based Boeing Co. did not immediately respond to a request for comment.

Air India also announced on Twitter it would cancel flights to Chicago, Newark, New York and San Francisco “due to deployment of the 5G communications” equipment. It said it would try to use other aircraft on US routes as well.

The cancellations come even after mobile phone carriers AT&T and Verizon will postpone new wireless service near some US airports planned for this week.

The FAA will allow planes with accurate, reliable altimeters to operate around high-power 5G. But planes with older altimeters will not be allowed to make landings under low-visibility conditions.

READ MORE: US airlines warn of ‘chaos’ if 5G allowed near airports

Source: AP

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