Tag: bailout

Sri Lanka’s Parliament approves IMF bailout package

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Colombo: Sri Lanka’s Parliament on Friday approved the much-needed USD 3 billion IMF bailout package to revive the island’s economy which was hit hard by a catastrophic economic and humanitarian crisis sparked by years of mismanagement and the raging pandemic.
Last month, the International Monetary Fund (IMF) approved the bailout programme to help Sri Lanka overcome its economic crisis and catalyse financial support from other development partners, a move welcomed by Colombo as a “historic milestone” in the critical period.
On Friday, at the end of a 3-day debate, 120 Members of Parliament in the 225-member assembly voted in its favour of the deal while 25 of them opposed it.

President Ranil Wickremesinghe told Parliament that the parliamentary approval was a necessity as his government was embarking on a serious economic reform programme.
Wickremesinghe, also the finance minister, in his Parliamentary address said it was critical for economic recovery to stabilise the economy, restore debt sustainability and build an inclusive and prosperous country.
The main Opposition Samagi Jana Balawegaya (SJB) members who accused the government of lack of transparency in obtaining the facility were not present when the vote was taken in the House.
Having obtained the USD 3 billion facility, Sri Lanka is currently negotiating debt restructuring with bilateral and multilateral creditors.
Wickremesinghe said by mid-May the restructuring programme would come into effect.

Sri Lanka in April declared its first-ever debt default in its history as the worst economic crisis since independence from Britain in 1948 triggered by forex shortages sparked public protests.
Months-long street protests led to the ouster of the then-president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after refusing to tap the global lender for support.
Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes to unlock the programme. Trade unions and opposition groups have organised protests against such measures.
The programme will allow Sri Lanka to access financing of up to USD 7 billion from the IMF, International Financial Institutions (IFIs), and multilateral organisations, a statement said.
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( With inputs from www.siasat.com )

April 28, 2023
Biden skirts bank bailout backlash

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“Biden has been a steady hand through this financial crisis,” Sen. Elizabeth Warren (D-Mass.), one of the party’s most scathing critics of the banking industry, said in an interview. “It reinforces the steadiness of his approach internationally.”
It’s a surprising potential boon to Biden’s economic record. The political response indicates that he may avoid the kind of populist backlash triggered by past bank bailouts, if contagion remains contained.
It has started to give Democrats fresh material to make the case that the government should play an assertive role in the economy. In the case of Silicon Valley Bank, high-flying venture capitalists begged the Biden administration for help.
“Just as there are no atheists in foxholes, it appears that when there is a bank crash, there are no libertarians in Silicon Valley,” Senate Banking Chair Sherrod Brown (D-Ohio) said at a hearing Tuesday on SVB’s failure.
A Morning Consult poll found that a majority of voters support the bank rescue plan, despite viewing it as a bailout. A CBS/YouGov survey showed that 51 percent of Americans thought the Biden administration was handling U.S. banking issues well.
“The public seems quite supportive of the actions we’ve taken,” said one administration official granted anonymity to speak freely. “But I think the key is to make sure we’re not in that position again.”
Over the weekend that SVB collapsed, Rep. Nikema Williams (D-Ga.) said she unexpectedly received a stream of texts from constituents worried about the situation because they worked for Black-owned startups that banked with SVB. The bank catered to tech companies and their investors.
“The first person was actually a friend,” Williams, who sits on the House Financial Services Committee, said. “She’s like, ‘I haven’t told you about my new job move yet, but I’m over at this Black tech startup. And our money is in that bank. And is something going to happen by midnight before the banks open Monday morning?’”

The administration’s response that Sunday “shows the decisiveness that we needed to see from our president at the time,” Williams added.
“The administration, with bipartisan assistance, kept this banking crisis from being much worse,” Brown told POLITICO. “So, yes, I think all the way around” voters will receive it well.
Warren, a critic of the 2008 TARP bank bailout, said Biden’s bank rescue was framed in terms of small businesses making payroll and people not getting laid off — something “that’s right in Biden’s wheelhouse.”
Warren and other Democrats are now rallying behind Biden’s call to enact tougher penalties on executives of failed banks.
“He’s made clear his fury over the need to backstop high-flying corporate CEOs, and he wants laws to hold them accountable,” Warren said. “That works in his favor politically as well as being the right answer economically.”
Many Republicans on Capitol Hill have been careful about bashing Biden’s handling of the situation. Some have even been supportive of the administration’s efforts to contain the failures of SVB and Signature Bank from causing a broader financial meltdown.
But Biden-appointed regulators are facing bipartisan scrutiny of why they failed to avert SVB’s failure, which was triggered by its mismanagement of rising interest rates. It’s a message that dovetails into wider GOP criticism that Biden policies helped fuel the inflation that necessitated the rate hikes, even as White House officials try to trace back the banking instability to looser regulation under President Donald Trump.
“At the core of it, people understand the impact that persistently high inflation is having not only on their family and on their family budget but also causing economic instability in other areas as well,” Rep. Bryan Steil (R-Wis.) said.
Sen. J.D. Vance (R-Ohio) said the rescue was a “terrible idea” because it put smaller banks on the hook “to pay for millionaire uninsured depositors, in some cases billionaire uninsured depositors.” Banks pay fees to cover the costs of federal deposit insurance, and smaller lenders have been lobbying against having to cover the losses from SVB.
“I don’t think it was necessary to save the banking system,” Vance said. “And I think politically it’s going to be a real problem for these guys.”
Sen. Mike Crapo (R-Idaho) said that based on what he’s hearing from constituents, a fair amount of people are “unhappy with the government stepping in and bailing out again.”
“They’re not protesting yet, but there’s a pretty strong feeling,” he said.
Biden probably won’t get a big boost in the polls from the SVB episode. Sen. Brian Schatz (D-Hawaii) said when it comes to managing the economy, “it’s more a question of downside political risk, rather than upside.” Rep. Brad Sherman (D-Calif.) said “a crisis averted is a crisis forgotten.”
“I don’t think people are running around saying, thank goodness that Janet Yellen and the FDIC sprung into action and did what was necessary,” Schatz said. “They’re mostly just glad that things appear to be stable now.”
And, to be sure, the economy isn’t out of the woods yet. The fear now is that banks will be more risk-averse and less willing to offer credit to businesses, upping the odds of a recession.
“Don’t get me wrong, they did a great job,” Schatz said. “I just don’t know that this is going to be part of their reelection strategy.”
Victoria Guida contributed reporting.
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( With inputs from : www.politico.com )

March 30, 2023
US Treasury Secretary Yellen rules out bailout for Silicon Valley Bank

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Washington: US Treasury Secretary Janet Yellen on Sunday said that the federal government will not provide a bailout for Silicon Valley Bank’s investors after the bank was abruptly shuttered, but said financial regulators are “concerned” about the impact to depositors and working to address their needs, media reports said.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out,” Yellen said in an interview, CBS News reported.
“And the reforms that have been put in place means that we’re not going to do that again. But we are concerned about depositors and are focused on trying to meet their needs.”
California regulators shut down the Silicon Valley Bank on Friday after depositors rushed to withdraw money last week amid concerns about its balance sheet. The Federal Deposit Insurance Corporation (FDIC) was appointed receiver, and regulators are working to find a buyer for the institution, which ranked as the 16th-largest bank in the US before its failure.
The collapse of the 40-year-old bank, which catered to the tech industry, is the largest of a financial institution since the failure of Washington Mutual in 2008.
President Joe Biden spoke to California Governor Gavin Newsom about Silicon Valley Bank and the federal response on Saturday, and the FDIC spoke to members of the California congressional delegation late Saturday night.
Yellen said that in the wake of Silicon Valley Bank’s failure, Treasury officials have been hearing from depositors, many of which are small businesses, and she has been working with bank regulators to “design appropriate policies” to address the situation, though she declined to provide further details.
The FDIC, she said, is likely considering a “range of available options” to stabilise the situation, which could include an acquisition by a foreign bank, CBS News reported.

“The American banking system is really safe and well-capitalised. It’s resilient,” she said. “In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and it was tested during the early days of the pandemic and proved its resilience. So Americans can have confidence in the safety and soundness of our banking system.”
Still, Silicon Valley Bank’s shutdown has prompted nervousness about whether it could trigger a run on other small and regional banks. Yellen, though, said financial regulators are working to prevent the fallout from spreading to other institutions, CBS News reported.
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” she said. “The goal always of supervision and regulation is to make sure that contagion can’t occur.”
“We’re very aware of the problems that depositors will have,” Yellen said, CBS News reported. “Many of them are small businesses that employ people across the country, and of course this is a significant concern and [we’re] working with regulators to try to address these concerns.”
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#Treasury #Secretary #Yellen #rules #bailout #Silicon #Valley #Bank
( With inputs from www.siasat.com )

March 13, 2023
Federal bailout for Silicon Valley Bank off the table, Yellen says

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The bank had $209 billion in assets, and many of its depositors were Silicon Valley-backed startups and health-care businesses — many of them small businesses, Yellen said. Some have payrolls to meet this week.
But although the collapse is concerning, Yellen emphasized that the American banking system is “safe and well-capitalized” and “resilient.”
Americans “can have confidence in the safety and soundness of our banking system,” Yellen said Sunday.
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen added.
Although SVB’s failure is being compared to the financial crisis of 2008 that led to the collapse of hundreds of banks across the country, there’s reason to believe the government can steer the country away from a nation-wide fiscal emergency, Gary Cohn, former director of the National Economic Council said during an interview on CNN’s “State of the Union.”
“In 2008, the regulators did not have nearly as a robust toolbox that they have today,” Cohn said. “Today, the regulators have enormous tools at their disposal. They have enormous discretion to go through and really do whatever they want in this situation. … So, I’m cautiously optimistic that they will use their tools.”
Sen. Bob Menendez (D-N.J.), agreed that the government should avoid bailing out SVB’s investors. “I’m not ready to offer them a bailout by any stretch of the imagination,” he told NBC’s Chuck Todd during an interview on Meet the Press.
The best outcome would be for the Federal Deposit Insurance Corp. to find a buyer for the bank, Sen. Mark Warner (D-Va.), said Sunday.

“I’ve been in conversations with the regulators, the administration, the [Federal Reserve], the best outcome will be, can we — can they find a buyer for this SVB bank today before the markets open in Asia later in the day?” Warner, a member of the Banking Committee said during an interview on ABC’s “This Week.”
SVB’s collapse shouldn’t be seen as a sign that banks need to more regulation, Sen. Kevin Cramer (R-N.D.) said; it’s more likely a sign of mismanagement, he said during an interview on NBC’s “Meet the Press.”
Small banks “certainly don’t need any more regulation. That doesn’t mean that you can you can be mismanaged,” Cramer said. “Maybe better oversight, but certainly not more regulation.”
House Speaker Kevin McCarthy also addressed the bank’s failure Sunday, saying the federal government was working to come up with a solution before the markets open in Asia Sunday evening.
“I have talked with the administration from [Fed Chair] Jay Powell and Janet Yellen. They do have the tools to handle the current situation. They do know the seriousness of this, and they are working to try to come forward with some announcement before the markets open, McCarthy told Fox News’ Maria Bartiromo during an interview on “Sunday Morning Futures.”
“I’m hopeful that something can be announced today.”
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( With inputs from : www.politico.com )

March 12, 2023
Pak finance minister hopeful of signing bailout deal with IMF this week

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Islamabad: Pakistan’s Finance Minister Ishaq Dar vowed on Thursday that the government was “absolutely committed” to completing the current USD 7 billion bailout programme with the IMF, once again indicating that the cash-strapped country could sign the staff-level agreement with the global lender this week.
The Pakistan government is in a race against time to implement measures to reach an agreement with the International Monetary Fund (IMF) as the country has reserves barely enough for three weeks of essential imports, while hotly contested elections are due by November, Dawn newspaper reported.
Addressing a seminar organised by the Finance Ministry here, Dar said: “My team and I have decided that, in a short period of time, we will implement and we will discharge all the sovereign commitments that the previous government had made.” Pakistan and the IMF have been holding virtual talks after the two sides held 10 days of intensive negotiations with an IMF delegation in Islamabad from January 31 to February 9, which failed to reach an agreement.
He recalled that the coalition government was handed over an economy “in a shambles”.
“To top it [off], the previous government (led by Imran Khan) had agreed to a loan facility which was extended by the IMF. But instead of honouring the commitments, they reversed some conditionalities before leaving office. This led to a serious trust deficit [between the lender and Pakistan],” he highlighted.
However, the minister went on to say, the government had realised that these obligations were not made by an individual but by the sovereign state of Pakistan and decided to honour the commitments.
“We have been in the process of the 9th review which has taken longer than it should have […] we seem to be very close to signing the staff-level agreement, hopefully in the next two days,” Dar added.
The agreement with the IMF on the completion of the ninth review of a USD 7 billion loan Extended Fund Facility programme — which has been delayed since late last year over a policy framework — would not only lead to a disbursement of 1.2 billion but also unlock inflows from friendly countries.

The prerequisites by the lender are aimed at ensuring Pakistan shrinks its fiscal deficit ahead of its annual budget around June.
Pakistan has already taken most of the other prior actions, which included hikes in fuel and energy tariffs, the withdrawal of subsidies in export and power sectors, and generating more revenues through new taxation in a supplementary budget.
Prime Minister Shehbaz Sharif announced a slew of austerity measures last month, including cabinet members forgoing their salaries, paying their own bills, banning the purchase of luxury vehicles from 2024, and slashing the current expenditure by 15 per cent, among others.
The finance minister further said that Pakistan’s economic difficulties were compounded by the devastating 2022 floods, which caused physical and economic losses of nearly USD 30 billion.
The floods, which inundated a third of Pakistan, destroying land, crops, and infrastructure, left more than 1,700 persons dead.
“But despite the fiscal constraints and limitations, the federal and provincial governments have jointly allocated Rs 452 billion for relief and rehabilitation work of flood affectees.
“This persistent fake propaganda regarding the country defaulting on its international obligations is completely ill-founded and null […] in fact it harms the country,” he maintained, adding that “petty politics” was only doing more harm to the cash-strapped country.
Dar said that he had been appealing to the political parties to sit together and sign a charter of economy, but regretted that it always fell on “deaf ears.”
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( With inputs from www.siasat.com )

March 9, 2023
Former Greek Finance Minister Varoufakis attacked in central Athens

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ATHENS — Former Greek Finance Minister Yanis Varoufakis was attacked in central Athens late on Friday, suffering a broken nose, cuts and bruises.
The assault, which his party DiEM25 described as a “brazen fascist attack,” took place while Varoufakis was dining in the central Exarchia district with party members from all over Europe.
“A small group of thugs stormed the place shouting aggressively, falsely accusing him of signing off on Greece’s bailouts with the troika [the country’s bailout creditors],” DiEM25 said in a statement. “Varoufakis stood up to talk to them, but they immediately responded with violence, savagely beating him while filming the scene.”
Politicians from across the political spectrum swiftly condemned the assault in Varoufakis, the motorbike-riding, leather-jacket-wearing politician who became well-known as the country’s finance minister in 2015.
As part of the left-wing Syriza-led Greek government, Varoufakis battled the so-called troika and Europe-imposed austerity. While the Greek administration eventually capitulated and signed a bailout agreement, Varoufakis quit government and founded a cross-border far-left political movement, DiEM25.
“They were not anarchists, leftists, communists or members of any movement,” Varoufakis said in a tweet early Saturday. “Thugs for hire they were (and looked it), who clumsily invoked the lie that I sold out to the troika. We shall not let them divide us.”
The Exarchia neighborhood has a reputation for being a bastion of self-styled anarchists. Varoufakis was publicly harassed in 2015 while dining in the same district at the height of the financial crisis.
Greek Minister of Citizen Protection Takis Theodorikakos said police would take all measures to identify and arrest the perpetrators of Friday’s attack. He noted that the DiEM25 leader, “at his own initiative, was not accompanied by his personal police detail” while at the restaurant.

Greece has been hit by the biggest mass demonstrations since the eurozone crisis in recent days, as Greeks have taken to the streets almost on a daily basis to protest the country’s deadliest train crash, ramping up pressure on the conservative New Democracy government ahead of coming elections. The wave of public rage follows a train collision on February 28 that killed 57 people and raised profound questions about the management of the rail system.
The train crash has also sparked deeper questions about the functioning of the Greek state and fresh anger against the political system.
“Let us please stay focused: We are mourning the 57 victims of rail privatization. We support the spontaneous youth rallies, the greatest hope that Greece can change. See you at the demonstrations,” Varoufakis tweeted, as another big rally is scheduled for Sunday.

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( With inputs from : www.politico.eu )

March 9, 2023
IMF, Pakistan fail to strike deal on bailout package

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Washington: Cash-strapped Pakistan and the IMF have failed to reach a staff-level agreement on a much-needed USD 1.1 billion bailout package aimed at preventing the country from going bankrupt.
After 10 days of talks here, discussions between the two sides remained inclusive, with the Washington-based global lender saying that discussions will continue virtually in the coming days.
Pakistan, whose foreign exchange has dropped below USD 3 billion, is in desperate need of financial assistance and a bailout package from the International Monetary Fund in order to avoid an economic collapse.
The 9th review is currently pending and its successful completion will bring USD 1.1 billion in the form of the next tranche.
An IMF mission led by Nathan Porter visited Islamabad from January 31 to February 9 to hold discussions under the ninth review of the authorities’ programme supported by the IMF Extended Fund Facility (EFF) arrangement.
The Pakistan side was led by Finance Minister Ishaq Dar.
In a statement Porter said, the IMF team welcomes Pakistan Prime Minister Shehbaz Sharif’s commitment to implementing policies needed to safeguard macroeconomic stability and thanks the authorities for the constructive discussions.
“Considerable progress was made during the mission on policy measures to address domestic and external imbalances,” he said.

“Virtual discussions will continue in the coming days to finalise the implementation details of these policies,” he added.
Key priorities include strengthening the fiscal position with permanent revenue measures and reduction in untargeted subsidies while scaling up social protection to help the most vulnerable and those affected by the floods, he said.
Among other priorities include allowing the exchange rate to be market determined to gradually eliminate the foreign exchange shortage; and enhancing energy provision by preventing further accumulation of circular debt and ensuring the viability of the energy sector.
“The timely and decisive implementation of these policies along with resolute financial support from official partners are critical for Pakistan to successfully regain macroeconomic stability and advance its sustainable development,” Porter said.
Pakistan Finance Minister Dar said in a press conference on Friday the government has received a memorandum on the terms and conditions from the IMF for the completion of a USD 7 billion loan programme, but acknowledged that both sides are yet to clinch a staff-level agreement.
“We insisted that they (the Fund delegation) give us the MEFP before leaving so we could look at it over the weekend,” he said, adding that the government and the IMF officials would hold a virtual meeting on it on Monday.
“I am confirming that the MEFP draft has been received by us at 9 am today (Friday). We will completely go through the [MEFP] over the weekend and will hold a virtual meeting with [Fund officials]. It will obviously take a few days,” he said.
The finance minister acknowledged that reforms in certain sectors required by the IMF were in Pakistan’s interest, criticising the previous Pakistan Tehreek-e-Insaf-led government for “economic destruction and misgovernance”.
“It is necessary to fix those things. These reforms are painful but necessary,” Dar added.
He made the statement after the IMF delegation left Pakistan on Thursday night after 10 days of talks with the government.
“It is a standard process which can neither be shortened and hopefully they won’t extend it unnecessarily,” Dar said. The finance minister shared that the country would receive a USD 1.2 billion disbursement in the form of Special Drawing Rights (SDR) after the review’s completion.
SDRs are international reserve assets created by the IMF in 1969 and are allocated to member states to supplement existing official reserves.
Outlining the policy measures agreed upon between the government and the IMF, Dar said taxes amounting to Rs 170 billion would be imposed.
He, however, added that the government would try to ensure that the taxes did not directly burden the common man.
To impose the taxes, the government would introduce a finance bill or ordinance, depending on the situation at the time, Dar said.
“Secondly, we will implement the agreed-upon energy reforms through the federal cabinet,” he said, adding that the primary focus would be on minimising untargeted subsidies and reducing the “flow” in the gas sector to zero so there was no addition to the circular debt.
The Pakistan government initially conveyed to the media at the conclusion of talks on Thursday evening that everything thing was settled and Dar would announce the details at a press conference.
But the conference was postponed and instead Finance Secretary Hamed Yaqoob Shaikh told the media that the two sides agreed on a set of prior actions but a staff-level agreement (SLA) on the Memorandum of Economic and Financial Policies (MEFP) was not signed yet.
“All issues have been settled and prior actions agreed upon,” said Shaikh, adding that the SLA would be finalised in the days to come.
The IMF mission is going to share the details of talks with the top IMF officials in Washington and then issue a statement.
The finance secretary rejected the impression that there was any disagreement by saying that “all things have been settled”.
He, however, refused to divulge the details of the prior actions. He said the finance minister would address a press conference after the fund had issued its statement.
The IMF mission came to Pakistan after Islamabad agreed to take tough decisions, including restoring the market-based exchange rate and increasing petroleum prices.
In the first phase, Pakistan’s technical discussion with the IMF went on till February 3. It was followed by the second phase of policy negotiations that concluded on February 9 to finalise a memorandum of economic and financial policies.
Pakistan inked a USD 6 billion IMF programme in 2019, which last year expanded to USD 7 billion.
Earlier, talks on the review were originally scheduled to be held in October but were delayed after Dar refused to implement some of the conditions of the fund after taking the finance ministry from Miftah Ismail.
Pakistan’s reserves have fallen below USD 3 billion and the country is feared to default on its external liabilities unless the IMF unlocks its funds for it. The availability of IMF money will avoid the default but it is feared to bring a tsunami of price hikes.
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( With inputs from www.siasat.com )

February 10, 2023
After India, China gives financing assurances to Sri Lanka for IMF bailout package

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Colombo: China has given debt-ridden Sri Lanka the financing assurances required by the IMF to unlock a USD 2.9 billion bailout package for the country, days after India strongly backed the island nation’s efforts to secure the loan from the global lender to recover from its worst-ever economic crisis.
The Sunday Times newspaper reported that China’s Exim Bank delivered a letter on Saturday granting Sri Lanka a two-year moratorium on repayment and agreeing with the International Monetary Fund’s extended fund facility (EFF).
The report was confirmed by Sri Lankan officials who did not want to be named.
The Chinese response came close on the heels of India stepping in first to issue the necessary assurances last week.
India’s ministry of finance last week issued a letter to the IMF to confirm its support to Sri Lanka on the issue of debt restructuring, ahead of the visit by the external affairs minister S Jaishankar to Colombo which concluded on Friday.
Jaishankar during his visit also announced that India has given the required assurances to Sri Lanka for the bailout package.
Sri Lankan officials said that China had agreed to a short-term suspension of what Sri Lanka owed and expects Sri Lankan creditors to get together to work out the medium and long-term commitments.
The IMF in September last year approved Sri Lanka a 2.9 billion dollar bailout package over 4 years pending Sri Lanka’s ability to restructure its debt with creditors — both bilateral and sovereign bond holders.

By the end of June 2022, Sri Lanka owed nearly USD 40 billion to bilateral, multilateral and commercial loans, according to the figures released by the Treasury.
Chinese loans amounted to 20 per cent of the total debt owed and 43 per cent of the bilateral loans.
Sri Lanka in April declared its first-ever debt default in its history as the economic crisis triggered by forex shortages sparked public protests.
Months-long street protests led to the ouster of the then president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after rejecting to tap the global lender for support.
With assurances from creditors, the 2.9 billion dollar facility could get the IMF board approval in March, officials said.
Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes. Trade unions and opposition groups have organised protests against such measures.
The IMF bailout has been put on a halt as Sri Lanka pursues talks with creditors to meet the global lender’s condition for the facility to help it get through its worst economic crisis since independence in 1948. Earlier, Sri Lanka completed its debt restructuring talks with Japan.
The IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank.
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#India #China #financing #assurances #Sri #Lanka #IMF #bailout #package
( With inputs from www.siasat.com )

January 22, 2023