IMF Head Warns On Impact Of Credit Crisis

“The credit squeeze will force governments worldwide to make substantial changes to their budget plans, Rodrigo Rato, outgoing Managing Director of the International Monetary Fund (IMF), has warned. Rato said the credit squeeze was a ‘serious crisis’ that was not over yet and would curtail growth worldwide. …

His comments came during an interview with the FT in which he appeared to endorse European concerns about the decline in the dollar; … Rato said the dollar is now ‘undervalued’ on many measures... Rato said the market crisis ‘is going to have an impact on growth’ and that this will force finance ministers to revise their budget assumptions. Many appear reluctant to do so, he added.

Since the credit crisis originated in the financial markets of the ‘most sophisticated’ economies, its impact would be felt ‘more quickly’ in the US and to some extent in Europe and Japan rather than in the rest of the world, Rato argued. …

But he cautioned against assuming the developing world could decouple completely from the US. … Rato said emerging markets with large current account deficits would be much more vulnerable to changes in the availability and price of credit than those in a ‘more balanced situation’. …”  [The Financial Times (UK, 10/07)]

In a separate piece, FT adds that “…Rato believes there are plenty of questions that do need to be addressed. These include ‘transparency questions’ relating to banks’ exposure to off-balance-sheet vehicles, ‘methodology questions’ regarding ratings agencies and incentives in credit markets, and questions over the structure of ‘regulatory systems’. …

He says there is now broad agreement on its future agenda, including shareholding reform, a new income model, possible new crisis prevention tools and a core role evaluating the spillover effects on the world economy from countries’ exchange rate and other economic policies.” [The Financial Times (UK, 10/07)]

Reuters writes that “…The IMF Managing Director regards concern over the dollar-Euro exchange rates as only part of a more complex global story... This also involves currencies such as China's Yuan, also known as the renminbi, that are formally or informally tied to the dollar and therefore fall when it falls. More currency flexibility from China would also help its neighbors, he said. …”[Reuters (10/08)/Factiva]

Germany To Push For Liberia's Debt To Be Waived.

“German Chancellor Angela Merkel said on Sunday she would push for Liberia's large foreign debts to be cancelled …

‘We have a big interest in Liberia being able to follow its own economic path, and so we will make every effort to waive the debts Liberia still has, both internationally and bilaterally,’ Merkel told reporters. … [She] said some creditor nations still needed convincing, within the framework of the International Monetary Fund, to help Liberia. …”[Reuters (10/08)/Factiva]

             AP writes that “…She announced a donation of 300,000 mosquito nets and EUR 4 million ($5.7 million) in infrastructure aid - offers of help that are ‘an illustration of our very clear interest in the future of your country and the rebuilding and reconstruction of your country,’ she said. Merkel's one-day visit to Liberia marks the end of her three-nation tour of Africa, which began last week with stops in Ethiopia and South Africa. …  

While in Liberia, Merkel was expected to tour a German-led project where weapons are being transformed into farming tools. She was also expected to tour the country's police academy and meet with women's groups. …”[The Associated Press (10/07)/Factiva]

Meanwhile, AFP writes that “Climate change is already happening in South Africa, Merkel said Saturday during a visit to a biodiversity centre in Cape town.  

‘You can see that climate change is already a reality here,’ said Merkel, as she visited Biota Africa, a centre where German and South African scientists conduct research on African climate change. …” [Agence France Presse (10/06)/Factiva]

BuaNews adds that “…Earlier on Saturday, Merkel and [Economic Cooperation and Development Minister Heidemarie] Wieczorek-Zeul met Nelson Mandela in Johannesburg, during which Wieczorek-Zeul pledged a donation of EUR 2.5 million to the Nelson Mandela Foundation, which contributes to the battle against HIV and AIDS.  

On Friday, Merkel held talks with President Thabo Mbeki, who described South Africa's relations with Germany as ‘very strong ... in all areas’ and which are valued ‘very much’ by South Africa.” [BuaNews (South Africa, 10/07)/Factiva]   

FT writes that “German companies in South Africa at the weekend launched an important training initiative to tackle the country’s skills shortages in advance of the football World Cup in South Africa in 2010.

The scheme, to provide engineering and services training to 50,000 unskilled young people working in World Cup-related jobs, is the largest such initiative linked to an international sporting event, organisers said. …Mbeki told Merkel… Pretoria ‘wanted to learn from’ Germany’s successful preparation and hosting of the World Cup in 2006. [The Financial Times (UK, 10/08)/Factiva]

World Bank's Additional Menu For Clients

"Indonesia has expressed interest in joining the World Bank's StAR initiative. The Bank's new Country Director for Indonesia, Joachim von Amsberg, answered some questions from The Jakarta Post …on the StAR issue.  

Question: The World Bank recently launched the ‘StAR’ initiative…What kind of support will World Bank provide?  

Answer: The origin of the StAR initiative was a conversation with our member countries about what the Bank could provide to help countries that want to fight corruption more seriously. And the feedback from member countries was that we can help internally but also externally…

Mostly it's a capacity building initiative, working with and providing technical assistance to national authorities in charge of pursuing such stolen assets, by helping coordinate efforts between different authorities, so they can jointly approach foreign authorities to seek legal assistance.  

The World Bank has formed a team of technical experts, and we will send a team to Indonesia, which will work with the Attorney General and other authorities to assess what their needs and requirements are in terms of external support… there will be training courses and an exchange of information and experience with authorities of other countries…. It is not an initiative to pursue any particular case    - that would have to be done by the authorities of the country.  

Question: What do you think Indonesiamust do to benefit from the initiative?  

Answer: The Indonesian government has requested participation. President Susilo Bambang Yudhoyono and World Bank President Zoellick have agreed to some assistance provided, the next step is the technical level. The teams will get together and discuss how exactly the World Bank can contribute.  

At the same time, this initiative is directed at high-income countries. The World Bank can use its offices to pursue advocacy for member countries to ratify the UN convention against corruption and help pursue assets in high-income countries.  

Question: Has there been any support from the G8 countries for the StAR initiative?  

Answer: A few years ago, there was a sense that some countries were making a business of allowing questionable assets and illegal financial transactions within their boundaries. But now the word has spread. This behavior is no longer what a reputable country that wants to belong to the international community can do. So I think the international environment is more favorable today to those countries pursuing stolen assets.” [The Jakarta Post (Indonesia, 10/08)/Factiva]

Asia To Halve Extreme Poverty By 2015: Report.

“Asiais on track to halve extreme poverty by 2015, reflecting the impact of the region's dynamic economy on the lives of its nearly four billion people, according to a joint report released Monday.  

The report by the Asian Development Bank and the UN Development Program (UNDP) said Asia was also set to achieve goals in primary education coverage, gender parity and fighting the deadly AIDS virus. The findings were set out in an update on the region's progress towards achieving the Millennium Development Goals. …” [Agence France Presse (10/08)/Factiva]

   AFX writes that “…However, there is uneven progress within countries and many of the less developed economies need global support to plug some of their key development gaps, the report said. …if the countries in the region that are either slow or regressing, were able to speed up and meet the MDG targets by 2015 then some 196 million people would be lifted out of grinding poverty.  

The region's greatest failures lie in addressing the issues of child mortality, nutrition, improving maternal health, and providing safe drinking water and sanitation facilities, the ADB stated. The most serious problems are in South Asia where most countries are off track,particularly with child and maternal health indicators. …” [AFX (10/08)/Factiva]

             AP notes that the region “…had over 1 billion people living on less than $1 day in 1990, but that number has now dropped to 641 million, according to the latest estimates …

Chinahas made the biggest headway, with one in three Chinese living in poverty in 1990, compared to one in 10 today, the report said.

But other countries were lagging behind, among them the Philippines, India, Bangladesh, Pakistan and Sri Lanka, the report showed. Among the region's 55 developing countries, only half had made their data available, the report said. …”[The Associated Press (10/08)/Factiva]

World Bank Loans Helping Women Worldwide

World Bank Lead Gender Specialist Amanda Ellis gave an interview with ABC: 

Question: For the past three years the World Bank has been pioneering a program that gives women in developing nations access to finance. The International Finance Corporation (IFC)…has so far provided $41 million in loans to women in Africa…how many loans does that actually represent?  

Answer: We're very excited because this is the first lines of credit for women, medium-sized businesses in Africa, and some of these funds are on-lent to micro-credit institutions, which means the outreach is really big. ..

For example in Tanzania, a $1 million has been on-lent to 8,000 women…and we're hoping that that's going to reach 30,000 within three years. …in Nigeriawhere we have lent $30-million to Access Bank, they have been on-lending sums as large as one million dollars to women who haven't been able to get loans previously.  

Question: … When someone needs so much, where do they start when money suddenly becomes available to them?  

Answer: …Access to finance really does have an impact on poverty, and just to take the example of Kenyawhere women are 48 percent of the government-tracked small businesses, they have seven percent of credit. So, there's a real disparity there.  

And when you look at the land ownership, they only own one percent of land in their own names. That's why it's so important for groups like the IFC to be working with local finance institutions and helping them with different products like leasing… and to be working with government over time to be developing credit bureaus, and changes in the legislation, so women too are able to own property.  

Question: Just how entrepreneurial are people in the developing world…?  

Answer: Incredibly entrepreneurial. Women tend to be traders in Africabecause that's an activity where it doesn't take a lot of capital to buy the goods and then on-sell. …And what we're trying to do at IFC is to take that wonderful entrepreneurial spirit and really bolster it with both access to finance through the banks and practical training to overcome that lower literacy you were talking about.  

Question: … How much resistance are you facing from the governments whether that be overtly or, as you mentioned, perhaps less obviously through regulatory constraints?  

Answer: There's a far greater realization that collective action can bring about change. In Uganda for example, there's a gender coalition, which is formed of the women lawyers association, the women's business association and civil society groups. And they've actually taken up the recommendations of a gender and growth assessment we did for government and they sit outside Parliament when bills are being passed and actively lobby. …

Question: Tell us about your experience in Rwanda.  

Answer: …President Kagame and his Cabinet appear to be very, very much behind the campaign of one Rwanda, learning from the lessons, making sure that there is engagement with the private sector, and they're also very much promoting women's economic empowerment. There are 49 percent of women parliamentarians in Rwanda, the highest number in the world. …” [Australian Broadcasting Corporation (10/05)/Factiva]

Canada Grants Patent Waiver For Rwanda AIDS Drug

“Canada has authorized a company to make a generic version of a patented AIDS therapy drug for export to Rwanda, in the first case of a patent waiver under World Trade Organization (WTO) rules.  

According to a notification from Canada to the WTO on Friday, posted on the WTO's website, Canada will allow Apotex Inc., the largest Canadian-owned pharmaceutical company, to export TriAvir, a fixed-dose antiretroviral drug, to Rwanda. …”[Reuters (10/05)/Factiva]

             AP notes that “… ‘The triple combination AIDS therapy drug, TriAvir, can now be made and exported to Rwanda, which is unable to manufacture the medicine itself,’ a WTO statement said.  

Canada's notification that it would make use of the… ‘Compulsory license’ procedure completes action that began July 17 when Rwanda informed the WTO that it would invoke the provision in ordering the drugs from Canada.  

That was ‘the first notification from any government that it has authorized a company to make a generic version of a patented medicine for export under special WTO provisions agreed in 2003,’ WTO said. …” [The Associated Press (10/05)/Factiva]

Briefly Noted… Ethiopia’s government is launching a commodity exchange to help alleviate food shortages and encourage the commercialization of agriculture. The Ethiopia Commodity Exchange (ECEX), which is due to open in December, will sit at the hub of new price dissemination and quality control systems designed to improve liquidity and transparency and reduce transaction risk. [The Financial Times (UK, 10/07)]

The World Bank has agreed to provide funds to spur the production of electricity in the Democratic Republic of Congo (DRC), DRC Finance Minister Athanase Matenda Kyelu has announced. [Xinhua (10/05)/Factiva]

The World Bank has praised the success of the introduction of new unified currency in the Sudan. The Bank said today the new pound would result in greater efficiency and enhanced stability of the financial system. [The Sudan Tribune (10/08)/Factiva]

The International Monetary Fund (IMF) on Friday said it expects robust economic growth in Russia over the near term, bolstered by high oil prices, but cautioned that inflationary pressures were building. Overall, the IMF said its staff projects gross domestic product growth of around 7 percent in the near term. [Reuters (10/05)/Factiva]

After the biggest opium harvest in Afghanistan’s history, American officials have renewed efforts to persuade the government in Kabul to begin spraying herbicide on opium poppies, and they have found some supporters within President Hamid Karzai’s administration, officials of both countries said. [The New York Times (10/07)]

Israeli and Palestinian teams will meet Monday to start work on a joint statement ahead of a Mideast peace conference, Palestinian President Mahmoud Abbas said. The teams are to draft principles to guide future peace talks. The US-hosted conference is to take place in November or early December. [The Associated Press (10/06)/Factiva]

Montenegro’s use of the Euro as its national currency is incompatible with EU law, according to a draft statement prepared for an EU Finance Ministers’ meeting in Luxembourg on Tuesday. Diplomats said the EU would not take the step of asking Montenegro to abandon the Euro as a prelude to re-adopting it later. Rather, the aim was to underline the legal and economic preconditions of Euro zone membership [The Financial Times (UK, 10/07)]

World Bankexperts have advised Ukraine to create special tax courts, as this may increase the trust of tax payers to the system of solving tax disputes. These proposals were included in a report of the Bank's board for the implementation of the modernization program for Ukraine's State Tax Administration, STA has reported on its Web page. [Ukraine General Newswire (10/05)/Factiva]

A World Bank official has expressed concerns about Kazakhstan's attitude to foreign investment after a series of disputes with top energy companies. Mamadou Barry said recent moves by ministers to penalize foreign firms for alleged environmental lapses and production delays sent a bad signal. [BBC News (UK, 10/05)]

The International Monetary Fund's most pressing job is deepening the role of emerging market nations in the global financial institution, the newly elected head of the Fund's steering committee Tommaso Padoa-Schioppa said on Sunday. [Reuters (10/07)/Factiva]

  EU member states are confident that a contentious treaty to modernize the bloc’s institutions will secure approval at a summit in Lisbon on October 18-19. According to high-ranking EU officials and diplomats, the summit of heads of state and government is likely to produce a deal. [The Financial Times (UK, 10/07)]

EU Finance Ministers will open two days of talks Monday to discuss the US slowing economy, feeble dollar and current account deficit as problems for the EU and the rest of the world. [The Associated Press (10/07)/Factiva]

In an interview with Spanish business daily Cinco Dias, World Bank Vice President Ana Palacio stressed the strength of the Bank's  financial situation since the IBRD transferred $1500 million to International Development Association (IDA), which she expects will ‘set the tone for other donors, most notably European governments’ during the next IDA replenishment.  [Cinco Días (Spain, 10/06)/Factiva]

The world's poorest countries may be forced to spend a record $28 billion on grain imports this year due to soaring prices and freight rates, the Food and Agriculture Organization said on Friday. [Reuters (10/05)/Factiva]