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Tag: International Monetary Fund

  • US, China are still committed to global debt efforts, IMF strategy chief says

    By Andrea Shalal and Karin Strohecker

    WASHINGTON (Reuters) -Top U.S. and Chinese officials will join Wednesday’s meeting of the Global Sovereign Debt Roundtable, where a key topic will be the lack of transparency about bank loans that have complicated developing countries’ debt restructuring efforts.

    International Monetary Fund strategy chief Ceyla Pazarbasioglu said the continued participation of the world’s two largest economies in the roundtable, despite a fierce trade war dividing them, showed their commitment to keep addressing the high debt levels hurting developing countries.

    Speaking to reporters at the annual meetings of the IMF and the World Bank, Pazarbasioglu said the roundtable created in 2023 had led to progress in shortening the timelines of official debt restructurings and restructuring bonded debt, but there was more work to do on non-bonded debt.

    “These discussions have been important to get everyone on the same page,” she said. “The fact that tomorrow we will have the U.S. Treasury Secretary (Scott Bessent) there, China will be there, and others will be there, is a sign that they are still committed to this discussion.”

    CALL FOR TRANSPARENCY OVER DEBT

    Pazarbasioglu said transparency was a shared concern, especially regarding non-bonded debt holdings. “They would like to see more transparency in terms of debt. They fully back this effort of publishing data by the debtors.”

    “Non-bonded debt is the laggard at this point,” she said, noting that some countries had moved through a debt restructuring process but still faced bank exposures or other exposures that prevented credit rating agencies from removing them from default status and increasing their ratings.

    “This is a critical step to make sure that countries are able to access lower cost financing. So that’s what we are really focusing on now,” she said.

    A recent IMF paper detailed the challenges faced by countries such as Ghana, Sri Lanka, Zambia and Suriname, which have gone through debt restructurings, but are still negotiating with loan creditors, delaying upgrades by ratings agencies.

    The Group of 20 major economies, which launched the Common Framework for debt restructurings during the COVID pandemic, is also expected to issue a statement on debt issues later this week, activists and officials with G20 countries said.

    GLOBAL DEBT AT RECORD LEVELS

    Global debt is at record levels, but many emerging markets have actually reduced their debt-to-GDP ratios, although they still face crushing debt service payments and have been crowded out of the capital market by advanced economies.

    Investors and debt experts say high borrowing costs on international capital markets have effectively shut out many riskier borrowers, pushing governments to opt for loans where terms and conditions are rarely published.

    Jose Vinals, former Group Chairman of Standard Chartered – one of the two private sector creditors together with BlackRock that are part of the global sovereign debt roundtable, said more transparency was clearly needed.

    “This is something that complicates enormously the restructuring processes and I think one of the things where progress needs to be made,” he said during an event hosted by the Bretton Woods Committee on Tuesday evening.

    Loans lack mechanisms such as collective action clauses often written into bonds that help to streamline sovereign debt restructurings by allowing a majority of bondholders to bind the minority to a new deal and prevent “holdout” creditors.

    “When you talk about bank loans, we don’t have those positions, so it’s much more complicated,” Vinals said, calling for accelerated discussions on the issue in coming months.

    He also pointed to working groups such as the London Coalition on Sustainable Sovereign Debt, launched in June by the British government to help make debt contracts clearer and more transparent, improving the way loan terms address natural disasters, and addressing problems with group lending practices.

    England and New York are jurisdictions that are used for almost all international bond and loan contracts across emerging markets.

    (Reporting by Andrea Shalal and Karin StroheckerEditing by Frances Kerry)

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  • IMF chief Kristalina Georgieva dismisses impact of Trump trade war: ‘Trade is like water, you put in an obstacle, it goes around it’ | Fortune

    The escalating trade clash between the U.S. and China has investors on edge, fearing it could mark the beginning of the end for global cooperation as we know it. On Friday, President Donald Trump called China’s new export controls “extraordinarily aggressive” and “hostile”; he threatened a retaliatory 100% tariff. (He later sought to deescalate the situation, calming U.S. markets.)

    For Kristalina Georgieva, head of the International Monetary Fund, it’s just another day in the office. Speaking at Fortune’s Most Powerful Women 2025 summit in Washington, D.C., she downplayed any fears of a trade war.

    “Frankly, this thing that trade is dead is completely overstated,” Georgieva told Fortune’s Diane Brady. “Trade is like water. You put [up an] obstacle, it goes around it.”

    And while Georgieva recognizes the world is becoming “foggier” and full of uncertainty, one of the biggest challenges comes from getting buy-in that cooperation is better than division: “We are in this one big boat. It is a rough sea. We better row together.”

    Luckily, many countries already subscribe to this philosophy. She pointed out that following the onset of U.S. tariffs earlier this year, 188 out of the IMF’s 191 member states did not choose to retaliate. Instead, they’ve turned to regional partners for trade. Southeast Asia and the Gulf region are two examples she cited.

    Even China has benefited from diversifying its trade portfolio: overall exports rose 8.3% in September—the highest total this year—thanks to strong trade growth with the European Union. Chinese shipments to the U.S. fell 27% in September, marking half a year of double-digit trade declines, according to data released by the General Administration of Customs. 

    But for business leaders, there’s a growing opportunity to be a grounding voice as long as they are willing to “buckle up,” Georgieva added.

    “Good news for the world. The private sector is more agile, more adaptable,” she said. “Over the last years, we have seen in many countries where there was [a] big state presence in the economy—including because of IMF urging them to pull back—more private sector initiative. And in this time of strong winds, [business leaders] are an anchor of stability because you adapt, you just keep doing it.”

    For female business leaders, in particular, she reiterated the need to always be thinking about worst case scenarios—and be ready to adapt to them.

    “Think of the unthinkable so you’re ready when the unthinkable comes,” Georgieva said. “Because we know from COVID, we know from the war in Europe, it will come, and we women are so strong and resilient, and we can face it.”

    Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.

    Preston Fore

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  • Trump news at a glance: Bessent says markets not worried by Fed interference as Lagarde warns of ‘danger’

    US treasury secretary Scott Bessent talks about the independence of the Federal Reserve in an interview with Fox News.Photograph: Jacquelyn Martin/AP

    US treasury secretary Scott Bessent has said the Federal Reserve is and should be independent but that it had “made a lot of mistakes”, as he defended Donald Trump’s right to fire the central bank governor Lisa Cook.

    The president has criticised the Fed and its chair, Jerome Powell, for months for not lowering interest rates. Independent central banks are widely seen as crucial to a stable global financial system. Bessent also rejected the idea that markets were disturbed by the Trump administration’s actions. “S&P’s at a new high and bond yields are fine, so we haven’t seen anything yet,” he said.

    Bessent’s comments come as Christine Lagarde, the president of the European Central Bank (ECB), said Trump undermining the independence of the world’s most powerful central bank could pose a “very serious danger” for the world economy.

    Lagarde, who was France’s finance minister until 2011 before leaving to run the International Monetary Fund, said it would be “very difficult” for Trump to take control of Fed decision-making on interest rates, but such a scenario would be highly dangerous.

    “If US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could – as a result of the effects this would have around the world – be very worrying, because it is the largest economy in the world,” she said, according to remarks reported by Reuters.

    Read the full story

    Guatemala is ready and willing to receive about 150 unaccompanied children of all ages each week from the US, the country’s president has said, a day after a US federal judge halted the deportation of 10 Guatemalan children.

    Those children had already boarded a plane when a court responded to an emergency appeal on Sunday. They were later returned to the custody of the Office of Refugee Resettlement.

    On Monday, Guatemala’s president, Bernardo Arévalo, told journalists that his government had been coordinating with the US to receive the unaccompanied minors.

    Read the full story

    Nine former officials at the Centers for Disease Control and Prevention have said that Robert F Kennedy Jr’s leadership of the US health and human services department is “unlike anything our country has ever experienced” and “unacceptable”. They also warned that Kennedy’s leadership “should alarm every American, regardless of political leanings”.

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  • It will take years for the oil and gas market to recover from the ‘mother of all shocks,’ Harvard economist says

    It will take years for the oil and gas market to recover from the ‘mother of all shocks,’ Harvard economist says

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    • Oil and gas prices have been affected by the “mother of all shocks,” a Harvard economist says.

    • Energy prices have seen wild swings since the pandemic, and the impact is still being felt.

    • “When there is an energy shock, it can take a huge price change to clear the market,” Kenneth Rogoff said.

    Oil and gas prices are stuck on a roller coaster caused by the “mother of all shocks,” as the supply-demand imbalance from the pandemic is still roiling energy markets, says Kenneth Rogoff, a top economist.

    The Harvard professor and former International Monetary Fund chief economist pointed to the wild ride that oil and gas prices have taken over the past few years, with energy prices plunging in the wake of the pandemic and skyrocketing when Russia began its full-scale invasion of Ukraine.

    Brent crude plunged as low as $14 a barrel in 2020 before soaring to a peak of $133 a barrel in June 2022. Similar swings were seen in US gas prices, which plunged to a low of $1.77 a gallon in 2020 before peaking around $5 a gallon in 2022, according to the Energy Information Administration.

    Energy prices have eased in recent months, with Brent trading around $80 a barrel and gas prices cooling to around $3 a gallon. That’s largely due to fears of a coming recession in the US and the potential impact on demand.

    But over the long term, oil and gas prices are expected to trend higher — and prices are set to continue to see big bouts of volatility as the unprecedented shock from the pandemic continues to roll through the market.

    “When there is an energy shock, it can take a huge price change to clear the market. And the pandemic was the mother of all shocks, bringing about the biggest sustained shift in demand since World War II,” Rogoff said.

    The world’s total oil demand was estimated to have risen 2.3 million barrels a day last year, according to the International Energy Agency. By 2050, demand could skyrocket as high as 42%, per an EIA estimate.

    More energy giants are investing to ramp up their crude-oil production, with the US seeing more than $100 billion of oil mega-mergers in 2023. But it could take years for those investments to fix the industry’s chronic undersupply problem, some experts have warned — which means prices are probably climbing higher for the time being.

    “In the longer term, energy prices look set to rise unless investment picks up sharply, which seems unlikely given current policy guidance. Supply and demand shocks will most likely continue to roil the energy market and the global economy,” Rogoff said.

    Higher crude demand has been a boon for US oil producers, with production reaching an all-time high in 2023 as firms raced to fill the world’s expanding appetite for crude oil. The US is estimated by the EIA to churn out an average of 13.2 million barrels a day in 2024 and 13.4 million a day in 2025, eyeing new records for at least the next two years.

    This story was originally published in January 2024.

    Read the original article on Business Insider

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  • How Did Europe Get Left Behind?

    How Did Europe Get Left Behind?

    The privileged ability to spend through the dollar’s global reserve status, though amounting to a national debt of unprecedented size, has allowed the U.S. to run circles around Europe in public spending and crisis-time stimulus while subverting debt crises. USGS via Unsplash

    If the United Kingdom or France joined the United States, they would become the poorest states in the country, with a GDP per capita lower than even Mississippi. Germany would be the second poorest. For most of the second half of the 20th century, Europe and the U.S. rivaled each other in GDP. In 2008, the EU and U.S. had GDPs of $14.2 trillion and $14.8 trillion, respectively. Closing 2023, the EU has seen little growth, with a GDP of around $15 trillion, while the U.S. has marched ahead to a GDP of $27 trillion.

    The EU GDP growth clocked in at 0.1 percent for 2023’s last quarter, a small fraction of the U.S.’s 3.4 percent during the same period. The UK fell into recession in the back half of last year, but the French economy looks to an optimistic forecast of 0.9 percent growth for 2024 to put six months of stagflation in the rearview mirror. While inflation has come down to just above 3 percent, similar to the U.S., the European Central Bank’s rate hikes have taken a larger toll on the nation-states.

    One reason Europe has fallen behind? A spending handicap.

    After the 2008 Global Financial Crisis (GFC), which originated in the U.S. real estate debt and loaning markets in 2007 and triggered a recession in Europe in the second quarter of 2008, the U.S. and Europe increased stimulus spending and access to liquidity. This increased the debt-to-GDP percent in the U.S. from 61.8 percent in 2007 to 82.0 percent in 2009 and from around 60 percent to 73 percent for the average EU government in the same time period. Because the U.S. benefits from the dollar’s reserve currency status, it can comfortably borrow large amounts at relatively low rates due to the high demand and liquidity of the U.S. treasury market. Europeans cannot take advantage of the same privilege, and thus saw a growing debt crisis in the years following the GFC in countries like Ireland, Greece, Portugal and Spain, which were having trouble paying back the debt their governments had borrowed. The crisis peaked in 2010 when Greece’s sovereign debt was downgraded to junk by rating agencies. Numerous European countries required bailouts from the IMF and EU and instituted new austerity policies that limited public spending.

    Such austerity policies became handicaps in dealing with future crises: during the COVID pandemic, the U.S. distributed $5 trillion in stimulus, while the U.K. and Germany spent $500 billion, France spent $235 billion, and Italy $216 billion, as per Moody’s. Though controversial then and a contributor to the steep inflation that followed, the cash cascade likely helped the U.S. spend itself out of a recession. Household savings were at dramatic highs following the pandemic, allowing consumer spending—contributing to 70 percent of the U.S. GDP—to be strong through the Federal Reserve rate hikes. Post-pandemic, the U.S. has continued its public investment streak with the Infrastructure Investment and Jobs Act, CHIPS Act and Inflation Reduction Act, contributing another $2 trillion to its manufacturing and construction sectors and far exceeding EU contributions.

    The privileged ability to spend through the dollar’s global reserve status, though amounting to a national debt of unprecedented size, has allowed the U.S. to run circles around Europe in public spending and crisis-time stimulus while subverting debt crises.

    A variety of other factors

    The explanation of why the U.S. economy has outpaced Europe cannot be reduced to just one reason. Broad structural differences are at play: the U.S. enjoys a large single free trade zone, where capital and labor can unquestionably cross state boundaries without additional tax, tariff or currency conversion costs. Brexit and many other hurdles have tested the EU’s free trade zone. The U.S. is also unusually entrepreneurial: more start-ups are founded in the U.S. than in the European Union, and the U.S. leads the world in VC funding. Eight of the ten largest companies globally by market cap are American; none are European. The U.S. is also the globe’s most attractive place for investment, making the New York Stock Exchange larger than every European stock exchange combined (and that is just one of the U.S.’s equity exchanges). Recent events also serve as obstacles: energy embargos on Russia have been far more taxing on Europe, with the cost of electricity far higher than in the U.S. and not yet returning to pre-sanction levels.

    Recent events also serve as obstacles: energy embargos on Russia have been far more taxing on Europe, with the cost of electricity far higher than in the U.S. and not yet returning to pre-sanction levels.

    What’s next?

    European leaders are eager to act. “We’re in danger of falling out of touch. There is no time to waste. The gap between the European Union and the U.S. in terms of economic performances is becoming bigger and bigger,” former Italian Prime Minister Enrico Letta admitted in a recent report.

    Last week, European leaders gathered to discuss the “European Competitiveness Deal,” aimed at helping the continent catch up to the U.S. and China. The policy would upskill workers, make Europe more attractive for capital, reduce the cost of energy and strengthen trade, as per the European Commission. Among Europe’s long-term challenges is that its leaders ultimately need to make their markets an attractive place for Europeans to invest their savings; French President Emmanuel Macron noted that “Europe has more savings than the United States of America … and every year, around 300 billion euros of these savings go to finance the American economy.”

    The U.S. greatly benefits from a stronger Europe, giving it an ally to help curtail Chinese and Russian influence. However, the U.S. has recently levied tariffs against Europe while implementing trade and subsidy policies. European leaders have criticized it as protectionist, reducing Europe’s global competitiveness and growth potential.

    How Did Europe Get Left Behind?

    Shreyas Sinha

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  • Dominique Strauss-Kahn Fast Facts | CNN

    Dominique Strauss-Kahn Fast Facts | CNN



    CNN
     — 

    Here is a look at the life of Dominique Strauss-Kahn, former International Monetary Fund (IMF) Director.

    Birth date: April 25, 1949

    Birth place: Neuilly-sur-Seine, France

    Birth name: Dominique Gaston Andre Strauss-Kahn

    Father: Gilbert Strauss-Kahn, a legal and tax advisor

    Mother: Jacqueline Fellus, a journalist

    Marriages: Myriam L’Aouffir (October 2017-present); Anne Sinclair (1991-2013, divorced); Brigitte Guillemette (1984-date unavailable publicly, divorced); Helene Dumas (1967-date unavailable publicly, divorced)

    Children: with Brigitte Guillemette: Camille; with Helene Dumas: Vanessa, Marine and Laurin

    Education: HEC Paris (École des Hautes Études Commerciales de Paris), Public Law, 1971; Paris Institute of Political Studies (Institut d’Études Politiques de Paris), Political Science, 1972; University of Paris, Ph.D., Economics, 1977

    His 2010 IMF salary was tax free, amounting to more than $500,000 with perks.

    Taught economics at the prestigious Institut d’Etudes Politiques de Paris, commonly known as Sciences Po, and at Stanford University in California.

    Was considered to be the leading contender to run against Nicolas Sarkozy for the 2012 presidency of France.

    1981-1986 – Deputy Commissioner of the Economic Planning Agency.

    1986 – Wins election to France’s National Assembly – the lower house of parliament.

    1988-1991 – Chairs the Finance Commission.

    1991- 1993 – Minister of Industry and International Trade under President Francois Mitterrand.

    1997-1999 – Minister of Economy, Finance and Industry. Resigns amid allegations that as a practicing lawyer he was involved in party campaign funding irregularities. Strauss-Kahn is later cleared of the charges.

    2001-2007 – Elected three times to the French National Assembly.

    2006 – Loses to Segolene Royal for the Socialist Party’s presidential nomination.

    November 1, 2007-May 18, 2011 – IMF Managing Director.

    2008 – Is reprimanded by the IMF for a relationship with a subordinate, Piroska Nagy.

    May 14, 2011 – Is escorted off an Air France flight headed to Paris and taken to a New York police station for questioning about the alleged sexual assault of a Sofitel Hotel housekeeping employee. The hotel employee says that Strauss-Kahn attempted to force himself on her when she came to clean his room. By the time police officers arrived, Strauss-Kahn had already left the Manhattan hotel.

    May 14, 2011 – Is charged with attempted rape and imprisonment of the hotel employee.

    May 16, 2011 – Is denied bail and transferred to New York’s Rikers Island jail.

    May 18, 2011 – Resigns his position with IMF. His 2007 contract includes a severance package with a $250,000 one-time payout and a smaller annual pension.

    May 19, 2011 – Is indicted on seven counts: two counts of a criminal sexual act, two counts of sexual abuse, and one count each of attempt to commit rape, unlawful imprisonment and forcible touching.

    May 19, 2011 – Is granted bail based on these conditions: home confinement, the surrender of his travel documents, and the posting of $1 million in cash bail and a $5 million bond.

    June 6, 2011 – Pleads not guilty to all seven charges.

    July 1, 2011 – Is released from house arrest after prosecutors disclose that the accuser admitted to lying about certain details.

    July 4, 2011 – French journalist Tristane Banon’s lawyer says that Banon will be filing a complaint claiming Strauss-Kahn attempted to rape her in 2003. In anticipation of the filing, Strauss-Kahn files a counterclaim against Banon for “false declarations.”

    July 5, 2011 – Banon files a criminal complaint against Strauss-Kahn, alleging attempted rape.

    August 8, 2011 – Nafissatou Diallo, the Manhattan maid who accused Strauss-Kahn of sexual assault, files a civil lawsuit against him.

    August 23, 2011 – All sexual assault charges against Strauss-Kahn, related to Diallo, are dismissed at the request of the prosecutor.

    September 3, 2011 – Leaves New York to return to France.

    September 18, 2011 – In an interview with French television station TF1, Strauss-Kahn says the incident at the Sofitel Hotel was “not only an inappropriate relationship, but more than that – an error, a mistake, a mistake concerning my wife, my children, my friends, but also a mistake that the French people placed their hope in change on me.”

    October 13, 2011 – French prosecutors announce that charges will not be filed against Strauss-Kahn for the alleged sexual assault of Banon due to a lack of sufficient evidence and a statute of limitations that applies to the case.

    February 21-22, 2012 – Is questioned by French police about an alleged prostitution ring possibly operated out of luxury hotels.

    March 26, 2012 – Strauss-Kahn is warned that he is under investigation for “aggravated pimping” for his alleged participation in a prostitution ring.

    May 14, 2012 – Files a countersuit for at least $1 million against Diallo, the Manhattan maid who accused him of sexual assault.

    May 21, 2012 – A French investigation into Strauss-Kahn’s alleged involvement in a prostitution ring widens. Authorities say that police will open a preliminary inquiry into acts that allegedly took place in Washington, DC, in December 2010, which they believe could constitute gang rape.

    October 2, 2012 – A French prosecutor drops the investigation connecting Strauss-Kahn to a possible gang rape in Washington, DC. The testimony on which the investigation is based has been withdrawn and the woman is declining to press charges.

    December 10, 2012 – Diallo and Strauss-Kahn reach a settlement in her civil lawsuit against him. Terms of the settlement are not released.

    July 26, 2013 – Prosecutors announce that Strauss-Kahn will be tried on charges of “aggravated pimping” for his alleged participation in a prostitution ring.

    September 17, 2013 – It is announced that Strauss-Kahn has been appointed as an economic adviser to the Serbian government.

    February 2, 2015 – The trial concerning “aggravated pimping” charges against Strauss-Kahn begins.

    February 17, 2015 – A prosecutor tells a French criminal court that Strauss-Kahn should be acquitted of aggravated pimping charges because of insufficient evidence. The Lille prosecutor’s office said in 2013 that evidence didn’t support the charges, but investigative magistrates nevertheless pursued the case to trial.

    June 12, 2015 – Strauss-Kahn is acquitted of charges of aggravated pimping.

    February 2016 – Is named to the supervisory board of Ukrainian bank Credit Dnepr.

    June 2016 – Strauss-Kahn and seven others are fined in civil court after the anti-prostitution group Mouvement du Nid appeals the June 2015 acquittal. Strauss-Kahn is ordered to pay more than $11,000 in damages to the group.

    December 7, 2020 – Netflix releases “Room 2806: The Accusation,” a documentary series covering the 2011 sexual assault case involving Strauss-Kahn and Diallo.

    December 15, 2022 – Le Monde reports that French authorities are investigating Strauss-Kahn for potential tax fraud related to his consulting activities in Morocco. Strauss-Kahn was one of dozens whose financial secrets and offshore dealings were released in the “Pandora Papers” by the International Consortium of Investigative Journalists (ICIJ) in 2021.

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  • Prediction: These Could Be the Best-Performing Artificial Intelligence (AI) Stocks Through 2030

    Prediction: These Could Be the Best-Performing Artificial Intelligence (AI) Stocks Through 2030


    Do you remember first hearing about this strange thing called “the cloud”? It was probably sometime in the 2010s. Many said it would be a massive boon for tech companies — and they were right.

    Spending on public cloud usage rose from $31 billion in 2015 to nearly $200 billion in 2023. Microsoft‘s Intelligent Cloud and Amazon‘s (NASDAQ: AMZN) Amazon Web Services (AWS) provide terrific revenue streams with annual run rates of over $100 billion each. This technology has been the linchpin driving total returns of over 900% since 2015 for both stocks.

    Artificial intelligence (AI) looks like the next big thing. Some say it will be as transformative as the internet. The International Monetary Fund says it will change nearly 40% of jobs worldwide, and data compiled by Statista shows the AI market will increase sixfold from $300 billion this year to over $1.8 trillion by 2030.

    A bar chart showing estimates of increased AI spending.

    A bar chart showing estimates of increased AI spending.

    Here are four companies taking advantage of the growth in AI with the potential to make investors very happy in the next six years.

    Palantir

    Palantir (NYSE: PLTR) is a popular stock, and much of the hype is deserved. Managing, analyzing, and using data to optimize decision-making are at the core of its business. And its platforms for the private sector and governments use AI to do this.

    Palantir’s newest product, Artificial Intelligence Platform (AIP), is also built for the defense and the private sectors, where it deploys on the customer’s network and leverages large language models (LLMs). What exactly does this mean? Here’s an example from Palantir.

    Say that you’re a military operator in charge of forces in the field, and data comes in saying the enemy is amassing equipment nearby. The operator can visualize the field and ask questions such as, “What enemy units are nearby?” and “What are likely enemy formations?” Then, they can direct drones or satellites to capture images. Using this technology assists the operator with planning and operational decisions.

    Palantir has historically done well with defense revenue. This is a terrific source of income because governments have deep pockets. However, the private sector also offers a massive marketplace.

    The company’s commercial revenue grew 32% year-over-year (YOY) in the fourth quarter of 2023 to $284 million (an acceleration from the 23% YOY growth in Q3), and government revenue grew 11% to $324 million. Palantir was also profitable on a generally accepted accounting principles (GAAP) basis for the fifth straight quarter — an impressive achievement for a high-growth tech company.

    The stock trades for 25 times sales, which isn’t cheap, but this falls to 20 on a forward basis using sales estimates. There’s short-term risk because of the valuation, so consider buying over time. In the long term, Palantir’s AI credentials are top-notch.

    UiPath

    Here’s a phrase to add to your vocabulary: robotic process automation (RPA). This takes tedious and non-value-adding tasks and automates them.

    For example, a mortgage broker may spend hours reviewing emails, downloading attachments, and manually entering data into applications. With RPA, this can be automated, freeing the broker to focus on higher-level tasks like communicating with underwriters and reaching out to customers. This is an example of what UiPath (NYSE: PATH) can do for its customers.

    Speaking of customers, UiPath boasts over 10,800 of them, and they provide $1.4 billion in annual recurring revenue (ARR). Sales came in at $326 million in the third quarter of UiPath’s fiscal 2024 (the three months ended Oct. 31, 2023) on 24% growth, which is impressive, considering the challenging economic environment in 2023. UiPath also has a fortress-like balance sheet with $1.8 billion in cash and investments and no long-term debt.

    UiPath has stiff competition in a fragmented industry, which may be the most significant risk for investors. The company is also not GAAP profitable, although it is cash-flow positive. The stock trades for 11 times sales, which is reasonable for the industry.

    RPA has the potential to save companies vast amounts of money by automating low-level tasks, and UiPath could be a significant long-term beneficiary of this trend.

    Evolv Technologies

    Before I delve into this company, please note that this stock has a market cap of less than $1 billion, making it more speculative than others. Managing risk is crucial, so speculative stocks should only occupy a set portion of your portfolio, based on your age, i.e., how much time you have to make up losses, and risk tolerance. With that understanding, Evolv Technologies (NASDAQ: EVLV) sells fascinating technology that could save your life (and maybe make investors loads of money).

    Currently, when entering a stadium or other venue, people stand in line to go through a metal detector one at a time, empty their pockets, and often get a second screening with a wand. It’s inefficient, and items are often missed.

    Evolv’s technology is different. Multiple people can walk through the AI-powered machines, and the detectors look at various characteristics, such as shapes, to identify guns or knives, rather than alerting for everything metal, like car keys. Alerts show security personnel where the object is detected, and they take it from there.

    Schools, hospitals, and stadiums are the target customers for Evolv. Several major sports teams, school districts, and medical campuses already use it. Ending ARR in Q3 2023 was $66 million on 129% year-over-year growth, and subscriptions jumped 137% to just over 4,000. With a market cap of $676 million, Evolv trades at a reasonable 10 times ARR and has loads of potential.

    Amazon

    I said there was at least one company in this article that you may have never heard of, but it’s probably not this one. Amazon is known for its online marketplace, but will also benefit tremendously from AI since AWS is the world’s leading cloud service provider.

    AI software requires tons of data, and much of this will be processed in the cloud. Amazon also offers other AI solutions, like foundational models — which allow users to tailor AI software to their needs.

    Amazon just released its Q4 2023 earnings, and they were spectacular. Total revenue was up 14% to $170 billion, along with significant increases in cash flow and operating income. As depicted below, the stock rose but still trades below its five-year average, based on sales and cash flow.

    AMZN PS Ratio ChartAMZN PS Ratio Chart

    AMZN PS Ratio Chart

    AI will give Amazon a boost that should please investors for years to come.

    Should you invest $1,000 in Palantir Technologies right now?

    Before you buy stock in Palantir Technologies, consider this:

    The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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    John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bradley Guichard has positions in Amazon and UiPath. The Motley Fool has positions in and recommends Amazon, Microsoft, Palantir Technologies, and UiPath. The Motley Fool has a disclosure policy.

    Prediction: These Could Be the Best-Performing Artificial Intelligence (AI) Stocks Through 2030 was originally published by The Motley Fool



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  • Argentina’s Milei starts shock therapy by devaluing peso by 50 percent

    Argentina’s Milei starts shock therapy by devaluing peso by 50 percent

    New president Milei warns of painful measures as currency value slashed, subsidies cut, public works tenders cancelled.

    Argentina’s government has announced it will slash the value of its currency, the peso, by more than 50 percent against the US dollar as its new far-right president seeks radical solutions to fix the country’s worst economic crisis in decades.

    President Javier Milei‘s economy chief announced the painful measure on Tuesday, saying it was necessary for Argentina to “avoid catastrophe”.

    The devaluation would drop the peso’s value from 400 to the dollar to more than 800 to the dollar, a blow to tens of millions of Argentinians already struggling to make ends meet.

    Economy Minister Luis Caputo announced a raft of other austerity measures, including sweeping subsidy cuts, the cancellation of tenders for public works projects, and plans to axe nine government ministries.

    However, the government plans to double social spending for the poorest to help them absorb the economic shock.

    “For a few months, we’re going to be worse than before,” Caputo said in his televised address.

    “If we continue as we are, we are inevitably heading toward hyperinflation,” he said.

    A sign outside a store reads, in Spanish, ‘We accept dollars’, in Buenos Aires, Argentina, on December 12 [Tomas Cuesta/Reuters]

    ‘Tough pill to swallow’

    The planned measures drew praise from the International Monetary Fund (IMF), to whom Argentina owes $45bn, but sparked harsh criticism from some progressive activists.

    Left-wing activist Juan Grabois said that Caputo had declared “a social murder without flinching like a psychopath about to massacre his defenceless victims”.

    “Your salary in the private sector, in the public sector, in the popular, social and solidarity economy, in the cooperative or informal sector, for retirees and pensioners, will get you half in the supermarket,” Grabois said. “Do you really think that people are not going to protest?”

    Jimena Blanco, chief analyst with risk consulting firm Verisk Maplecroft, said Milei’s government was trying to temper an otherwise guaranteed economic crash landing.

    “He promised a very tough pill to swallow and he’s delivering that pill,” she said. “The question is how long will popular patience last in terms of waiting for the economic situation to change.”

    Economic shock

    The economic overhaul is part of the new strategy by Milei, who was sworn in on Sunday and has aggressively sought to tackle the fiscal deficit he believes is the root of Argentina’s economic woes.

    A self-described “anarcho-capitalist”, Milei argues harsh austerity is needed to put Argentina back on the path to prosperity and that there is no time for a gradualist approach. However, he has promised any adjustments will almost entirely affect the state rather than the private sector.

    Argentinians, disillusioned with skyrocketing inflation and a 40 percent poverty rate, have proven surprisingly receptive to his vision.

    Still, Milei’s road map is likely to encounter fierce opposition from the left-leaning Peronist movement’s lawmakers and unions it controls, whose members have said they refuse to lose wages.

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  • Argentina’s Milei Devalues Peso by 54% in First Batch of Shock Measures

    Argentina’s Milei Devalues Peso by 54% in First Batch of Shock Measures

    (Bloomberg) — Argentina devalued the peso by 54%, overhauled its crawling peg and announced massive spending cuts to eliminate its primary fiscal deficit next year as the first steps in President Javier Milei’s shock-therapy program.

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    The newly inaugurated administration weakened the official exchange rate to 800 pesos per dollar, Economy Minister Luis Caputo said in a televised address after the close of local markets on Tuesday. It was 366.5 per dollar before the address. The central bank will henceforth target a monthly devaluation of 2%.

    The moves were welcomed by the International Monetary Fund. The central bank is scheduled to announce new monetary measures on Wednesday.

    “There is no more money,” Caputo said repeatedly in the recorded video, adding that Argentina needs to solve its “addiction” to fiscal deficits.

    The government will slash spending equivalent to 2.9% of gross domestic product, in a radical fiscal adjustment, according to a senior economic official.

    Cuts to energy subsidies will save the 0.5% of GDP, while reductions to transport subsidies will save 0.2%, according to the government’s estimates. The administration also expects reductions in social security and pensions to save an additional 0.4% of GDP. The government plans to end indexation of pension payments, the official said.

    The finance ministry also expects tax revenue to grow by 2.2% next year.

    Other measures announced including halving the number of ministries, cutting transfers to provinces and suspending public works. At the same time, Argentina will boost certain social welfare programs, Caputo said.

    The IMF praised the new government’s “bold initial actions” shortly after Caputo’s announcement. “Their decisive implementation will help stabilize the economy and set the basis for more sustainable and private-sector led growth,” spokesperson Julie Kozack said in a statement.

    Dramatic Steps

    The dramatic first steps follow a somber inauguration speech on Sunday, when Milei warned that Argentines will have to endure months of pain while he works to pull the country from the economic crisis inherited from his predecessor. Inflation is already running at more than 140% annually, and prices are expected to jump between 20% and 40% in the months to come, the president said.

    The government had closed Argentina’s export registry Monday, a technical step that often foreshadows a currency devaluation or major policy change. The central bank also announced Monday the official currency market would operate with limited transactions — a restriction it said it will lift on Wednesday.

    The devaluation was long seen as inevitable. In the run-up to Milei’s inauguration, markets were signaling a currency drop of about 27% in the first week of the new government, while investment banks like JPMorgan Chase & Co. and local private advisory firms suggested it could weaken about 44%. Grocers had already increased prices and banks were offering sharply weaker retail exchange rates hours before the Tuesday announcement.

    Argentine authorities have for years slowed the peso’s decline in the official market through currency controls and import restrictions in an attempt to protect dwindling reserves. That hodgepodge of capital controls has spurred at least a dozen exchange rates, hampering business and restricting investment in South America’s second-largest economy. On the campaign trail, Milei pledged to scrap the currency altogether, replacing it with the US dollar.

    “We’re always worse off because our response has been to attack the consequences but not the problem,” Caputo said in his address. “What we’ve come to do is the opposite of what they always did, and that’s solve the root problem.”

    On Dec. 7, the prior administration had let the peso slip by about 5%, while simultaneously limiting the amount of greenbacks banks could hold in order to prevent them from hoarding dollars. The government had been burning reserves to keep the currency largely steady at 350 per dollar since the August primary vote, when Milei’s surprise showing sent markets into a tailspin. In parallel markets, that rate is about 1,000.

    Since being spooked by his emergence in the August primary, investors have changed tack on the firebrand libertarian, cheering on his first steps as president-elect — namely, his decision to pick Wall Street veterans for some of the main cabinet positions while distancing himself from more radical proposals including dollarizing the economy and shuttering the central bank. As he begins his four-year term, the rally will be put to the test.

    Caputo previously served as finance chief in the administration of Mauricio Macri, when he negotiated a $16.5 billion deal with holdout bondholders, allowing Argentina to return to international capital markets. Amid a currency run in 2018, Macri tapped him to take over at the central bank, but he only served for a few months before unexpectedly stepping down amid tensions with the IMF.

    Caputo has tapped longtime colleague Santiago Bausili, a Deutsche Bank and JPMorgan Chase & Co veteran, to run Argentina’s central bank.

    —With assistance from Davison Santana and Patrick Gillespie.

    (Updates with details on new crawling peg from first paragraph)

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  • Zombie firms are filing for bankruptcy as the Fed commits to higher rates

    Zombie firms are filing for bankruptcy as the Fed commits to higher rates

    In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales.

    “The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.”

    Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Banks lend to these weak firms in hopes that they can turn their trend of sinking sales around.

    “A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University.

    Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit.

    The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.

    “The biggest implication of the rapid rise in interest rates that we’ve seen the last five or six quarters, actually, is that it reestablished cash,” said Lotfi Karoui, chief credit strategist at Goldman Sachs. “That actually puts some constraints on risk assets.”

    The Fed says it thinks interest rates will remain higher for longer. “Given the fast pace of tightening, there may still be meaningful tightening in the pipeline,” Fed Chair Jerome Powell said at an Economic Club of New York speech Oct. 19.

    Watch the video above to learn more about the Fed’s battle with unviable zombie firms in the U.S.

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  • How the Fed fights zombie firms

    How the Fed fights zombie firms

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    Some firms sustain their businesses by taking on more debt that they can repay. Economists call them zombie companies. When compared to their peers, zombies are smaller in size and deliver lower returns to investors. These companies distort markets, keeping resources from their fundamentally sound competitors. Banks and governments keep zombie firms alive with bailout loans. As the Federal Reserve resets the economy with higher interest rates, many zombie firms are filing for bankruptcy.

    10:01

    Tue, Oct 31 20236:00 AM EDT

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  • The IMF sees greater chance of a ‘soft landing’ for the global economy | CNN Business

    The IMF sees greater chance of a ‘soft landing’ for the global economy | CNN Business


    London
    CNN
     — 

    The International Monetary Fund (IMF) sees better odds that central banks will manage to tame inflation without tipping the global economy into recession, but it warned Tuesday that growth remained weak and patchy.

    The agency said it expected the world’s economy to expand by 3% this year, in line with its July forecast, as stronger-than-expected growth in the United States offset downgrades to the outlook for China and Europe. It shaved its forecast for growth in 2024 by 0.1 percentage point to 2.9%.

    Echoing comments made in July, the IMF highlighted the global economy’s resilience to the twin shocks of the pandemic and the Ukraine war while warning in its World Economic Outlook that risks remained “tilted to the downside.”

    “Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled,” IMF chief economist Pierre-Olivier Gourinchas wrote in a blog post. “The global economy is limping along,” he added.

    The IMF’s projections for growth and inflation are “increasingly consistent with a ‘soft landing’ scenario… especially in the United States,” Gourinchas continued.

    But he cautioned that growth “remains slow and uneven,” with weaker recoveries now expected in much of Europe and China compared with predictions just three months ago.

    The 20 countries using the euro are expected to grow collectively by 0.7% this year and 1.2% next year, a downgrade of 0.2 percentage points and 0.3 percentage points respectively from July.

    The IMF now expects China to grow 5% this year and 4.2% in 2024, down from 5.2% and 4.5% previously.

    “China’s property sector crisis could deepen, with global spillovers, particularly for commodity exporters,” it said in its report

    By contrast, the United States is expected to grow more strongly this year and next than expected in July. The IMF upgraded its growth forecasts for the US economy to 2.1% in 2023 and 1.5% in 2024 — an improvement of 0.3 percentage points and 0.5 percentage points respectively.

    “The strongest recovery among major economies has been in the United States,” the IMF said.

    The agency expects that inflation will continue to fall — bolstering the case for a “soft landing” in major economies — but it does not expect it to return to levels targeted by central banks until 2025 in most cases.

    The IMF revised its forecasts for global inflation to 6.9% this year and 5.8% next year — an increase of 0.1 percentage point and 0.6 percentage points respectively.

    Commodity prices pose a “serious risk” to the inflation outlook and could become more volatile amid climate and geopolitical shocks, Gourinchas wrote.

    “Food prices remain elevated and could be further disrupted by an escalation of the war in Ukraine, inflicting greater hardship on many low-income countries,” he added.

    Oil prices surged Monday on concerns that the latest conflict between Israel and Hamas could cause wider instability in the oil-producing Middle East. Brent crude prices were already elevated following supply cuts by major producers Saudi Arabia and Russia.

    High oil and natural gas prices, leading to skyrocketing energy costs, helped drive inflation to multi-decade highs in many economies in 2022. The latest jump in oil prices could cause a fresh bout of broader price rises.

    Bond investors are already on edge. They dumped government bonds last week in the expectation that the world’s major central banks would keep interest rates “higher for longer” to bring inflation down to their targets.

    The IMF also pointed to concerns that high inflation could become a self-fulfilling prophecy. If households and businesses expect prices to go on rising, that could cause them to set higher prices for their goods and services, or demand higher wages.

    “Expectations that future inflation will rise could feed into current inflation rates, keeping them high,” the IMF noted.

    It added that the “expectations channel is critical to whether central banks can achieve the elusive ‘soft landing’ of bringing the inflation rate down to target without a recession.”

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  • To counter China, Biden is backing the World Bank for a bigger role on the global stage

    To counter China, Biden is backing the World Bank for a bigger role on the global stage

    During the G20 leaders’ summit, U.S. President Joe Biden called on G20 leaders to support the World Bank and other multilateral development banks to increase their ability to support low and middle-income countries. From left, World Bank President Ajay Banga, Brazil’s President Luiz Inacio Lula da Silva, India’s Prime Minister Narendra Modi, South Africa’s President Cyril Ramaphosa and U.S. President Joe Biden in New Delhi on Sept. 9, 2023.

    Evan Vucci | Afp | Getty Images

    World leaders have called for the World Bank’s expansion to boost its lending capacity — but that can’t happen without funding from the private sector, the bank said. 

    The World Bank is no longer just focused on eradicating poverty, but also on other impending global challenges — like pandemics, climate change and food insecurity, its president Ajay Banga told CNBC’s Tanvir Gill on Saturday. 

    “There’s no way there’s enough money in the multilateral development bank, or even in governments … that can drive the kinds of changes we need for this polycrisis. Getting the private sectors’ capital and ingenuity into the game is going to be very important,” he told CNBC in an exclusive interview on the sidelines of the Group of 20 nations leaders’ summit in New Delhi.

    “We are digging deep to boost our lending capacity, but we are going further, creating new mechanisms that would allow us to do even more,” Banga said at the G20 leaders summit. 

    “We’re working to expand concessional financing to help more low-income countries achieve their goals, while thinking creatively about how to encourage cooperation across borders and tackle shared challenges,” he added. 

    Biden backs World Bank

    Leaders at the summit agreed that this isn’t something the World Bank can tackle alone. 

    During the summit, U.S. President Joe Biden called on G20 leaders to further support the World Bank and other multilateral development banks over the next year in order to increase the institution’s ability to support low and middle-income countries. 

    Biden has asked Congress to increase the World Bank’s financing by more than $25 billion, a move that will enable the bank to further help developing countries achieve their development and economic goals. 

    The world needs institutions to work together.

    Kristalina Georgieva

    Managing Director, IMF

    “This initiative will make the World Bank a stronger institution that is able to provide resources at the scale and speed needed to tackle global challenges and address the urgent needs of the poorest countries,” the White House said. 

    The World Bank was created in 1944 to help rebuilding efforts in Europe and Japan after the Second World War. It started with just 38 members but today includes most of the countries in the world.

    World Bank president: China has been a very consistent partner

    Biden has previously said that developing countries need more funding options to reduce their dependency on China, and help them recover from the effects of Russia’s war on Ukraine. The administration asked for $3.3 billion to increase development and infrastructure finance by the World Bank.

    “It is essential that we offer a credible alternative to the People’s Republic of China’s (PRC) coercive and unsustainable lending and infrastructure projects for developing countries around the world,” the White House said in August.

    Apart from providing more resources to help developing countries reduce poverty, the World Bank’s expansion also aims to help these nations in their renewable energy transition. 

    “I do have the idea that if I could get a certain amount of money in the bank to put into say, renewable energy, could I get the private sector to put one-is-to-one, two-is-to-one, three-is-to-one?” Banga said. 

    He highlighted that investors are keen on investing in renewable energy in developing countries, and are confident that solar, wind and geothermal projects “can be built to make money.” 

    ‘Work together’

    Both the World Bank and IMF have pledged to form a stronger partnership to help countries with their debt struggles, sustainability goals, and digital transition. 

    In a separate interview with CNBC’s Martin Soong at the G20 summit, the IMF’s Managing Director Kristalina Georgieva said: “The world has changed. the horizon of how many different lenders there are and different conditions they provide their resources, is much, much broader that it was 10 years ago.”

    “We need this conversation because if you don’t have it, we have no solutions and the debt problem is very pressing,” Georgieva said Sunday.

    She added that “25% of debt of emerging markets is treading in distressed territory.”

    “We now have more than half of of the low income countries either in or close to that distress.”

    The world has changed and institutions need to work together, says IMF chief

    The IMF Chief reiterated that the World Bank and the fund must work to complement each other and promote synergies.

    “The bank has very deep sectoral expertise. We don’t and we would never ever get into sectoral investments,” she explained.

    “What we bring is how you can use fiscal policies to advance the transition to digital economy; how you can use monetary policy to assess the new types of risks — including from crypto from climate; and how you can use data to cover what matters to policymakers today and in the future.”

    “The world needs institutions to work together,” she added, pledging that both the IMF and World Bank will work with others to “set the right example of what it means for the whole to be bigger than the sum of individual parts.”

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  • The world has changed and institutions need to work together, says IMF chief

    The world has changed and institutions need to work together, says IMF chief

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    The IMF’s Managing Director Kristalina Georgieva tells CNBC’s Martin Soong that the World Bank and IMF are complementary but yet have differing expertise. “The world needs institutions to work together,” she said in an exclusive CNBC interview on the sidelines of the G20 leaders’ summit.

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  • Calls to move away from the U.S. dollar are growing — but the greenback is still king

    Calls to move away from the U.S. dollar are growing — but the greenback is still king

    Calls to move away from relying on the U.S. dollar for trade are growing.

    More and more countries — from Brazil to Southeast Asian nations — are calling for trade to be carried out in other currencies besides the U.S. dollar.

    The U.S. dollar has been king in global trade for decades — not just because the U.S. is the world’s largest economy, but also because oil, a key commodity needed by all economies big and small, is priced in the greenback. Most commodities are also priced and traded in U.S. dollars.

    But since the Federal Reserve embarked on a journey of aggressive rate hikes to fight domestic inflation, many central banks around the world have raised interest rates to stem capital outflows and a sharp depreciation of their own currencies.

    “By diversifying their holdings reserves into a more multi-currency sort of portfolio, perhaps they can reduce that pressure on their external sectors,” said Cedric Chehab from Fitch Solutions.

    To be clear, the U.S. dollar remains dominant in global forex reserves even though its share in central banks’ foreign exchange reserves has dropped from more than 70% in 1999, IMF data shows.

    The U.S. dollar accounted for 58.36% of global foreign exchange reserves in the fourth quarter last year, according to data from the IMF’s Currency Composition of Foreign Exchange Reserves (COFER). Comparatively, the euro is a distant second, accounting for about 20.5% of global forex reserves while the Chinese yuan accounted for just 2.7% in the same period.

    China is one of the most active players in this push given its dominant position in global trade right now, and as the world’s second largest economy.

    Based on CNBC’s calculation of IMF’s data on 2022 direction of trade, mainland China was the largest trading partner to 61 countries when combining both imports and exports. In comparison, the U.S. was the largest trading partner to 30 countries.

    “As China’s economic might continues to rise, that means that it’ll exert more influence in global financial institutions and trade etc,” Chehab told CNBC last week.

    China — long among the top 2 foreign holders of U.S. Treasurys — has been steadily reducing its holdings of U.S. Treasury securities.

    Mainland China held nearly $849 billion of U.S. Treasurys as of February this year, the latest data from the U.S. Treasury department showed. That’s at a 12-year low, according to historic data.

    Changing dynamics

    Brazil is rebuilding ties with China, former Brazilian diplomat says

    Economic benefits

    Analysts say changing global economic dynamics are driving the co-called de-dollarization trend which can benefit local economies in a number of ways.

    Trading in local currencies “allow exporters and importers to balance risks, have more options to invest, to have more certainty about the revenues and sales,” former Brazilian ambassador to China, Marcos Caramuru, told CNBC last week.

    Another benefit for countries moving away from using the dollar as the middle man in bilateral trade, is to “help them move up the value chain,” said Mark Tinker from ToscaFund Hong Kong told CNBC “Street Signs Asia” early April.

    “It isn’t about selling cheap stuff to Walmart, keeping down the prices for American consumers in order to earn dollars to buy its energy. This is now about actually a completely bilateral trade bloc,” Tinker said.

    The de-dollarization trend is a reflection that U.S. growth is no longer the only story that matters

    Meanwhile, growth of non-U.S. economic blocs also encourage these economies to push for wider use of their currencies. The IMF estimates that Asia could contribute more than 70% to global growth this year.

    “U.S. growth might slow, but U.S. growth isn’t what it’s all about anymore. There is a whole non-U.S. block that’s growing,” said Tinker. “I think there is going to be a re-internationalization of flows.”

    Geopolitical concerns

    Geopolitical risks have also accelerated the trend to move away from U.S. dollar.

    “Political risk is really helping introduce a lot of uncertainty and variability around how much of a safe haven that U.S. dollar really is,” said Galvin Chia from NatWest Markets told “Street Signs Asia” earlier.

    Tinker said what accelerated the calls for de-dollarization was the U.S. decision to freeze Russia’s foreign currency reserves after Moscow invaded Ukraine in February 2022.

    The yuan has reportedly replaced the U.S. dollar as the most traded currency in Russia, according to Bloomberg.

    So far, the U.S. and its western allies have frozen more than $300 billion of Russia’s foreign currency reserves and slapped multiple rounds of sanctions on Moscow and the country’s oligarchs. This forced Russia to switch trade to other currencies and increase gold in its reserves.

    “Now you find that if you disagree with U.S. foreign policy, you risk having those confiscated or frozen. You’ve got to have alternative place to put those assets,” Tinker said. In the Middle East, major oil exporter Saudi Arabia has reportedly signaled it’s open to trade in other currencies other than the greenback. 

    Although analysts don’t anticipate a complete break away from dollar-denominated oil trade over the short-term, “I think what they’re saying more is, well, there’s another player in town, and we want to look at how we trade with them on a bilateral basis using yuan,” said Chehab.   

    Dollar is still king

    Despite the slow erosion of its hegemony, analysts say the U.S. dollar is not expected be dethroned in the near future — simply because there aren’t any alternatives right now.

    “Euro is somewhat an imperfect fiscal and monetary union, the Japanese yen, which is another reserve currency, has all sorts of structural challenges in terms of the high debt loads,” Chehab told CNBC.

    The Chinese yuan also falls short, Chehab said.

    “If you look at the yuan reserves as a share of total reserves, it’s only about 2.5% of total reserves, and China still has current account restrictions,” Chehab said. “That means that it’s going to take a long time for any other currency, any single currency to really usurp the dollar from that perspective.”

    Data from IMF shows that as of the fourth quarter of 2022, more than 58% of global reserves are held in U.S. dollar — that’s more than double the share of the euro, the second most-held currency in the world.

    The international reserve system “is still a U.S.-reserve dominated system,” said NatWest’s Chia.

    “So long as that commands the majority, so long as you don’t have another currency system or economy that’s willing to step up to that international reach, convertibility and free floating and the responsibility of a reserve currency, it’s hard to say dollar will be displaced over the next 3 to 5 years. unless someone steps up.”

    — CNBC’s Joanna Tan and Monica Pitrelli contributed to this report.

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  • IMF: Banking crisis boosts risks and dims outlook for world economy | CNN Business

    IMF: Banking crisis boosts risks and dims outlook for world economy | CNN Business


    London
    CNN
     — 

    At the start of the year, economists and corporate leaders expressed optimism that global economic growth might not slow down as much as they had feared. Positive developments included China’s reopening, signs of resilience in Europe and falling energy prices.

    But a crisis in the banking sector that emerged last month has changed the calculus. The International Monetary Fund downgraded its forecasts for the global economy Tuesday, noting “the recent increase in financial market volatility.”

    The IMF now expects economic growth to slow from 3.4% in 2022 to 2.8% in 2023. Its estimate in January had been for 2.9% growth this year.

    “Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled,” the organization said in its latest report.

    Fears about the economic outlook have increased following the failures in March of Silicon Valley Bank and Signature Bank, two regional US lenders, and the loss of confidence in the much-larger Credit Suisse

    (CS)    , which was sold to rival UBS in a government-backed rescue deal.

    Already, the global economy was grappling with the consequences of high and persistent inflation, the rapid rise in interest rates to fight it, elevated debt levels and Russia’s war in Ukraine.

    Now, concerns about the health of the banking industry join the list.

    “These forces are now overlaid by, and interacting with, new financial stability concerns,” the IMF said, noting that policymakers trying to tame inflation while averting a “hard landing,” or a painful recession, “may face difficult trade-offs.”

    Global inflation, which the IMF said was proving “much stickier than anticipated,” is expected to fall from 8.7% in 2022 to 7% this year and to 4.9% in 2024.

    Investors are looking for additional pockets of vulnerability in the financial sector. Meanwhile, lenders may turn more conservative to preserve cash they may need to deal with an unpredictable environment.

    That would make it harder for businesses and households to access loans, weighing on economic output over time.

    “Financial conditions have tightened, which is likely to entail lower lending and activity if they persist,” said the IMF, which hosts its spring meeting alongside the World Bank this week.

    If another shock to the world’s financial system results in a “sharp” deterioration in financial conditions, global growth could slow to 1% this year, the IMF warned. That would mean “near-stagnant income per capita.” The group put the probably of this happening at about 15%.

    The IMF acknowledged forecasting was difficult in this climate. The “fog around the world economic outlook has thickened,” it said.

    And it warned that weak growth would likely persist for years. Looking ahead to 2028, global growth is estimated at 3%, the lowest medium-term forecast since 1990.

    The IMF said this sluggishness was attributable in part to scarring from the pandemic, aging workforces and geopolitical fragmentation, pointing to Britain’s decision to leave the European Union, economic tensions between the United States and China and Russia’s invasion of Ukraine.

    Interest rates in advanced economies are likely to revert to their pre-pandemic levels once the current spell of high inflation has passed, the IMF also said.

    The body’s forecast for global growth this year is now closer to that of the World Bank. David Malpass, the outgoing World Bank president, told reporters Monday that the group now saw a 2% expansion in output in 2023, up from 1.7% predicted in January, Reuters has reported.

    In a separate report published Tuesday, the IMF said that while the rapid increase in interest rates was straining banks and other financial firms, there were fundamental differences from the 2008 global financial crisis.

    Banks now have much more capital to be able to withstand shocks. They also have curbed risky lending due to stricter regulations.

    Instead, the IMF pointed to similarities between the latest banking turmoil and the US savings and loan crisis in the 1980s, when trouble at smaller institutions hurt confidence in the broader financial system.

    So far, investors are “pricing a fairly optimistic scenario,” the IMF noted in a blog based on the report, adding that access to credit was actually greater now than it had been in October.

    “While market participants see recession probabilities as high, they also expect the depth of the recession to be modest,” the IMF said.

    Yet those expectations could be quickly upended. If inflation rises further, for example, investors could judge that interest rates will stay higher for longer, the group wrote in the blog.

    “Stresses could then reemerge in the financial system,” it noted.

    That bolsters the need for decisive action by policymakers, the IMF said. It called for gaps in supervision and regulation to “be addressed at once,” citing the need in many countries for stronger plans to wind down failed banks and for improvements to deposit insurance programs.

    — Olesya Dmitracova contributed to this report.

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  • IMF cuts GDP forecasts, says global economy heading for weakest growth since 1990

    IMF cuts GDP forecasts, says global economy heading for weakest growth since 1990

    The International Monetary Fund has released new economic forecasts and warns that it will be hard for policymakers to bring down inflation while keeping a growth momentum.

    Ishara S. Kodikara | Afp | Getty Images

    The International Monetary Fund on Tuesday released its weakest global growth expectations for the medium term in more than 30 years.

    The D.C.-based institution said that five years from now, global growth is expected to be around 3% — the lowest medium-term forecast in an IMF World Economic Outlook since 1990.

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    “The world economy is not currently expected to return over the medium term to the rates of growth that prevailed before the pandemic,” the Fund said in its latest World Economic Outlook.

    The weaker growth prospects stem from the progress economies like China and South Korea have made in increasing their living standards, the IMF said, as well as slower global labor force growth and geopolitical fragmentation, such as Brexit and Russia’s invasion of Ukraine.

    These forces are now overlaid by and interacting with new financial stability concerns.

    In the short term, however, the IMF expects global growth of 2.8% this year and 3% in 2024, slightly below the fund’s estimates published in January. The new estimates are a cut of 0.1 percentage points for both this year and next.

    “The anemic outlook reflects the tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geoeconomic fragmentation,” the IMF said in the same report.

    Looking at some of the regional breakdowns, the IMF sees the United States economy expanding by 1.6% this year and the euro zone growing by 0.8%. However, the United Kingdom is seen contracting by 0.3%.

    China’s GDP is expected to increase by 5.2% in 2023, according to the IMF, and India’s by 5.9%. The Russian economy — which contracted by more than 2% in 2022 — is seen growing by 0.7% this year.

    “The major forces that affected the world in 2022 — central banks’ tight monetary stances to allay inflation, limited fiscal buffers to absorb shocks amid historically high debt levels, commodity price spikes and geoeconomic fragmentation with Russia’s war in Ukraine, and China’s economic reopening—seem likely to continue into 2023. But these forces are now overlaid by and interacting with new financial stability concerns,” the IMF warned.

    Banking turmoil

    The IMF said that its baseline forecast “assumes that the recent financial sector stresses are contained.” It comes after a number of banks failed in March, causing volatility across global markets.

    Silvergate Capital, Silicon Valley Bank and Signature Bank all failed, with regulators taking action in an effort to prevent contagion. Since then, First Republic Bank has also received support from other lenders, and in Switzerland, authorities asked UBS to step in and acquire its struggling rival Credit Suisse.

    The pressures in the banking sector have dissipated in recent weeks, but they have made the overall economic picture worse in the eyes of the IMF.

    U.S. jobs data strong enough to warrant another Fed rate hike, analyst says

    “Financial sector stress could amplify and contagion could take hold, weakening the real economy through a sharp deterioration in financing conditions and compelling central banks to reconsider their policy paths,” the fund said.

    The bank failures shed light on the potential consequences of hawkish monetary policy across many major economies. Higher interest rates, raised by central banks battling to bring down stubbornly high inflation, are hurting companies and national governments with high levels of debt.

    “A hard landing — particularly for advanced economies — has become a much larger risk. Policymakers may face difficult trade-offs to bring sticky inflation down and maintain growth while also preserving financial stability,” the IMF said.

    The institution expects global headline inflation to drop from 8.7% in 2022 to 7% this year, as energy prices come down. However core inflation, which excludes volatile food and energy costs, is expected to take longer to fall.

    In most cases, the IMF does not expect headline inflation to return to its target levels before 2025.

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  • IMF chief warns of ‘risks’ to global financial stability, but China showing signs of recovery | CNN Business

    IMF chief warns of ‘risks’ to global financial stability, but China showing signs of recovery | CNN Business


    Hong Kong
    CNN
     — 

    The head of the International Monetary Fund called for greater vigilance over the global financial system during a speech in China on Sunday in which she also pointed to “green shoots” emerging in the world’s second-largest economy.

    “Risks to financial stability have increased,” IMF Managing Director Kristalina Georgieva said during remarks at the China Development Forum in Beijing.

    Georgieva lauded how policy-makers had acted swiftly in response to the banking crisis, citing the recent collaboration by major central banks to boost the flow of US dollars around the world.

    “These actions have eased market stress to some extent,” she said. “But uncertainty is high, which underscores the need for vigilance.”

    Global investors have been on high alert about the health of the banking sector following the sudden downfalls of Credit Suisse, Silicon Valley Bank and US regional lender Signature Bank.

    Last week, concerns about Deutsche Bank and speculation over one of its bond payments also weighed on markets, prompting EU leaders to reassure the public over the resilience of Europe’s banking system.

    Georgieva said Sunday that the IMF was continuing to watch the situation, and assess potential implications for the global economic outlook.

    Meanwhile, she reiterated an IMF projection that the world economy will see growth slow to just under 3% this year, due to continued fallout from the pandemic, the war in Ukraine and tighter monetary policies.

    That’s compared to the historic average of 3.8%, according to Georgieva, and down from 3.2% in 2022.

    But she also pointed to the emergence of “green shoots” in China, where the IMF expects the recently reopened economy to expand by 5.2% this year. That’s roughly in line with Beijing’s official target of 5%.

    Such growth would mark a historic low. But it would still be a significant improvement on the 3% logged by the world’s second-largest economy last year — and help prop up the global economy.

    China’s rebound this year will allow it to contribute roughly one third of global growth, according to Georgieva. Any 1% increase in Chinese GDP growth would also help lift other Asian economies’ growth by an average of 0.3%, she added.

    But the IMF chief urged Chinese policymakers to take steps to shift its economy and “rebalance” it toward more consumption-driven growth.

    Leaning toward that model would be “more durable, less reliant on debt, and will also help address climate challenges,” Georgieva said.

    “To get there, the social protection system will need to play a central role through higher health and unemployment insurance benefits to cushion households against shocks.”

    Georgieva also called for reforms to help “level the playing field between the private sector and state-owned enterprises, together with investments in education.”

    “The combined impact of these policies could be significant,” she said.

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  • CNBC Daily Open: Deutsche Bank is not Credit Suisse

    CNBC Daily Open: Deutsche Bank is not Credit Suisse

    A Deutsche Bank AG branch in the financial district of Frankfurt, Germany, on Friday, May 6, 2022.

    Alex Kraus | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    Deutsche Bank is the latest bank to suffer a panic-driven sell-off. But analysts said it’s an irrational move by markets.

    What you need to know today

    • U.S. markets edged higher Friday, shrugging off renewed fears of the banking crisis spreading in Europe. But Europe’s Stoxx 600 closed 1.4% lower, weighed down by a 3.8% drop in banks. Deutsche Bank aside, Societe Generale lost 6.13%, Barclays tumbled 4.21% and BNP Paribas dropped 5.27%.
    • International Monetary Fund chief Kristalina Georgieva said recent bank collapses have increased risks to financial stability. But China’s economic rebound may boost the world economy, Georgieva added. Every 1 percentage point increase in China’s GDP adds 0.3 percentage point in the GDP of other Asian economies, according to IMF estimates.
    • PRO Several important economic data points will be released this week: personal consumption expenditures, consumer sentiment and home sales. But concerns about the banking system will likely dominate markets and cause continued volatility.

    The bottom line

    Now that central banks worldwide have made their interest rate decisions, markets are turning their attention back to the banking sector. In today’s heightened atmosphere, however, prudence can quickly — and arbitrarily — tip over into paranoia.

    Deutsche Bank appears to be the latest victim of the market’s panic. On Friday, after the price of its credit default swaps rose to its highest since 2018, investors sparked a sell-off in the German bank.

    The move is mostly irrational, according to analysts. Deutsche Bank is not another Credit Suisse in two key aspects.

    First, have a look at their fourth-quarter reports. Deutsche Bank reported a 1.8-billion-euro ($1.98 billion) net profit, giving it an annual net income for 2022 of 5 billion euros. By contrast, Credit Suisse had a fourth-quarter loss of 1.4 billion Swiss francs ($1.51 billion), bringing it to a full-year loss of 7.3 billion Swiss francs. The difference between the two European banks couldn’t be starker.

    Second, Deutsche Bank’s liquidity coverage ratio was 142% at the end of 2022, meaning the bank had more than enough liquid assets to cover a sudden outflow of cash for 30 days. On the other hand, Credit Suisse disclosed it had to use “liquidity buffers” in 2022 as the Swiss bank fell below regulatory requirements of liquidity.

    Research firm Autonomous, a subsidiary of AllianceBernstein, was so confident in Deutsche Bank that it issued a research note stating: “We have no concerns about Deutsche’s viability or asset marks. To be crystal clear — Deutsche is NOT the next Credit Suisse.”

    While the Deutsche Bank episode reverberated through Europe markets, U.S. investors seemed less concerned. In fact, the SPDR S&P Regional Banking ETF gained 3.03% on Friday. Major indexes also rose — not just for the day, but the week. The Dow Jones Industrial Average inched up 0.41%, giving it a 0.4% week-over-week gain. The S&P 500 rose 0.56%, contributing to a 1.4% weekly increase. The Nasdaq Composite added 0.3% to finish the week 1.6% higher.

    It’s an impressive showing given market volatility. Unfortunately, there’s no promise of stability this week. The personal consumption expenditure price index — the inflation reading most important to the Fed — will come out Friday, and it’s “going to be sticky,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. But the banking crisis will continue gripping markets so tightly that they might not care about inflation as much — for better or worse.

    Subscribe here to get this report sent directly to your inbox each morning before markets open.

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  • As cash runs out, Pakistan introduces bill to unlock IMF funds

    As cash runs out, Pakistan introduces bill to unlock IMF funds

    Islamabad, Pakistan – The Pakistani government has tabled a 170 billion rupee ($643m) finance bill to help the cash-strapped country secure funds from the International Monetary Fund (IMF) to stave off default.

    Presented before Parliament on Wednesday evening by Finance Minister Ishaq Dar, the measures include raising the general sales tax by a percentage point to 18 percent and follow hikes in the price of fuel and gas earlier this week as part of efforts to meet the global lender’s conditions for the release of a $1.1bn loan tranche, originally due in November 2022.

    The bill will be put up for debate in Pakistan’s Senate, the upper house of Parliament, on Friday. Dar said he expected it to be approved by early next week.

    It comes after an IMF delegation visited Pakistan late last month to discuss the ninth review of a $6.5bn bailout programme that Pakistan entered in 2019.

    While the government failed to sign a staff-level agreement with the IMF team after 10 days of negotiations, it is expected that the bill’s approval will result in the IMF unlocking the $1.1bn installment, as well as Pakistan’s allies providing it with much-needed external financing.

    Pakistan was able to secure the previous tranche of $1.17bn in August last year after the IMF approved the seventh and eighth review of the package, with the central bank possessing at the time more than $8bn in foreign reserves.

    The delay in completing the ninth review, however, has sent the country’s economy spiralling down further – foreign reserves have dwindled to $2.9bn, covering less than just three weeks of imports.

    Devastating floods last year that caused damage worth more than $30bn – and that forced millions from their homes and destroyed infrastructure and crops – have only compounded hardship in a country mired in financial and political crises.

    With inflation at 27.5 percent, the country’s highest in nearly 50 years, experts see difficult days ahead for Pakistan’s population following the imposition of new taxes and austerity measures.

    Ratings agency Fitch on Tuesday also predicted a gloomy outlook, downgrading Pakistan’s rating to CCC – and said inflation could touch 33 percent in the next few months. The World Bank, in its global outlook report issued in January, revised growth projections from four percent in June last year to two percent for the current fiscal year, citing the “precarious economic situation, low foreign exchange reserves and large fiscal and current account deficits” among the primary reasons.

    Sajid Amin Javed, a senior economist associated with the Sustainable Development Policy Institute in Islamabad, said the negotiations between the government and the IMF involved known issues that Pakistan had already agreed upon when entering the programme.

    “A country goes to the IMF when it has no other option. It tells the lender of its needs, and the lender then asks what the government will do to fix its economic problems, before agreeing to give the money. The country then writes a letter of intent to IMF, committing to undertake reforms,” Amin told Al Jazeera.

    The reason why Pakistan and the IMF continued to debate and argue over the sticking points, said Amin, was because of “Pakistan’s own waste of time”.

    “Why do we have to wait for IMF to tell us that [the] rupee should be determined on [the] market rate?” Amin asked. “You don’t need an Einstein to tell you that for a country which has exponentially more imports than its exports, its reserves are so dangerously low, why do you want to keep rupee inflated artificially?”

    The Pakistani rupee has dropped more than 15 percent against the United States dollar since the removal of an exchange cap opposed by the IMF in a bid to revive the bailout. Pakistan’s central bank in the past has used its foreign exchange reserves to keep the Pakistani rupee propped up for extended periods of time. Official statistics, meanwhile, show that the country’s total import bill between July 2021 and June 2022 surpassed $80bn, with exports totalling $31bn in the same period.

    For Amin, the overarching problem behind the failure to implement the IMF programme sooner was the lack of political stability in the country.

    “All the delays, reversals, and hesitation in this programme, it is all due to political instability,” he said. “We should not do politics on economy and reforms. Otherwise you will have to suffer the consequences.”

    In April 2022, the government of Prime Minister Imran Khan, chief of the Pakistan Tehreek-e-Insaf (PTI) political party, was removed through a parliamentary vote of no confidence.

    Weeks before his removal, Khan decided to reduce fuel prices, which were on the rise globally amid the Russia-Ukraine war.

    “When the PTI saw that it was going to lose the vote of no confidence, it took myopic economic decisions to ensure they leave a minefield for the incoming government, forcing them to feel the heat,” Amin said.

    Asad Sayeed, a Karachi-based economist associated with the research firm Collective for Social Science Research, also called the fuel-price decision a “complete, utter violation of the IMF agreement”.

    Sayeed went on to say that Dar, who became finance minister in September, undertook similar actions that went against what the IMF had asked Pakistan to do.

    “He came in with the mind to reduce inflation. He decided to control the dollar rate in the market and suppress imports. What he did was perhaps not as stark as what the previous government did, but it equally hurt the country’s economy,” Sayeed told Al Jazeera.

    But Hammad Azhar, a former energy minister and senior PTI leader, defended the decision to reduce fuel prices following the start of the war in Ukraine.

    “When we gave the subsidy, we had arranged financing for it which we showed to IMF. Plus, we were also arranging oil from Russia, which meant reduced load on our economy,” Azhar said. “But we were pushed out of government. If the incoming government thinks it was such a problem and it caused a rupture of trust, why didn’t they reverse it immediately?”

    Sayeed said the new government of Prime Minister Shehbaz Sharif “delayed decision-making” from November 2022, when the latest package disbursement was suspended, until this month.

    “This meant all the price adjustments will also be steeper, and more painful. All these inflationary impacts will impact their own voters,” he said. “The situation could have been made relatively smoother, less volatile if they had agreed to implement steps earlier. But they will have to do it now, and it will be akin to political suicide.”

    Pakistan is scheduled to have its general elections in October this year. Amin pointed out that a government lacking an electoral mandate would typically find it hard to implement painful measures.

    “A government can make tough economic decisions knowing it will not have to worry about losing political currency,” he said. “They don’t have to worry about upcoming elections or pleasing its constituents.”

    Pakistan first entered an IMF programme in 1958, just 11 years after independence. It has since gone back to the lender another 22 times.

    For Alia Moubayed, a senior official at financial firm Jefferies and its chief economist for Pakistan,  the country’s history with the IMF is “undoubtedly complicated and controversial”.

    “Pakistan is at a critical point, facing extreme financial stress again,” she told Al Jazeera. “Governance failures in my view are at the core of Pakistan’s problems, and IMF programmes alone cannot fix them without a strong local ownership and commitment to long-standing structural reforms. The IMF is necessary, but not sufficient to address such problems.”

    Amin, however, sees a silver lining in these troubling times for the country, and believes that if Pakistan wants to emerge from the crisis, it must own the reforms it desperately needs.

    “We have run out of options,” he said. “Our global partners are also refusing to bail us out like they used to in [the] past and nudging us to seek recourse from [the] IMF. We should be thankful to them. If somebody gives us money, we will again ignore the commitments made to IMF. So this lack of help from our friends is the big help we needed.”

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