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Daily Archives: August 2, 2022

Charts: Birth Rates in U.S. and Europe Reverse Down Trend in 2021

Source : Nikkei

Chart: Home Prices in China Keep Falling

Source : Caixin

Humour

Zambia Cancels US$1.6 billion Chinese Loans and Halts Infrastructure Projects in Move to Avoid Debt Crisis

Jevans Nyabiage wrote . . . . . . . . .

Zambia has cancelled US$1.6 billion in agreed upon but not-disbursed Chinese loans, mostly from China Exim Bank and the Industrial Commercial Bank of China, to help manage its debt woes.

It is a portion of the US$2 billion that Lusaka has cancelled in undisbursed loans from its external creditors, coming shortly before its official bilateral lenders agreed on Saturday to provide debt relief to the Southern African nation.

Lusaka announced that it ceased the construction and rehabilitation of several roads, highways and information and technology projects, most funded by China Exim Bank, after it faced challenges in making loan payments.

“Measures have been taken by the government of the Republic of Zambia to address the current debt challenges – beyond the debt restructuring process. Cabinet, at its sitting on Thursday … took measures to discontinue some loan-financed projects,” Zambia’s Ministry of Finance and National Planning announced on Saturday.

Further, it said a few critical projects would be re-scoped to allow critical components to be finished using budget resources allocated over the medium term.

The ministry said it had started talks with creditors and contractors to formalise the cancellation of works contracts.

Among the projects cancelled are the rehabilitation of a major highway – the US$1.2 billion Lusaka-Ndola dual carriageway funded by China Jiangxi Corporation – which was to link the capital to the country’s Copperbelt Province. Lusaka has engaged China Jiangxi to cancel US$157 million in undisbursed loans.

Digital projects, such as Smart Zambia phase II and digital terrestrial television broadcasting systems in Zambia phases II and III, have also been stopped as the country moves to avert a debt crisis.

Zambia said it had notified Chinese lenders and contractors about plans to cancel undisbursed loan balances for 14 projects.

It will move to stop the disbursement of US$333.2 million for Smart Zambia phase II, which was being implemented by Huawei Technologies and funded by China Exim Bank.

The initial phase of the project involved building a national data centre and an ICT talent training centre. Huawei was to develop Zambia’s national broadband system to bolster public service delivery in subsequent phases.

The country has also asked China Exim Bank to cancel US$159 million earmarked to fund the building of Chalala army barracks in Lusaka.

Besides Chinese loans, Zambia also plans to cancel loans advanced by the British Standard Chartered Bank for the building of Kafulafuta Dam for US$381.7 million, of which US$224.6 million had already been disbursed. The other is a multimillion-dollar deal involving Israel Discount Bank to fund military aircraft and equipment.

In 2020, Zambia became the first African country to default during the pandemic when it failed to make payments on US$17 billion of external debt, including US$3 billion dollar-denominated bonds. Lusaka owes Chinese lenders about US$6 billion, which went into building mega projects, including airports, highways and power dams.

In addition to cancelling contracts and stopping the disbursement of loans, Lusaka has received a reprieve after official creditors led by China and France agreed to provide debt relief. The decision paves the way for the country to access a US$1.4 billion bailout from the International Monetary Fund. Still, Lusaka has to seek similar relief from private creditors over the US$3 billion it owes Eurobond holders.

It had sought debt relief from the Group of 20 wealthiest nations and its top private creditors under the G20’s new Common Framework to help more than 70 developing countries with post-Covid debt restructuring and relief. The process allows creditors to jointly renegotiate its foreign debt – even though China usually prefers bilateral negotiations.

The official creditor committee for Zambia – co-chaired by China and France with South Africa acting as a vice-chair and including IMF and World Bank staff – met on July 18 where they committed to offering Zambia debt relief.

IMF managing director Kristalina Georgieva welcomed the official creditors’ move to provide financial assurances, clearing the way for a fund programme, saying it showed the “potential of the G20 Common Framework for debt treatment to deliver for countries committed to dealing with their debt problems”.

“The delivery of these financing assurances will enable the IMF executive board to consider approval of a fund-supported programme for Zambia and unlock much needed financing from Zambia’s development partners,” Georgieva said.

“Amid elevated debt levels and tightening financial conditions, I look forward to the Common Framework working for other countries facing debt problems.”

Zambia’s Minister of Finance Situmbeko Musokotwane said the country would “continue to work with both official and private creditors to agree on the terms of the debt restructuring in line with the comparability of treatment principle”.

The Common Framework aims to help countries weather the Covid-19 storm with debt relief and restructuring, but besides Zambia, only Ethiopia and Chad have applied to join the plan, with most countries fearing that by seeking relief their credit rating will be downgraded by rating agencies.


Source : Yahoo!

Charts: Hong Kong’s Economy Shrank YoY in Q2 2022

Source : Trading Economics

China’s Home Sales Slump Further During Mortgage Boycotts

China’s top 100 developers saw home sales slump further in July, indicating a widening mortgage boycott crisis emerging around the country has further weighed on buyer confidence.

Combined contract sales plunged 39.7% from a year earlier to 523.1 billion yuan ($78 billion), according to data compiled by China Real Estate Information Corp., as demand remained stagnant amid an economic downturn despite government efforts to stimulate purchases.

The pace of decline was narrower than the previous month’s 43% fall, CRIC said in a report. However, combined sales plummeted 49% in the first seven months, a relatively steep drop compared with the magnitude of declines in the same period of previous years, the report said, without elaboration.

The preliminary July sales figures provide the first reading on property purchases since homebuyers nationwide began refusing to pay mortgages on stalled projects. A revival of home sales is needed to generate cash for debt-laden developers like China Evergrande Group and reduce mounting pressure on banks and the economy.

“Overall market demand and purchasing power have been overdrawn, while the industry confidence is also at a low level,” CRIC said in the report. “Developers are still facing heavy de-stocking pressure in the short term.”

The Chinese government has been racing to rescue its all-important real estate sector as a long-standing crackdown on leverage and speculation hits demand. Authorities have cut borrowing costs and down payments among other measures to shore up a sector that accounts for about a quarter of the world’s second-largest economy.

Financial regulators have also urged banks to boost lending to builders to help finish the projects, while the Politburo, the Communist Party’s top decision-making body, last month vowed to maintain real-estate market stability. Authorities are considering a plan to seize undeveloped land from distressed real estate firms to help finance the completion of stalled projects, people familiar with the matter said last week.

China’s overall property loans rose at the slowest rate on record as of the end of June, as banks were cautious about lending to cash-strapped developers while household demand for mortgages was weak. Housing prices fell for a 10th straight month in June.

CRIC said local authorities around the country are expected to further ramp up property policy stimulus, with the country’s second-, third- and fourth-tier cities expected to further ease restrictions.

Cities under heavy pressure from the property slump will likely implement fiscal measures to stimulate home buying and stabilize market expectations, the report said, adding that ensuring delivery of housing projects would be an important task for builders as stressed at the latest Politburo meeting.


Source : BNN Bloomberg

Chart: Coal and Natural Gas Still Dominate Global Power Source

Source : Caixin