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Category Archives: Debt

Charts: U.S. Consumer Credit Climbed in June 2022

Source : Bloomberg

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!

Hundreds of Suppliers to China’s Real Estate Industry Say Builders Still Owe Them Money

Source : Caixin

Chart: Canada Federal Debt by Prime Ministers

Source : Fraser Institute

Chart: Which Country Has The Highest Debt in the EU?

Source : Statista

China New Bank Loans Nearly Triple in May as Beijing Steps Up Policy Support


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New bank lending in China jumped far more than expected in May and broader credit growth also quickened, as policymakers try to pull the world’s second-largest economy out of a sharp, COVID-induced slump.

Chinese banks extended 1.89 trillion yuan ($282.62 billion) in new yuan loans in May, nearly tripling April’s tally and handily beating expectations, data released by the People’s Bank of China on Friday.

Analysts polled by Reuters had predicted new yuan loans would surge to 1.3 trillion yuan in May from 645.4 billion yuan in April and against 1.5 trillion yuan a year earlier.

“Credit growth was stronger than expected last month and is likely to accelerate further following the clear signal in late May that policymakers want banks to step up lending,” Capital Economics said in a note.

“More policy easing is likely. But private sector credit demand is likely to remain subdued while, on current budgetary plans, local government borrowing is about to slow. A dramatic increase in credit growth still seems unlikely.”

New household loans, including mortgages, rose to 288.8 billion yuan in May, after contracting 217 billion yuan in April, while new corporate loans soared to 1.53 trillion yuan in May from 578.4 billion yuan in April.

However, 38% of the new monthly loans were in the form of short-term bill financing, which was down from 80% in April but still higher than 10% in the first quarter, suggesting real credit demand remains weak.

Chinese policymakers have recently stepped up support for the slowing economy as Shanghai and other cities ease tough COVID-19 lockdowns following a drop in new infections.

The cabinet announced a package of policy steps last month, including broader tax credit rebates and postponing social security payments and loan repayments to support businesses.

Local media also reported last month that financial authorities had told commercial banks to speed up lending.

In May, the central bank cut its benchmark reference rate for mortgages by an unexpectedly wide margin, its second reduction this year, in a bid to turn around the contracting housing market, a key economic growth driver.

But analysts say both banks and potential borrowers remain cautious in case there are further virus disruptions.

After discovering a handful of new cases, China’s commercial hub of Shanghai will lock down millions of people for mass COVID-19 testing this weekend – just 10 days after lifting a grueling two-month lockdown – unsettling residents and raising concerns about a fresh blow to businesses.

MORE POLICY EASING UNDERWAY

Premier Li Keqiang has vowed to achieve positive economic growth in the second quarter, although many private sector economists have penciled in a contraction.

China will increase the credit quota for policy banks by 800 billion yuan ($120 billion) for them to support infrastructure construction, state television CCTV quoted a cabinet meeting as saying.

Broad M2 money supply grew 11.1% from a year earlier, central bank data showed, above estimates of 10.4% forecast in the Reuters poll. M2 grew 10.5% in April from a year ago.

Outstanding yuan loans grew 11.0% in May from a year earlier compared with 10.9% growth in April. Analysts had expected 10.7% growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.5% in May from 10.2% in April.

Chinese provinces are racing to issue hundreds of billions of dollars worth of special bonds in June, frontloading investment to revive the slowing economy.

Analysts and policy insiders expect China to issue special treasury bonds later this year, to maintain a steady stream of funding.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

In May, TSF jumped to 2.79 trillion yuan from 910.2 billion yuan in April. Analysts polled by Reuters had expected May TSF of 2.02 trillion yuan.


Source : Financial Post

Charts: U.S. Monthly Consumer Credit Come Down Slightly in April 2022

Total revolving credit outstanding is over 1.1 trillion, a record high.

Source : Bloomberg

Chart: U.S. Consumers Saving Rates Dropped While Building Up Debts

Source : Bloomberg

Infographic: U.S. Consumer Debt Approaches $16 Trillion

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Source : Visual Capitalist

Charts: U.S. Consumer Credit Rose to Record High in March 2022

Amount in billion US$

Source : Bloomberg