IRBIL, IRAQ — Dozens of people protested in front of the Central Bank of Iraq in Baghdad and bank owners called for official action to stem a sharp increase in the dollar exchange rate Wednesday, after the United States blacklisted 14 Iraqi banks. 

Over the past two days, the market rate of the dollar jumped from 1,470 dinar per dollar to 1,570 dinar per dollar. The jump came after the U.S. listed 14 private Iraqi banks among banks that are banned from dealing with U.S. dollars due to suspicions of money laundering and funneling funds to Iran. 

The ban was imposed by the U.S. Treasury Department and the Federal Reserve Bank of New York and was first reported by The Wall Street Journal on July 19.

“The listing of almost one-third of the private banks as banned from dealing with the U.S. dollar will have negative consequences from many perspectives,” Haidar al Shamaa, owner of a private bank in Baghdad said at a news conference Wednesday.

He called on “the brothers at the Iraqi government to work … to undo the damage which occurred to us specifically, and to the Iraqi banking section in general.”

The 14 banks facing the ban issued a joint statement urging the Iraqi government to address the issue and warning that banning a third of Iraq’s private banks from dollar trading would not only impact the dollar price but hinder foreign investment.

Protesters organized by a group calling itself Thuwar Tishreen (October Revolutionaries), which is connected to a movement that started mass protests in Iraq in 2021, also demanded that the government take action to halt inflation.

Also Wednesday, central bank chief Ali al-Allaq told the state-run Iraqi News Agency that his institution continues to provide dollars at the official rate of 1,320 dinar to the dollar for “all legitimate transactions” including “remittances and credits for various imports.”

He blamed the current rise in the street price of the dollar on the “reluctance of certain merchants” who “do not practice legitimate activities and operations” to use the official electronic platform used for currency requests.

On Sunday, the Iraqi Prime Minister Mohammed Shia al Sudani met with al-Allaq and discussed measures to stabilize the dinar price against the dollar.

A similar dive in the value of the dinar took place earlier this year after measures taken by the United States late last year to stamp out money laundering and the channeling of dollars to Iran and Syria from Iraq severely restricted Iraq’s access to hard currency.
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The U.S. Federal Reserve raised a key interest rate by a quarter of a percentage point on Wednesday, citing still-elevated inflation as a rationale for what is now the highest U.S. central bank policy rate since 2007.

The hike, the Fed’s 11th in its last 12 meetings, set the federal funds rate – the benchmark rate on overnight loans that banks charge each other – in the 5.25%-5.50% range. That level was last seen just prior to the 2007 housing market crash, and it has not been consistently exceeded on an effective basis for about 22 years.

“The [Federal Open Market] Committee will continue to assess additional information and its implications for monetary policy,” the Fed said in language that was little changed from its June statement and left the central bank’s policy options open as it searches for a stopping point to the current tightening cycle.

As it stated in June, the Fed said it would watch incoming data and study the impact of its rate hikes on the economy “in determining the extent of additional policy firming that may be appropriate” to reach its 2% inflation target.

Though inflation data since the Fed’s June 13-14 meeting has been weaker than expected, policymakers have been reluctant to alter their hawkish stance until there is more progress in reducing price pressures.

Fed Chair Jerome Powell said any future policy decisions would be made on a meeting-by-meeting basis, and that in the current environment officials could provide only limited guidance about what’s next for monetary policy.

But he didn’t rule out action if it was deemed necessary.

“It is certainly possible that we would raise the funds rate again at the September meeting if the data warranted, and I would also say it’s possible that we would choose to hold steady at that meeting” if that was the right policy call, Powell said in a press conference after the release of the policy statement.

But Powell cautioned against expecting any near-term easing in rates. “We’ll be comfortable cutting rates when we’re comfortable cutting rates, and that won’t be this year,” Powell said.

Yields on both the two- and 10-year Treasury notes moved down modestly from levels right before the release of the Fed’s policy statement, while U.S. stocks ended mixed. Futures markets showed bets on the path of Fed rate increases over the remainder of the year were little changed, seeing small odds of a rise in September.

“The forward guidance remains unchanged as the committee leaves the door open to further rate hikes if inflation does not continue to trend lower,” said Kathy Bostjancic, chief economist at Nationwide. “Our view is the Fed is likely done with rate hikes for this cycle since continued easing of inflation will passively lead to tighter policy as the Fed holds the nominal fed funds rate steady into 2024.”

‘Moderate’ growth

Key measures of inflation remain more than double the Fed’s target, and the economy by many measures, including a low 3.6% unemployment rate, continues to outperform expectations given the rapid increase in interest rates.

Job gains remain “robust,” the Fed said, while it described the economy as growing at a “moderate” pace, a slight upgrade from the “modest” pace seen as of the June meeting. The U.S. government on Thursday is expected to report the economy grew at a 1.8% annual pace in the second quarter, according to economists polled by Reuters.

Powell said he’s still holding out hope the economy can achieve a “soft landing,” a scenario in which inflation falls, unemployment remains relatively low and a recession is avoided.

“My base case is we’ll be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses,” he said, while noting that outlook is “a long way from assured.” He also noted that Fed staff economists are no longer predicting a recession as they have at recent meetings.

With about eight weeks until the next Fed meeting, a longer than usual interlude, continued moderation in the pace of price increases could make this the last rate hike in a process that began with a cautious quarter-percentage-point increase in March 2022 before accelerating into the most rapid monetary tightening since the 1980s.

In the most recent economic projections from Fed policymakers, 12 of 18 officials expected at least one more quarter-percentage-point increase would be needed by the end of this year.
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This week as Beijing suddenly announced that China’s foreign minister Qin Gang had been removed after just seven months in the job, his predecessor and now replacement, seasoned diplomat Wang Yi, was on a tour of some of Africa’s key economies.

Wang participated in BRICS summit-related meetings in South Africa, infrastructure talks in Kenya, and pledges on debt relief in Ethiopia, meetings that analysts said illustrate China’s way of showing its commitment to the continent.

“Talk about hitting the ground running: news broke when Wang Yi was on tour as the director of the foreign affairs commission of the party’s central committee,” Lauren Johnston, senior China-Africa researcher at the South African Institute of International Affairs said of the revelation that Qin — who hadn’t been seen for a month — had been removed.

“His tour, now as foreign minister, includes South Africa, Nigeria, Kenya and Turkey — all big players in the Global South,” she told VOA.

Paul Nantulya, research associate for the Africa Center for Strategic Studies in Washington, told VOA that Wang’s trip to the region comes as China seeks to re-engage more with Africa in the wake of the COVID-19 pandemic.

However he noted: “It is rather unusual to have two high-level multicountry visits within a space of six months, because remember Qin Gang was in Africa at the beginning of the year for the inaugural Chinese foreign affairs visit.”

Cliff Mboya, a research fellow at the Afro-Sino Center for International Relations, suggested it might not be coincidence that Wang was in the region when Qin’s exit was announced, noting Wang could be “coming to re-establish relations and continue from where Qin Gang left.”

Requests and Promises

The analysts noted Kenya, South Africa and Nigeria, where Qin is also scheduled to travel, are the economic powerhouses of East, Southern and West Africa. Ethiopia, a surprise addition to Wang’s itinerary, is the seat of the African Union.

According to a statement from the Chinese Foreign Ministry, while in Addis Ababa Wang told Prime Minister Abiy Ahmed: “China encourages powerful and reputable enterprises to invest in Ethiopia and is willing to play a positive role in easing Ethiopia’s debt pressure.”

The country is billions of dollars in debt. Security there is also a concern as the strategic Horn of Africa nation emerges from a brutal civil war.

Next, in Kenya, Wang met with President William Ruto — who was elected last year and had talked tough on China during his campaign.

Nantulya noted that China is Kenya’s largest trading partner and a key security partner, and that Beijing has been “very anxious about the change of government” there and was obviously looking to cement ties.

According to a readout from the Chinese side, Ruto used the meeting with Wang to push for more infrastructure investment, despite analysts noting China has pulled back a bit recently from its major Belt and Road Initiative projects.

Kenya said it is willing to “deepen cooperation in the fields of railways, highways, water conservancy, aviation and renewable energy,” the Chinese Foreign Ministry said.

On his third stop, in South Africa, Wang attended security meetings related to the upcoming summit of the BRICS group of economies, which also includes Brazil, Russia and India. Wang spoke with his South African counterpart, Naledi Pandor, and President Cyril Ramaphosa.

According to the Chinese Foreign Ministry, Wang noted that “the friendship between China and South Africa has a long history, and the two countries have forged a profound friendship of comrades and brothers.”

Steven Kuo, a senior lecturer at the University of Cape Town and author of the book “Chinese Peace in Africa: From Peacekeeper to Peacemaker,” pointed out that Chinese rhetoric around “South-South cooperation” and anti-imperialism “does strike a chord with African countries. Increasingly African countries, including South Africa, see the West as hypocritical, so there are some ideological commonalities.”

Wang also promised South Africa that China would “expand cooperation in key minerals, digital economy, clean energy, environmental protection industries, marine resource development, poverty reduction and other fields.”

Looking Ahead

Wang’s trip comes as global powers vie for influence in Africa — which is youthful, growing and resource-rich.

This week has been a busy time for Africa diplomatically, with the U.S. Treasury undersecretary in Kenya and Somalia, Ukraine’s Foreign Minister Dymtro Kuleba trying to get support on a trip to Equatorial Guinea, and Russian President Vladimir Putin hosting leaders at a Russia-Africa summit in St. Petersburg from Thursday.

The next two stops on Wang’s schedule are a fourth African state, the continent’s largest economy, Nigeria, and Turkey.

Like Kenya, Nantulya noted, Nigeria has a new government, which might be one of the reasons it was chosen, as well as the fact that Beijing is increasing engagement in West Africa. Earlier this month China’s navy visited the country amid speculation it is seeking a military base somewhere on the Atlantic coast.

In August, President Xi Jinping is expected to attend the BRICS Summit in Johannesburg, along with all the other leaders of the bloc, except for Russian President Putin, who is unable to attend due to an International Criminal Court warrant out for his arrest.
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JOHANNESBURG — African leaders, including South African President Cyril Ramaphosa, are heading to St. Petersburg this week for the second Russia-Africa Summit, as an isolated Moscow looks to shore up its influence in a key region.

Analysts told VOA that high on the agenda will be President Vladimir Putin’s nixing of an arrangement that allowed Ukrainian grain to reach foreign markets.

Putin will be under pressure to reassure them after he terminated a deal allowing safe passage of Ukrainian grain exports earlier this month — a move criticized by the African Union Commission as something that could negatively affect food security, especially in Africa.

The move has riled African governments, with one senior Kenyan official saying the axing of the agreement is “a stab [in] the back.”

Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, said the decision not to renew the deal has already caused an increase in global food prices, which could hurt parts of Africa.

“Our very hope is that as the African leaders go to the Russia-Africa Summit, they can actually be able to have a much more sound conversation about the Black Sea grain deal — amongst other things that of course will be negotiated there — so that this can go back on the table and the exports can go,” Sihlobo said.

Earlier this week Putin himself sought to reassure African countries, relations with which have become increasingly important given Russia’s isolation by the West since its invasion of Ukraine last year. Many African countries have been hesitant to take sides in the conflict.

In a statement, Putin promised that Russia could replace the Ukrainian grain itself “both on a commercial and free-of-charge basis.”

Cameron Hudson, an analyst with the Center for Strategic and International Studies in Washington, said Putin is likely to use the St. Petersburg meeting, which starts Thursday, to appeal to African leaders’ direct needs.

“Obviously he’s trying to win back some friends from his exit from the grain deal,” Hudson said, “and also show that he has the power to kind of cut bilateral deals with African countries that put them frankly more in his need, which is exactly the position that he wants to be in.”

Analysts have noted that Russia has an outsized influence in Africa comparative to its trade and investment clout. This is sometimes because of the former Soviet Union’s support for the region’s 20th century liberation movements, and because of shared anti-Western sentiment.

At the first Russia-Africa Summit in 2019, Putin vowed to double trade with Africa to $40 billion over five years. Instead, it has been sitting at about $18 billion a year, compared with China’s record $282 billion worth of trade with Africa.

Despite its relatively minor economic clout, Moscow is keen to use the summit to project political heft, said Denys Reva, a researcher for the Institute of Security Studies in South Africa.

“Despite the fact that the level of investment has been low, the level of trade has been low, Russia has very cleverly learned, or realized, some of the problems that exist between Western states, the European Union and the U.S., and Africa, and has positioned itself, in a way, to separate itself from these traditional partners,” Reva said.

While the summit aims to position Russia as a global player, Russian media reported that fewer than half of the African countries attending are sending their heads of state.

Analysts also said the issue of the Wagner Group — the mercenary group that recently attempted a mutiny in Russia and which has operations in several African nations — will likely be raised on the summit’s sidelines.
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«Ми усунули митні бар’єри для завезення запчастин і комплектацій»
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Japan imposed export controls on advanced microchip technologies this week, mirroring recent moves by the United States and the Netherlands. As Henry Ridgwell reports from Tokyo, the controls are widely seen as targeting China
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Snaking lines for fuel, empty shelves in food stores, angry street protests — those were common scenes in Sri Lanka last year when the country became bankrupt.

Now, the long waits outside fuel stations have gone, markets are again stacked with food and the streets of the capital Colombo are calm.

A year after Sri Lanka’s economic collapse brought a new government, the island nation is past the worst of the crisis. But the country’s economic woes are far from over.

For many the dilemma is that while food is now available, it is unaffordable.

Costs of all basics — food, fuel, electricity, and medicines have spiraled, taking a huge toll on millions in lower income groups.

“What we see now is the most vulnerable communities struggling and still facing hardships in getting three meals a day. The socio-economic indices indicate that still the crisis is far from over and it’s a long path to recovery,” according to Bhavani Fonseka at the Center for Policy Alternatives in Colombo.

Among the scores of community kitchens that sprang up across the country last year to address the hunger crisis were those run by The Voice for Voiceless Foundation in Colombo. It continues to provide about 600 meals a day.

“There is still a huge need,” the foundation’s national director, Moses Akash, told VOA. “What we find is that with prices of electricity and other utilities having risen hugely, people have lesser money left to buy food.”

The organization has cut back its operations due to a shortage of funds and spiraling food prices, said Akash. “We now focus on giving meals to children because many were facing malnourishment as families were unable to afford items such as milk or eggs.”

The World Food Program says the crisis that the country faced last year has been alleviated but has not gone away. According to the WFP, about 17% now face food insecurity, compared with about one quarter of the population last year. That adds up to about four million people in the nation of 22 million.

“The most vulnerable cross section in terms of food insecurity are people relying on social protection assistance, unskilled workers relying on daily wages and households with lower levels of education,” Abdur Rahim Siddiqui, Country Director at the World Food Program in Sri Lanka told VOA.

However, there are signs of revival in some sectors. Tourists have begun returning to the country’s pristine beaches, bringing back jobs in a crucial industry that has long been the backbone of Sri Lanka’s economy.

On a recent visit to India, President Ranil Wickremesinghe, who took charge after protestors stormed his predecessor’s home and office a year ago, expressed optimism about his country’s economic revival.

“I have set Sri Lanka firmly on a path of economic reform and Sri Lanka is already witnessing the stabilizing outcomes of these measures and the revival of confidence both within and outside the country,” Wickremesinghe said during a recent visit to New Delhi.

Sri Lanka turned the corner after it secured a bailout package of about $ 3 billion from the International Monetary Fund in March. But while the IMF loan extended a lifeline and removed Sri Lanka’s “bankrupt” tag, it came with tough conditions that require imposing higher taxes and steep cuts to government spending and welfare programs.

The next task for the country is to restructure both its domestic and foreign debt on which it defaulted last year. With more stringent reforms still to come, there is uncertainty over what lies ahead.

“How does it impact state-owned enterprises for example? Would people lose their jobs? There are a lot of conversations now as to what the restructuring will mean for people’s pensions and savings,” said Fonseka.

Analysts say while the reforms will lead to more pain and fuel popular resentment, Sri Lanka will have to stay the course.

“The worst is seemingly over but it can come back if the present trends don’t continue, if the government of the day does not plan and execute the policies it has outlined in a judicious manner,” according to Harsh Pant, Observer Research Foundation in New Delhi.

That means that for millions, the tentative signs of economic recovery will bring little cheer in the foreseeable future.

The economic crisis was blamed on the COVID-19 pandemic and economic mismanagement by former President Gotabaya Rajapaksa’s government.

Many are also disappointed that demands for political change and accountability have failed to materialize in the country that last year witnessed its biggest street protests in decades, with anger directed at the former president and his family over allegations of corruption and mismanagement. The Rajapaksas had controlled the affairs of the country for the most part of the last two decades.

The protests ended after Rajapaksa resigned. The new president Wickremesinghe took a tough approach to the demonstrations and there is still simmering anger in the country. Many protestors were disappointed when he came to the helm.

Some question whether the practices that led to the crisis have changed.

“The demand was for a system change that would ensure greater transparency and political accountability. But has there really been change or is the new administration a new avatar of the old?” said Fonseka.

She adds that there are still many questions about accountability regarding economic crimes and corruption.
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WASHINGTON — The International Monetary Fund on Tuesday raised its 2023 global growth estimates slightly given resilient economic activity in the first quarter, but warned that persistent challenges were dampening the medium-term outlook.

The IMF in its latest World Economic Outlook said inflation was coming down and acute stress in the banking sector had receded, but the balance of risks facing the global economy remained tilted to the downside and credit was tight.

The global lender said it now projected global real GDP growth of 3.0% in 2023, up 0.2 percentage point from its April forecast, but it left its outlook for 2024 unchanged, also at 3.0%.

The 2023-2024 growth forecast remains weak by historical standards, well below the annual average of 3.8% seen in 2000-2019, largely due to weaker manufacturing in advanced economies, and it could stay at that level for years.

“We’re on track, but we’re not out of the woods,” IMF chief economist Pierre-Olivier Gourinchas told Reuters in an interview, noting that the upgrade was driven largely by first-quarter results. “What we are seeing when we look five years out is actually close to 3.0%, maybe a little bit above 3.0%. This is a significant slowdown compared to what we had pre-COVID.”

This was also related to the aging of the global population, especially in countries such as China, Germany and Japan, he said. New technologies could boost productivity in coming years, but that in turn could be disruptive to labor markets.

Debt distress could spread

The outlook is “broadly stable” in emerging market and developing economies for 2023-2024, with growth of 4.0% expected in 2023 and 4.1% in 2024, the IMF said. But it noted that credit availability is tight and that there was a risk that debt distress could spread to a wider group of economies.

The world is in a better place now, the IMF said, noting the World Health Organization’s decision to end the global health emergency surrounding COVID-19, and with shipping costs and delivery times now back to pre-pandemic levels.

“But forces that hindered growth in 2022 persist,” the IMF said, citing still-high inflation that was eroding household buying power, higher interest rates that have raised the cost of borrowing and tighter access to credit as a result of the banking strains that emerged in March.

“International trade and indicators of demand and production in manufacturing all point to further weakness,” the IMF said, noting that excess savings built up during the pandemic are declining in advanced economies, especially in the United States, implying “a slimmer buffer to protect against shocks.”

While immediate concerns about the health of the banking sector — which were more acute in April — had subsided, financial sector turbulence could resume as markets adjust to further tightening by central banks, it said.

The impact of higher interest rates was especially evident in poorer countries, driving debt costs higher and limiting room for priority investments. As a result, output losses compared with pre-pandemic forecasts remain large, especially for the world’s poorest nations, the IMF said.

The IMF forecast that global headline inflation would fall to 6.8% in 2023 from 8.7% in 2022, dropping to 5.2% in 2024, but core inflation would decline more gradually, reaching 6.0% in 2023 from 6.5% in 2022 and easing to 4.7% in 2024.

Gourinchas told Reuters it could take until the end of 2024 or early 2025 until inflation came down to central bankers’ targets and the current cycle of monetary tightening would end.

The IMF warned that inflation could rise if the war in Ukraine intensified, citing concern about Russia’s withdrawal from the Black Sea grain initiative, or if more extreme temperature increases caused by the El Nino weather pattern pushed up commodity prices. That in turn could trigger further rate hikes.

The IMF said world trade growth is declining and will reach just 2.0% in 2023 before rising to 3.7% in 2024, but both growth rates are well below the 5.2% clocked in 2022.

The IMF raised its outlook for the United States, the world’s largest economy, forecasting growth of 1.8% in 2023 versus 1.6% in April as labor markets remained strong.

It left its forecast for growth in China, the world’s second-largest economy, unchanged at 5.2% in 2023 and 4.5% in 2024. But it warned that China’s recovery was underperforming, and a deeper contraction in the real estate sector remained a risk.

The fund cut its outlook for Germany, now forecast to contract 0.3% in 2023 versus a 0.1% contraction in April, but sharply upgraded its forecast for the U.K., now expected to grow 0.4% versus a 0.3% contraction forecast in April.

Euro zone countries are expected to grow 0.9% in 2023 and 1.5% in 2024, both up 0.1 percentage point from April.

Japan’s growth was also revised upward by 0.1 percentage point to 1.4% in 2023, but the IMF left its outlook for 2024 unchanged at 1.0%.

Inflation remains a focus

The rise in central bank policy rates to fight inflation continues to weigh on economic activity, the IMF said, adding that the U.S. Federal Reserve and the Bank of England were expected to raise rates by more than assumed in April, before cutting rates next year.

It said central banks should remain focused on fighting inflation, strengthening financial supervision and risk monitoring. If further strains appeared, countries should provide liquidity quickly, it said.

The fund also advised countries to build fiscal buffers to gird for further shocks and ensure support for the most vulnerable. 

“We have to be very vigilant on the health of the financial sector … because we could have something that basically seizes up very quickly,” Gourinchas said. “There is always a risk that if financial conditions tighten, that can have a disproportionate effect on emerging market and developing economies.”

The IMF said unfavorable inflation data could trigger a sudden rise in market expectations regarding interest rates, which could further tighten financial conditions, putting stress on banks and nonbank institutions — especially those exposed to commercial real estate.

“Contagion effects are possible, and a flight to safety, with an attendant appreciation of reserve currencies, would trigger negative ripple effects for global trade and growth,” the IMF said.

Fragmentation of the global economy given the war in Ukraine and other geopolitical tensions remained another key risk, especially for developing economies, Gourinchas said. This could lead to more restrictions on trade, especially in strategic goods such as critical minerals, cross-border movements of capital, technology and workers, and international payments. 
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