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No consensus among finance chiefs at IMF talks due to Ukraine war

The International Monetary Fund ended its semi-annual gathering of global finance chiefs without a consensus for the first time in its history on Thursday, a sign of the strains created by Russia’s invasion of Ukraine.
The war and the raft of sanctions on Moscow have endangered the global recovery from the COVID-19 pandemic and threatened global cooperation.
“This meeting has obviously not been business as usual,” Spain’s Economy Minister Nadia Calvino told the reporters at the conclusion of the IMF spring meeting.
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“Russia’s war against Ukraine has made it impossible to come to a consensus on a communique,” she said.
The Washington-based crisis lender, created after World War II to help in the reconstruction of Europe, relies on consensus among ministers at these meetings, although the day-to-day operations rely on the IMF board, where the United States wields a deciding vote.
Instead of the traditional communique, Calvino, who chairs the fund’s steering committee, the International Monetary and Financial Committee, issued a statement saying she had the support of the “overwhelming majority” of the 189 members.
In addition, there was “virtual unanimity on the substantive issues on the table,” she said.
The Russian attack on its neighbor has caused food and energy prices to soar worldwide, fueling already-rising inflation, and causing the IMF to slash its growth forecast for the global economy to 3.6 percent this year.
It also raises fear of a food and debt crisis amid reduced grain supplies, and rising interest rates to combat inflation.
Finance ministers and central bankers “have made an overwhelming call to stop the war,” and voiced concerns about the economic impact, “which goes beyond neighboring countries and has a global scope,” Calvino said.
“If there has been a time for multilateralism it is now and against this truly challenging background, we need the international community to come together, stand strong and demonstrate our full commitment to cooperation.”
With many poor nations facing debt distress, officials this week have lamented the slow pace of implementation of the G20 Common Framework created during the pandemic to help heavily indebted countries find a path to restructure their obligations.
A key hurdle has been the lack of information on the size of debt owed to China, and only three countries, Chad, Ethiopia and Zambia, have even requested assistance under the framework.
But IMF Managing Director Kristalina Georgieva said China made “a very concrete commitment” to join the creditors committee for Zambia and “to work constructively” on the debt resolution process.
Earlier Thursday, US Treasury Secretary Janet Yellen called on Beijing to do more to advance the process of helping indebted countries.
“I have been very disappointed by the failure of that framework to deliver relief for more countries. And I’ve explicitly called out China,” Yellen told reporters.
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Ukraine army denies claims Lysychansk is ‘encircled’

The Ukrainian army on Saturday rejected claims that Moscow-backed separatists and Russian forces had surrounded the key eastern city of Lysychansk, but said heavy fighting was ongoing on its edges.
“Fighting rages around Lysychansk. (But) luckily the city has not been encircled and is under control of the Ukrainian army,” Ruslan Muzytchuk, a spokesman for the Ukrainian National Guard, said on Ukrainian television, after a separatist spokesman made the allegations earlier in the day.
Capturing the city would allow the Russians to push deeper into the wider eastern region of the Donbas, which has become the focus of their offensive since failing to capture Kyiv after launching their military operation in Ukraine in late February.
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Across the Donets river from Lysychansk, the Russians seized the neighboring city Sievierodonetsk last week.
Andrei Marotchko, a spokesman for the separatist forces, earlier told the TASS news agency: “Today the Luhansk popular militia and Russian forces occupied the last strategic heights, which allows us to confirm that Lysychansk is completely encircled.”
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China adds $45 billion in stimulus to pay for infrastructure projects

China announced another stimulus measure to finance infrastructure projects, part of its push to drive investment and increase employment in the second half of this year as the economy starts to recover from the effects of Covid lockdowns.

The government will raise 300 billion yuan ($44.8 billion) to finance infrastructure projects by selling financial bonds and other methods, the State Council chaired by Premier Li Keqiang decided Wednesday, according to a report by the official Xinhua News Agency.

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Those bonds are usually sold by policy banks. The money will be used to replenish the capital of major projects such as new types of infrastructure, the statement on Thursday said.

These types of financial tools can help expand effective investment, drive employment and facilitate consumption and allow China to stick to its stance of “not flooding the economy with stimulus or over-printing money,” the meeting concluded, adding that this will help banks achieve a better match between their loans and deposits and improve the transmission of monetary policy.

The People’s Bank of China will take the lead to support China Development Bank and Agricultural Development Bank of China to raise the funds via financial bonds, according to a late Friday report by Financial News, a newspaper published by the central bank.

The top economic planner will come up with a list of projects for the investment, in collaboration with other agencies and state-owned enterprises, it said.

Infrastructure projects are a key factor in determining how fast the economy can grow in the remaining six months of this year as other sources of growth such as housing and private consumption are still slowing.

President Xi Jinping pledged last month to strive to meet economic targets for the year, although Beijing’s Covid Zero strategy has caused analysts to cut their forecasts for annual growth to levels far below the official goal of around 5.5 percent.

The announcement lifted the share price of heavy equipment makers in the onshore market. SANY Heavy Industry Co. climbed 4.1 percent on Friday, Zoomlion Heavy Industry Science and Technology Co. gained 4.9 percent and Jiangsu Hengli Hydraulic Co. rose 1.9 percent, while the benchmark CSI 300 Index dipped 0.4 percent.

New Stimulus

The new stimulus can in theory leverage as much as 1.2 trillion yuan in credit from the banking sector and capital markets, based on the government requirement that the money should be at least 20 percent of overall investment, according to Nomura Holdings Inc. economists including Lu Ting.

But its impact in reality could be much smaller, and won’t be enough to plug an estimated 6 trillion yuan funding gap that the government has to fill if it wants to carry out its proactive fiscal policy, they wrote in a note Friday.

Local authorities are under huge financial stress this year due to the cost of Covid controls and tax cuts, as well as a slump in land sales that reduced a key source of revenue.

The new money is in addition to the 800 billion yuan the three policy banks were told in June to lend for infrastructure projects. That loan quota has already been allocated to the policy banks, local newspaper the 21st Century Business Herald reported Friday, citing sources it didn’t identify.

China Development Bank was allowed to boost lending by 400 billion yuan, Agricultural Development Bank of China’s quota for new credit was 300 billion yuan and another 100 billion yuan was assigned to the Export-Import Bank of China, the newspaper reported.

The development banks’ main source of funds is issuing bonds or loans from China’s central bank, although it hasn’t been announced where the money to finance these new loans will come from.

The size of the additional bonds is only a fraction of what the policy banks normally issue in a year. The banks sold a gross amount of 5.5 trillion yuan bonds in the interbank market last year, with a monthly average of 460 billion yuan, according to Bloomberg calculation based on Chinabond and Shanghai Clearing House data. Between January and May this year, they issued 2.3 trillion yuan in bonds.

The State Council, which is China’s cabinet, also vowed to implement a batch of investment projects that are aimed at increasing workers’ income and boosting their consumption.

These projects will have to spend more than 30 percent of central government funding on paying workers, up from 15 percent previously.

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UN condemns protesters’ storming of Libya’s parliament

A senior UN official for Libya on Saturday condemned the storming of the parliament’s headquarters by angry demonstrators as part of protests in several cities against the political class and deteriorating economic conditions.
Hundreds of protesters marched in the streets of the capital Tripoli and other Libyan cities on Friday, with many attacking and setting fire to government buildings, including the House of Representatives in the eastern city of Tobruk.
“The people’s right to peacefully protest should be respected and protected but riots and acts of vandalism such as the storming of the House of Representatives headquarters late yesterday in Tobruk are totally unacceptable,” said Stephanie Williams, the UN special adviser on Libya, on Twitter.
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Friday’s protests came a day after the leaders of the parliament and another legislative chamber based in Tripoli failed to reach an agreement on elections during UN-mediated talks in Geneva. The dispute now centers on the eligibility requirements for candidates, according to the UN.
Libya failed to hold elections in December following challenges including legal disputes, controversial presidential hopefuls and the presence of rogue militias and foreign fighters in the country.
The failure to hold the vote was a major below to international efforts to bring peace to the Mediterranean nation. It has opened a new chapter in its long-running political impasse, with two rival governments now claiming power after tentative steps toward unity in the past year.
The protesters, frustrated from years of chaos and division, have called for the removal of the current political class and elections to be held. They also rallied against dire economic conditions in the oil-rich nation, where prices have risen for fuel and bread and power outages are a regular occurrence.
There were fears that militias across the country could quash the protests as they did in 2020 demonstrations when they opened fire on people protesting dire economic conditions.
Sabadell Jose, the European Union envoy in Libya, called on protesters to “avoid any type of violence.” He said Friday’s demonstrations demonstrated that people want “change through elections and their voices should be heard.”
Libya has been wrecked by conflict since a NATO-backed uprising toppled and killed President Muammar Gaddafi in 2011. The country was then for years split between rival administrations in the east and west, each supported by different militias and foreign governments.
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