Tunisian political chaos threatens IMF deal

Tunisian political chaos threatens IMF deal
Tunisia could face the fate of Lebanon, where the currency has plummeted and savings have been wiped out.
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Updated 27 May 2021

Tunisian political chaos threatens IMF deal

Tunisian political chaos threatens IMF deal
  • Power struggle between president, PM, parliament
  • Pandemic sends national debt to 91% of GDP

TUNIS: Tunisian politicians and officials warn of an economic collapse if the government cannot agree a new International Monetary Fund (IMF) loan this summer, but political paralysis could scotch that effort.
Tunisians are used to last-ditch financial talks that pit the demands of foreign lenders against public opinion, but this time a power struggle between the president, prime minister and parliament has added new complications.
“The political situation is blocked in Tunisia,” said former prime minister Youssef Chahed. In an interview with Reuters, he said “there is no serious debate” in the political class about fixing the economy.
After the COVID-19 pandemic cut output by 8.8 percent last year and sent the national debt to 91 percent of gross domestic product (GDP), the stakes are high and urgent.
Central Bank Governor Marouan Abassi told parliament last week that if the government tried to use the bank to finance the deficit instead of agreeing an IMF deal, inflation would hit three digits in a “Venezuelan scenario” .
Former finance minister Hakim Hamouda told Reuters the crisis “threatens to bankrupt the state” and former reform minister Taoufik Rajhi, who negotiated an earlier IMF loan for Tunisia, called the talks “a last chance to avoid imminent collapse.”
Both warned that Tunisia could face the fate of Lebanon, where the currency has plummeted and savings have been wiped out, leading to social unrest.
An IMF program may unlock more financial support to help prop up the lone democratic success story of the Arab Spring — and an important partner for Europe on security and migration.
Tunisia’s 2021 budget forecast borrowing needs at $7.2 billion, including about $5 billion in foreign loans. It put debt repayments at $5.8 billion including $1 billion due in July and August.
The IMF talks are expected to last through the summer. Prime Minister Hichem Mechichi has told Reuters he wants $4 billion, though few people think any sum higher than $3 billion is likely.
A bilateral loan may be needed to meet the summer debt obligations. Tunisian politicians say privately that Qatar or Libya may provide money.

CREDIBLE REFORMS
Diplomats say international goodwill for Tunisia may buy leeway in talks. But they are also frustrated at what they see as chronic misspending and the IMF wants Tunisia to offer credible reforms.
Chahed said foreign support, especially in the US and France, boosted the chances of a deal but only if Tunisia could commit to change. “We need to quickly take advantage of this context and immediately present a detailed plan,” he said.
But the chief reforms — subsidy cuts, restructuring state-owned companies and reducing the public sector wage bill — are opposed by the UGTT union and some political parties who say Tunisians are sick of seemingly endless sacrifices.
Public discontent showed in the 2019 elections with the rejection of established politicians, and more recently in January protests that could foreshadow the response to further economic woes.
Such internal divisions will make it hard for the government to assure the fund and other foreign lenders that it can implement any reforms it promises.
When elements of its proposal to the IMF were leaked this month, the UGTT said it had not been aware of the details and rejected them — contradicting previous government statements that they had struck an agreement on reform.
An agreement must be approved by the deeply fragmented parliament, where Mechichi’s government is supported by a narrow majority, but in which no party has more than a quarter of seats.
It would also have to be signed by President Kais Saied, who is at odds with both Mechichi and the parliament speaker. He has blocked a proposed reshuffle and rejected the assembly’s efforts to appoint judges to the Constitutional Court.
Disputes inside parliament, and between it and Saied, have already delayed efforts to fix the fiscal problem. Last year Tunisia had three separate governments so was unable to start talks.
“If we had started earlier... we could have had an easier negotiation,” said Chahed, the former PM.


Gold edges lower as US Treasury yields rise

Gold edges lower as US Treasury yields rise
Updated 18 October 2021

Gold edges lower as US Treasury yields rise

Gold edges lower as US Treasury yields rise

BENGALURU: Gold edged lower on Monday as a rise in US Treasury yields dented its appeal, although a risk-off sentiment in wider financial markets limited losses for the metal.

Spot gold was down 0.1 percent at $1,765.14 per ounce by 1:35 p.m. EDT (1735 GMT), while US gold futures settled down 0.2 percent at $1,765.70.

“If yields keep rising, the headwinds will remain significant for gold,” OANDA analyst Craig Erlam said.

“Unless markets start to price in bad news for the economy and stock markets, which may be a rational next step if policymakers insist on tightening even as the recovery remains sluggish and downside risks significant.”

Sentiment in wider financial markets remained weak as economic growth in China slowed, while a relentless surge in oil prices fueled concerns about elevated inflation.

US benchmark 10-year Treasury yields climbed as investors ramped up rate hike bets, while the dollar index held steady.

While gold is seen as an inflation hedge, it also contends with the greenback for safe-haven status. Reduced central bank stimulus and the prospect of interest rate hikes push government bond yields up, weighing on non-yielding bullion.

Other precious metals also dipped, with silver down 0.3 percent at $23.21 per ounce and platinum slipping 1.8 percent to $1,035.29. Palladium shed 3.3 percent to $2,005.07, its lowest in over a week.


New York makes registration mandatory for crypto lending platforms

New York makes registration mandatory for crypto lending platforms
Updated 18 October 2021

New York makes registration mandatory for crypto lending platforms

New York makes registration mandatory for crypto lending platforms
  • State’s attorney general directs unregistered outlets to cease operations

RIYADH: New York has made it mandatory on cyrptocurrency lending platforms to register with the Office of the Attorney General if they wish to operate in the state or offer their products to New Yorkers.

New York Attorney General Letitia James on Monday said these steps are aimed to protect New York investors and markets from exploitation by high-risk virtual currency schemes.

The official also ordered the closure of two cryptocurrency lending platforms in New York and three other platforms were directed to provide information about their business.

“Cryptocurrency platforms must follow the law, just like everyone else,” James said.

The move comes weeks after the attorney general won a court order forcing the closure of cryptocurrency exchange Coinseed.

“My office is responsible for ensuring industry players do not take advantage of unsuspecting investors. We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York,” he said.


Saudi Venture Investment Co. launches initiative to support startups

Saudi Venture Investment Co. launches initiative to support startups
Updated 18 October 2021

Saudi Venture Investment Co. launches initiative to support startups

Saudi Venture Investment Co. launches initiative to support startups

RIYADH: The Saudi Venture Investment Co. has launched the “Investment in Accelerator Funds and Startup Studios" initiative, the Saudi Press Agency reported on Monday.
It is part of the company’s efforts to support startups in the Kingdom in the seed and pre-seed phases.
SVC has investments worth SR1.1 billion ($293.2 million) in 20 funds.
The company has supported around 116 startups since its establishment in 2018 till the end of the third quarter of 2021.
 


Saudi Arabia sees gasoline, diesel demand rise in 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021
Updated 18 October 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021

Saudi Arabia sees gasoline, diesel demand rise in 2021

RIYADH/CAIRO: Average motor and aviation gasoline demand in Saudi Arabia jumped to 470 thousand barrels per day (kbd) in 2021, compared to 455 kbd in 2020, data compiled by Arab News from Jodi revealed.
Calculations made for 2021 were up to August, the year’s latest data point so far.
The data reflects a recovery in gasoline demand as the effects of the pandemic start to taper off. However, the demand is still below the pre-pandemic levels. Average gasoline demand used to cross 500 kbd before 2020 in the Kingdom.
The data for 2021 is incomplete and a 12-month dataset might lead to a different conclusion.
Saudi motor and aviation gasoline demand reached 471 kbd in August, which was a marginal decline from the previous month's 473 kbd. In annual terms, 2021 recorded a 9kbd fall in demand as compared to last year's August, which stood at 480 kbd.
Similarly, the Kingdom’s average diesel demand slightly increased to 497 kbd in 2021, up from 492 kbd in 2020. Nevertheless, it is still below pre-2020 levels. In 2017-19, average diesel demand was above the 520 kbd mark.
Diesel is mainly used by trucks and hence could be roughly used as a gauge for the intensity of goods shipments across the country.
In August, the demand for diesel reached 532 kbd, which was moderately higher than the same month last year by 11 kbd. It was also noticeably greater than the previous month’s demand as it recorded a monthly increase of 41 kbd.


Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap
Updated 18 October 2021

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

Bitcoin rises near 6-month high, as ETF launch date approaches: Market wrap

RIYADH: ProShares is set to launch a Bitcoin futures exchange-traded fund on the New York Stock Exchange on Tuesday, in what would be a first for institutional investors in the US, New York Times reported.

The ETF will provide institutional investors and retail investors exposure to Bitcoin, who cannot legally or do not want direct exposure, through a brokerage account.

“When we have a Bitcoin ETF in the US, billions and billions of dollars will flow into Bitcoin that under no circumstances would have found their way into Bitcoin otherwise,” MicroStrategy CEO Michael Saylor said.

Stablecoins

Asset-backed stablecoins do not pose a systemic risk to the US financial system and should not face a new set of rules, a major cryptocurrency lobby group told US regulators on Monday, as tighter oversight of the fast-growing technology looms.

Stablecoins — digital tokens usually backed by reserves of dollars or assets from gold to other cryptocurrencies — have ballooned during the COVID-19 pandemic.

As a result, the President’s Working Group on Financial Markets — which comprises top US regulators including the Treasury and Federal Reserve — is focusing on them as part of wider efforts to rein in crypto.

The group is widely expected to publish in the coming months a report detailing the risks and opportunities of stablecoins.

Adoption

The Central Bank of Brazil released a report showing that Brazilians have bought more than $4 billion in cryptocurrency imports since the beginning of the year.

The report also shows that Brazilians have consistently earned more than $350 million in cryptocurrencies every month since January.

However, according to some analysts from the central bank, this number is likely to reach twice its value this year.

Brazilians investing in cryptocurrencies abroad are likely to triple the amount invested in American shares, according to Bruno Serra the director of monetary policy of the Central Bank of Brazil.

Crypto regulation

Nasdaq-listed crypto exchange, Coinbase has published its proposal for crypto regulation after more than 75 meetings with stakeholders in government, industry, and academia.

“Today we’re launching our Digital Asset Policy Proposal, which we hope will help chart a course for clear regulation of cryptocurrency and web 3.0 in the US. It’s critical to bring clarity to this space and ensure America remains a financial leader,” Coinbase CEO Brian Armstrong tweeted.

ATMs

Popular BTM Operator, Bitcoin of America, recently announced their newest addition to their Bitcoin ATM machines.

Ethereum is available now for buy and sell at Bitcoin of America ATM locations due to its growing popularity,  it also offers Bitcoin and Litecoin options online and at their BTM locations.

Trading

Bitcoin, the leading cryptocurrency in trading internationally, traded higher on Monday, rising by 1.62 percent to $61,891 at 6 p.m. Riyadh time.

Ether traded at $3,769, down 1.94 percent, according to data from CoinDesk.