Sri Lanka will step up appeals to China and India

2021 ◽  
Keyword(s):  
Sri Lanka ◽  
Central Bank ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Economic Hardship ◽  
Content Type ◽  
China And India ◽  
The Imf

Significance Sri Lanka’s foreign exchange (forex) reserves fell to USD1.6bn at end-November, enough to finance only about one month’s imports. Colombo has in recent years relied on macroeconomic support from key partners Beijing and Delhi, but its relations with these players have come under some strain recently. Impacts Colombo will only turn to the IMF if its outreach to friendly countries fails to yield sufficiently favourable results. The central bank will strongly consider raising interest rates, having kept them steady at two policy meetings since hikes in August. Worsening economic hardship could prompt an increase in anti-government protests.

Bangladesh economy will ride out pandemic crisis

2021 ◽  
Keyword(s):  
Foreign Direct Investment ◽  
Sri Lanka ◽  
Central Bank ◽  
Foreign Exchange ◽  
Direct Investment ◽  
Low Risk ◽  
Content Type ◽  
Speed Up ◽  
The Government ◽  
Roll Out

Significance In late May, it approved a three-month, USD200mn currency swap with Sri Lanka to help ease Colombo’s foreign exchange woes. The move underscores its growing economic strength, even as it battles the fallout of the COVID-19 pandemic. Impacts The government will step up efforts to procure more COVID-19 jabs as it tries to speed up the vaccine roll-out. Bangladesh will attract more foreign direct investment, especially from Chinese- and Japanese-based multinationals. The central bank will continue to invest reserve assets in low-risk instruments overseas.

Turkey may be edging towards capital controls

2019 ◽  
Keyword(s):  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Credit Rating ◽  
Capital Controls ◽  
Short Term ◽  
Content Type ◽  
Rating Agencies ◽  
Equity Funds

Significance A score below 100 indicates a pessimistic outlook -- the index has not exceeded 100 since March 2018. Increasingly frequent and heavy-handed interventions by the Turkish Central Bank (TCMB) to help shore up the lira have fuelled concerns in financial markets that Turkey is edging closer to full capital controls. Markets and credit rating agencies are particularly focused on Turkey’s dangerously low level of net foreign-exchange (FX) reserves, once short-term dollar borrowing is excluded. Impacts Renewed escalation of the trade conflict and continued dollar strength are turning inflows into EM bond and equity funds into outflows. Market expectations of a cut in US interest rates by the year-end will help mitigate recent marked declines in EM asset prices. The rise in the price of Brent crude since late 2018 will put pressure on major energy importers such as Turkey, fuelling inflation.

Australian central bank holds rate as growth slips

2021 ◽  
Keyword(s):  
Economic Growth ◽  
Central Bank ◽  
Interest Rates ◽  
Labour Markets ◽  
Content Type ◽  
Commercial Lenders ◽  
The Government ◽  
Roll Out ◽  
Growth Forecasts

Significance The RBA has cut its growth forecasts amid rising job losses, weakening demand and increasing signs that the latest COVID-19 lockdowns will continue to slow the economy until the pace of the vaccine roll-out programme can be increased. Impacts Although the RBA is independent, the government will hope it keeps rates low ahead of the elections due next year. Commercial lenders could raise interest rates independently of the RBA if inflation remains high. Wage pressures will re-emerge as labour markets tighten but may be mitigated by the extent of underemployment. Economic growth will be uneven across the country in coming months as pandemic-related restrictions vary by location.

Central bank transparency, inflation targeting and monetary policy: a panel data approach

2018 ◽  
Vol 45 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Gabriel Caldas Montes ◽  
Cristiane Gea
Keyword(s):  
Developing Countries ◽  
Monetary Policy ◽  
Panel Data ◽  
Interest Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Inflation Targeting ◽  
Content Type ◽  
Central Bank Transparency ◽  
Policy Interest

Purpose The evidence concerning the effects of the inflation targeting (IT) regime as well as greater central bank transparency on monetary policy interest rates is not conclusive, and the following questions remain open. What is the effect of adopting IT on both the level and volatility of monetary policy interest rate? Does central bank transparency affect the level of the monetary policy interest rate and its volatility? Are these effects greater in developing countries? The purpose of this paper is to contribute to the literature by answering these questions. Hence, the paper analyzes the effects of IT and central bank transparency on monetary policy. Design/methodology/approach The analysis uses a sample of 48 countries (31 developing) comprising the period between 1998 and 2014. Based on panel data methodology, estimates are made for the full sample, and then for the sample of developing countries. Findings Countries that adopt the IT regime tend to have lower levels of monetary policy interest rates, as well as lower interest rate volatility. The effect of adopting IT on both the level and volatility of the basic interest rate is smaller in developing countries. Besides, countries with more transparent central banks have lower levels of monetary policy interest rates, as well as lower interest rate volatility. In turn, the effect of central bank transparency on both the level and volatility of the basic interest rate is greater in developing countries. Practical implications The study brings important practical implications regarding the influence of both the IT regime and central bank transparency on monetary policy. Originality/value Studies have sought to analyze whether IT and central bank transparency are effective to control inflation. However, few studies analyze the influence of IT and central bank transparency on interest rates. This study differs from the few existing studies since: the analysis is done not only for the effect of transparency on the level of the monetary policy interest rate, but also on its volatility; the central bank transparency index that is used has never been utilized in this sort of analysis; and the study uses panel data methodology, and compares the results between different samples.

Sri Lanka will try to manage debt without IMF help

2021 ◽  
Keyword(s):  
Sri Lanka ◽  
Foreign Exchange ◽  
Debt Crisis ◽  
Content Type ◽  
Special Drawing ◽  
External Stakeholders ◽  
Capital Outflows ◽  
The Government ◽  
Special Drawing Rights ◽  
India And China

Significance The government nevertheless remains under pressure from domestic critics and external stakeholders because of dwindling foreign exchange (forex) reserves and a growing debt crisis. Sri Lanka approached the IMF in early 2020 for macroeconomic support under the Fund’s Rapid Financing Instrument, but negotiations were shelved. Impacts The government will face increasing domestic pushback over its efforts to curb capital outflows. Although India and China will remain Sri Lanka’s most important partners, ties with Bangladesh will grow markedly. Sri Lanka should be able to access an allocation of IMF special drawing rights later this month.

Ultra-loose monetary policy will soon run its course

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Markets ◽  
Interest Rates ◽  
Mutual Funds ◽  
Investor Sentiment ◽  
Central Banks ◽  
Target Range ◽  
Content Type ◽  
Equity Mutual Funds

Significance Expectations that the Fed will refrain from hiking its benchmark rates from its target range of 0.25-0.5% and that the Japanese central bank will provide further stimulus are suppressing volatility in financial markets and fuelling demand for risk assets. However, evidence that "overburdened" monetary policy is losing its efficacy triggered a sell-off in bonds and equities on September 9, increasing the scope for sharper price falls as investors worry that central banks have run out of ammunition. Impacts Services expanded in August at their slowest pace since 2010, making it less likely that the Fed will raise interest rates this month. EM bond and equity mutual funds have enjoyed a surge in inflows since the Brexit vote as yield-hungry investors pour money into risk assets Oil, a key determinant of investor sentiment, will stay below 50 dollars/barrel unless major producers agree measures to stabilise prices.

Ghana's IMF bailout to persist despite souring ties

2016 ◽  
Keyword(s):  
Central Bank ◽  
Budget Deficit ◽  
Credit Rating ◽  
Gdp Growth ◽  
Content Type ◽  
Bank Financing ◽  
Electricity Crisis ◽  
Manufacturing Activity ◽  
The Government ◽  
The Imf

Significance Earlier this month, the government passed a bill allowing for central bank financing of the budget deficit, contravening a core requirement in its agreement with the Fund. Earlier breaches led to the fourth tranche of the bailout (worth 114 million dollars) being withheld. Impacts Other donors will withhold aid disbursements until the impasse between Accra and the IMF is resolved. The electricity crisis will continue to undermine manufacturing activity, contributing to disappointing GDP growth. Ivory Coast's pro-business reforms mean it could attract investors deterred by Ghana's economic woes. Prolonged tensions with the IMF coupled with a deterioration its Ghana's fiscal metrics may drive a credit rating downgrade.

Czech monetary divergence is set to end

2017 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Central Europe ◽  
Content Type ◽  
Core Inflation ◽  
Capital Outflows ◽  
Wait And See

Significance Hampl was interviewed on August 29, after the CNB announced its first rate rise in more than nine years on August 3. He said faster growth made debating further monetary policy tightening "relevant". A gradual period of normalisation in monetary policy across Central Europe (CE) seems to be under way. Impacts The CNB could raise rates sooner than expected if there is an unexpected rise in capital outflows. In Poland, weak core inflation is expected to encourage the central bank to retain its 'wait and see' stance regarding future rate rises. Hungary's central bank may be the last in the region to hike interest rates; no change is expected before mid-2018.

Politics will not mar Paraguay's economic outlook

2017 ◽  
Keyword(s):  
Central Bank ◽  
World Bank ◽  
Content Type ◽  
Agricultural Exports ◽  
Tax Revenues ◽  
Infrastructure Investments ◽  
Economic Outlook ◽  
The Imf

Significance The Central Bank has revised upwards its 2017 growth forecast from 3.7% to 4.2%. Forecasts by the IMF and World Bank remain lower at around 3.3% and 3.6% respectively, based primarily on an expectation of low growth in Brazil. Impacts Agricultural exports will help sustain growth this year. Although debt is manageable, there are few prospects for raising low tax revenues. Investigations into the awarding of contracts are likely to put infrastructure investments on hold.

Pandemic will take heavy economic toll in Colombia

2020 ◽  
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Economic Impacts ◽  
Fiscal Deficit ◽  
Slow Recovery ◽  
Content Type ◽  
Fiscal Incentives ◽  
Second Year ◽  
The Government

Significance This has triggered a series of economic setbacks. The economy showed modest growth in the first quarter of 2020 before plummeting 15.7% in the second, year-on-year. Various industries and sectors have all but ground to a halt. Unemployment reached 20.3% in the second quarter. Impacts Fiscal incentives implemented by the government to mitigate the pandemic’s economic impacts will widen Colombia’s fiscal deficit. Interest rates will probably drop further as the Central Bank tries to add liquidity into the economy. Fiscal pressures imply a slow recovery for the economy in coming years, rolling back two decades of social improvements.

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