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Tuesday, 11 October 2022

The World Bank and IMF don’t have bottomless bailout capacity

Are the IMF and World Bank stretched too thin? Economists are concerned that world’s biggest lenders are stretching themselves too thin bailing out emerging market economies, leaving them with less space to maneuver should future crises arise, the Wall Street Journal reports. The IMF had a record USD 135 bn of loans outstanding as of the end of September — up 45% from 2019 — while the World Bank’s lending has risen 53% since 2019 to a record USD 104 bn in September. Since the pandemic, the two lenders have also shifted their focus from short-term loans with strings like spending cuts and policy overhauls attached to looser, longer-term emergency loans.

Economists want them to tighten their pockets: “Now with a potential of a global recession and many countries having bouts of payment problems, they need to go back to their original function,” said a former World Bank official. “They are the lender of last resort.”

MEANWHILE- BoE doubles down on bond market support amid crisis: The Bank of England (BoE) introduced a handful of measures to relieve pressure on pension funds and alleviate worries about its emergency purchase program expiring at the end of this week, according to a BoE statement. The bank brought in the two-week emergency support at the end of September after Prime Minister Liz Truss and her numbers guy Kwasi Kwarteng set off a historic fire sale of UK assets and sent the gilts market into cardiac arrest with their unconventional mini-budget, which Included GBP 45 bn in unfunded tax cuts. The government has since U-turned on much of the budget. We broke down the gilts crisis in a nifty explainer here.

Also worth knowing about this morning:

  • Nissan could invest in its French partner Renault’s future electric vehicle unit, as part of ongoing discussions between the two companies about the future of their alliance. (Statement)
  • Shares of Chinese chipmakers suffered sagged and the Nasdaq saw its lowest close since July 2020 as Washington’s new export restrictions. (Financial Times | Wall Street Journal)

Up

EGX30

9,949

+0.1% (YTD: -16.7%)

None

USD (CBE)

Buy 19.60

Sell 19.71

None

USD at CIB

Buy 19.63

Sell 19.69

None

Interest rates CBE

11.25% deposit

12.25% lending

Down

Tadawul

11,530

-0.3% (YTD: +2.2%)

Down

ADX

9,831

-0.8% (YTD: +15.8%)

Down

DFM

3,339

-1.0% (YTD: +4.5%)

Down

S&P 500

3,612

-0.8% (YTD: -24.2%)

Down

FTSE 100

6,959

-0.5% (YTD: -5.8%)

Down

Euro Stoxx 50

3,357

-0.6% (YTD: -21.9%)

Down

Brent crude

USD 96.19

-1.8%

Up

Natural gas (Nymex)

USD 6.57

+2.0%

Up

Gold

USD 1,676.50

+0.1%

Down

BTC

USD 19,194.86

-1.1% (YTD: -58.6%)

THE CLOSING BELL-

The EGX30 rose 0.1% at yesterday’s close on turnover of EGP 1.15 bn (15.9% above the 90-day average). Foreign investors were net sellers. The index is down 16.7% YTD.

In the green: Sidi Kerir Petrochemicals (+3.0%), Housing and Development Bank (+2.6%) and Alexandria Containers and Cargo Handling (+1.9%).

In the red: Qalaa Holdings (-2.1%), Orascom Construction (-1.6%) and Ibnsina Pharma (-1.4%).

It’s a mixed picture for Asian markets in early trading this morning, with the Japanese and South Korean indices both trading lower as they reopen following a Monday bank holiday. Futures suggest European indices will largely open in the red, while Wall Street stocks could open in the green as they rebound from yesterday’s losses.

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