Asia

The head of the International Monetary Fund called on private creditors to join the Group of 20 in providing debt relief for the world’s poorest nations, saying that the alternative to suspension and restructuring is defaults, Bloomberg News reported. A debt-service suspension would provide time for restructuring debt on a case-by-case basis in countries where debt sustainability needs to be restored, Managing Director Kristalina Georgieva said in a webcast with the U.S. Chamber of Commerce Tuesday.

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Asian companies are at a higher risk of default in the coming quarters than last year, a Reuters analysis of their credit ratios showed, as the coronavirus pandemic has squeezed revenue and made it harder to refinance debt, Reuters reported. One measure of how easily a company can pay interest on outstanding debt - operating profit to interest ratio - fell to the lowest in 11 years at the end of March. The sample took into account companies worth at least $500 million with available data on Refinitiv.

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A would-be hub of Indo-Pacific commerce and global tourist gem, Sri Lanka was already struggling to deliver on grand visions before the coronavirus crisis struck the world economy, Bloomberg News reported. The next few months may determine its ability to avert a painful debt restructuring. The South Asian nation is locked in talks with the International Monetary Fund for emergency-financing aid, after its second longer-term program with the fund in less than a decade expired last Tuesday.

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Emerging and developing economies will shrink this year for the first time in at least six decades, according to the World Bank, underscoring the mounting economic toll from the coronavirus pandemic as it spreads across the world, the Financial Times reported. The bank’s forecast is that as many as 100m people in the developing world will be tipped into extreme poverty by a projected 2.5 per cent contraction in emerging markets’ gross domestic product, with incomes per capita set to shrink 3.6 per cent globally. The bank defines extreme poverty as an income of less than $1.90 a day.

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China is considering using about 200 billion yuan ($28 billion) in proceeds from government bond sales to help address risks in the banking sector, according to people familiar with the matter, Bloomberg News reported. The debt will be part of the total issuance planned by the central government in 2020, and it’ll be used for measures including re-capitalization for medium- and small-sized lenders, the people said, asking not to be named as they’re not authorized to speak publicly.

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India should prepare to inject capital into state banks and private-sector lenders need to strengthen their balance sheets, to help bolster the economy against the coronavirus pandemic, according to a senior banker, Bloomberg News reported. “I do believe the government will have to be ready to support public sector banks with capital,” said Uday Kotak, the billionaire founder of Kotak Mahindra Bank Ltd.

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A cut in India’s sovereign rating to junk status may threaten the nation’s chances of being added to global bond indexes, steepen the bond yield curve and weaken the rupee, according to UBS Group AG, Bloomberg News reported. The Swiss bank expects S&P Global Ratings and Fitch Ratings to lower their outlook on the rating to negative from stable over the next couple of months, strategists led by Rohit Arora wrote in a June 3 note.

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Shenzhen has drafted China’s first personal bankruptcy laws as the southern city tackles broader economic troubles stemming from the coronavirus outbreak, paving the way for others to follow suit, Reuters reported. The rules are intended to give “honest and unfortunate” debtors the chance to escape the mire of debt and make a comeback, the city government said in an official post on Wednesday.

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Group of Seven finance ministers on Wednesday said a debt relief initiative for the world’s poorest countries could be extended beyond the end of the year to help deal with economic fallout from the coronavirus pandemic, Reuters reported. In a lengthy joint statement, the G7 finance ministers urged all official creditors to join the initiative, called for strengthened reporting of public debt data, and said all creditors - public and private - should make responsible lending decisions in line with debt sustainability guidelines. In an apparent reference to practices reportedly used by China

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China’s central bank is trying to fix one of the domestic economy’s most intractable problems: Poor access to credit by small companies, Bloomberg News reported. Having resisted the kind of large-scale stimulus rolled out by its global peers, the People’s Bank of China instead has been tapping away at small-scale programs designed to improve the ability of small firms to survive the slump.

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