The IMF has warned Lebanon that its central bank has accumulated losses of as much as $49bn, as divisions between the government and the Banque du Liban threaten to derail vital bailout talks with the multilateral lender, the Financial Times reported. The BDL does not publish profit and loss accounts.
North Africa/Middle East
Fitch Ratings treats some amend and extend (A&E) exercises initiated by stressed corporate borrowers as distressed debt exchanges (DDEs), eventually leading to restricted defaults (RDs), Fitch Ratings reported. Since the coronavirus pandemic began affecting Europe in March 2020, Fitch has classified 11 transactions in its EMEA bond and loan portfolio as DDEs, which will contribute to default rates rising towards 4%-5% by end-2020 from 1% in 2019.
Saudi Arabia’s economy will shrink by 6.8% this year, the International Monetary Fund (IMF) said on Wednesday, a sharper decline than the 2.3% contraction estimated in April, as low oil prices and the coronavirus pandemic hit the kingdom hard, Reuters reported. In an update of its April World Economic Outlook forecast, the IMF said it now expects a deeper global recession in 2020 and a slower recovery in 2021, as the coronavirus crisis intensifies in many emerging and developing countries.
Saudi Binladin Group failed to pay thousands of employees as the construction giant reels under the impact of coronavirus and restructures about $15 billion of debt, Bloomberg News reported. The conglomerate missed some salary payments in April and May, according to people with knowledge of the matter. It’s not clear yet whether the company, which employs about 100,000 staff, will be able to pay those employees in June, the people said, asking not to be identified due to the sensitivity of the matter.
The International Monetary Fund remains in discussions with Lebanon about possible financing arrangements, an IMF spokesman said on Thursday, adding that it was premature to discuss the scope of any potential program, Reuters reported. Spokesman Gerry Rice declined to give any details on reforms the Fund would require before it would authorize a program, but said the Lebanese government needed to implement comprehensive, equitable reforms in many areas. He said Lebanon also needed to reach a common understanding about the source and size of the financial losses it faces.
With countries across Africa shedding long-held taboos to seek International Monetary Fund help, Algeria is a rare holdout, Bloomberg News reported. It may need a quick recovery in oil prices or Chinese backing to stay that way. On a continent where a checkered experiences with the IMF or distaste for foreign interference has meant trepidation toward the lender, the economic havoc wreaked by the coronavirus is sparking some sudden turnarounds.
Lebanon’s tax revenues dropped 12.5% during the first quarter of 2020 compared to a year earlier, ministry of finance data showed on Thursday, as a bruising financial crisis took its toll, Reuters reported. Lebanon has seen its currency plunge in value and unemployment soar since anti-government protests erupted last October. It defaulted on its sovereign debt before entering talks with the International Monetary Fund last month. The finance ministry data is the first to capture a full quarter since the protests started.
Saudi Arabia unveiled a $13.3 billion stimulus package to protect banks against an expected drop in profits and rise in bad loans as they confront the double whammy of the coronavirus shock and lower oil prices, Bloomberg News reported. The move by the central bank, the Saudi Arabian Monetary Authority, will help lenders amend and restructure loans, without additional fees, and support private sector employment and credit. It follows a 50-billion-riyal ($13.3 billion) program in March to help banks provide loans to businesses so companies didn’t have to cut jobs.
Emerging market investors are no strangers to sovereign debt crises, but few have been as perilous as the one facing Lebanon given a toxic combination of financial and political weaknesses and no obvious economic platform on which to build a recovery, Reuters reported. Since defaulting for the first time on its foreign currency debt in March, Lebanon has formed a rescue plan and started negotiations with the International Monetary Fund on $10 billion of aid, both moves that would normally be read as positive for a country mired in debt.
Joint administrators for Dubai-based NMC Health said on Thursday that the most likely exit option for the company was either dissolution or liquidation, Reuters reported. However, administrators from consulting firm Alvarez and Marsal Europe said it would not be possible to conclude the ultimate outcome of the process until all investigations into the company have progressed and the liability position is ascertained. NMC Health is the largest private healthcare provider in the UAE but came under scrutiny late last year when U.S.-based short-seller Muddy Waters criticised its financial state