Covid-19 is the illness caused by the corona virus. This illness caused the death of millions around the world. According to World Health Organisation WHO Coronavirus (COVID-19) Dashboard, as of April 2021, there have been globally 133,552,774 confirmed cases of COVID-19, including 2,894,295 deaths. As of April 2021, a total of 669,248,795 vaccine doses have been administered.
Hope for the end of the pandemic started to loom in the horizon with the discovery of vaccines with long term efficiency yet to be proved.
This article sheds light on latest developments in COVID-19 vaccines technologies. These developments are put together and consolidated in a vaccine technology framework proposed by the Union of Arab Banks. This framework embraces COVID-19 vaccines knowledge repository, tracking dashboard, technologies, policy and guidance, production, operation, and impact on GDP, stock market, and various economic sectors. We conclude with recommendations to empower the vaccine technology framework in a global digital economy and GROW, BUILD, and DEPLOY the supporting global digital economy platform.
VACCINES BASICS
The World Health Organization WHO informs that vaccination is a simple, safe, and effective way of protecting people against harmful diseases. It helps the body to build resistance to specific infections and strengthen immunity. Vaccines train the immune system to create antibodies when exposed to a disease. Most vaccines are given by an injection, but some are given orally or sprayed into the nose.
COVID-19 VACCINES DASHBOARD
Gavi, The World Vaccine Alliance, tracked COVID-19 vaccines developed so far. According to Gavi sources, as of January 2021, two hundreds novel coronavirus vaccine candidates are under development, of which 64 are in clinical trials.
Figure 1: The COVID-19 VACCINE RACE (sources: Gavi, The World Vaccine Alliance)
The most widely used vaccines are developed by the following firms:
Pfizer and its German-based partner BioNTech
Moderna
Johnson & Johnson’s and Janssen Pharmaceuticals
AstraZeneca made with a team at Britain’s University of Oxford
Novavax: Maryland-based biotechnology company
Sanofi and GlaxoSmithKline
Sinovac and Sinopharm Chinese company
Sputnik V developed by Russian researchers
COVID-19 VACCINES TECHNOLOGIES
Various technologies were used in covid-19 vaccines innovated to date. These technologies are described in the following table.
Table 1. COVID-19 Vaccines technologies (Table adapted from Source: CNN Reporting; Graphic: Will Mullery, CNN)
MIT technology review, compiled an annual selection of the year 2021 most important technologies changing our lives. COVID-19 vaccine technology, mRNA was on the top of the list of these most important technologies.
VACCINE PRODUCTION
The World Health Organization WHO, The Centre for disease control and prevention CDC, UNICEF, and various healthcare authorities around the world are developing blueprints for various vaccines. These blueprints give the following information about vaccines and can be accessed online:
Overview of vaccine producer and development
Number of vaccines produced so far and supplied to the world
Doses required at various time intervals
How it is taken (oral, or injection, or other)
Storage requirement
Approval by authorities and countries around the world
Trial stage
Side effects
Long term impact
Repeating frequency (how often we need to retake the jab to stay immune)
Uptake and acceptance by various communities
Underlying technology
Contributing manufacturers and labs
Other info
There has been huge efforts from world organization and authorities to encourage people to take vaccine but some people around the world still have fears and concerns about vaccines side effect, impact on the body, short term and long term efficiency, and other concerns in respects of use, production, and appropriate supply.
VACCINE SUPPLY
KPMG analysis reveals that the emergence of COVID-19 vaccines has generated immense excitement, but healthcare systems around the world now face the complex task of securing and distributing supplies and administrating vaccines. Acquiring sufficient quantities is just the start. The vaccines must then be transported safely to multiple destinations, maintained at the right temperature, and tracked at all times to avoid tampering and assure product integrity and delivery.
The World Economic Forum foresees that vaccines to be effective in containing the pandemic, they must be made widely available across the globe in a short space of time, which is putting increased pressure on governments, multilateral organizations, manufacturers, supply chain companies and community organizations.
According to ESRI, the producer of the world’s most powerful mapping & spatial analytics software, and the International Air Transport Association, approximately 25 percent of shipped vaccines are compromised due to poor temperature management.
VACCINE GUIDELINES
The World Health Organisation WHO and UNICEF put the COVID-19 vaccination supply and logistics guidance in February 2021. The guidance provides details about vaccines profiles, supply strategies, COVAX Supply Chain , preplanning, core functions and logistics, deployment, operations, reception of vaccines, storage of vaccines, repackaging vaccines, production or purchase of coolant packs, transportation of vaccine, reverse logistics, managing recalls, management of supply chain information, traceability and vaccines rapid information, securing the supply chain, budgeting and financial management, vaccine store infrastructure and power requirements, health care waste management, human resources training, capacity building, and assessed country preparedness activities.
The COVID-19 Tools Accelerator COVAX facility is co-led by CEPI, Gavi and WHO, alongside key delivery partner UNICEF, and PAHO Revolving Fund America procurement agent for COVAX. COVAX aims to accelerate equitable access to appropriate, safe and efficient vaccines for all countries.
VACCINE POLICIES
According to CNN news, Microsoft, Oracle and other tech giants teamed up to develop Covid-19 vaccine passports. Biggest tech firms and health care organizations have joined together in the Vaccine Credential Initiative that ensures that everyone has access to a secure, digital record of their Covid-19 vaccination. This digital record is like a digital vaccine passport and can be used for everything from airline travel to entering concert venues. The coalition comprises a broad range of health care and tech leaders including Microsoft, Salesforce, Oracle, CERN, Cigna, Epic and the Mayo Clinic, and others.
IMPACT ON STOCK MARKET
According to the Guardian news, Pfizer chief sold $5.6m of shares on day of Covid-19 vaccine announcement.
CNBC news foresee that COVID-19 vaccines are creating market winners and losers and sparking optimism that the pandemic end may be approaching. Analysts see that vaccines are fuelling hope of a return to normal soon.
With wide vaccine rollout, it is expected that some sectors will benefit more than others. Possible winners include the aviation, the retail, the estate, followed by office and hospitality sectors.
IMPACT ON GDP
FOX news forecasts that coronavirus vaccine will drive to economic re-bounce and restore economic growth. Strategists expect 6% growth in global GDP.
RAND research estimated economic re-bounce and the impact of COVID-19 vaccines on global GDP change as follows:
In world without vaccine the expected Global GDP change is –$3.45 Trillions
In nations with vaccine access the expected Global GDP change is –$1.23 Trillions
In all high income nations with vaccine access the expected Global GDP change is –$292 Billions
In all high and middle income nations with vaccine access the expected Global GDP change is –$153 Billions
Figure 2. Impact of COVID-19 vaccines on Global GDP change (Sources: RAND research)
IMPACT ON DIGITAL DIVIDE
Covid-19 vaccine rollout revealed a digital divide problem around the world from unequal internet access. World organizations and authorities stressed the importance of digital literacy and closing the digital divide as everything from school to work shifted from physical to virtual interactions. Those without access to reliable internet or devices at home are not able to keep up with the pandemic challenges.
THE WAY FORWARD IN A GLOBAL DIGITAL ECONOMY
Large scale pandemics cannot be totally avoided but technologies of the digital economy can help in various respects:
Innovation in vaccine production;
Developing secure data infrastructure for digital vaccine passport;
Improving the global supply chain of vaccines world roll out;
Raising awareness and prevention;
Innovation in gadgets production
Bridging the digital divide
Adapting design to new life style like work from home
The suggested way forward for a strong immune digital economy is to GROW – BUILD – DEPLOY a global digital economy platform empowering the vaccine technology framework, as detailed below:
GROW
Grow knowledge and expertise in digital technologies for vaccine production.
Grow policies for digital passports with vaccine data records.
Grow finances to support innovation.
BUILD
Build digital apps and gadgets for vaccine production and illness prevention.
Build secure and high quality global data infrastructure that can help in sharing and analysing vaccine data.
DEPLOY
Deploy apps developed for free use by healthcare authorities, producers and developers of vaccines, and the population at large. These apps include:
Vaccine global supply chain management apps
Vaccine planning apps
Dashboard apps to track infection and vaccine supply
The World Union of Arab Bankers (WUAB) organized on the 15th of April, 2021 the “First Banking Executive Online Conference 2021” via visual communication technology.
The Conference which serves as a platform of communication among active people in the field, was attended by more than 120 participants from Arab Banks, financial institutions, Arab banking and financial organizations, unions and NGOs, as well as diplomatic, governmental and political personnel.
Among the prominent participants were Dr. Joseph Torbey, Chairman, World Union of Arab Bankers, and Chairman of the Executive Committee, Union of Arab Banks, Mr. Adnan Ahmed Yousif, Chairman of Bahrain Association of Banks, Mr. Mohamed El-Etreby, Federation of Egyptian Banks (FEB), H.E. Mr. Marwan Hamadeh, H.E Ms. Kholoud M. Saqqaf, CEO, Social Security Investment Fund –Jordan, H.E. Dr. Imad Boukhamseen, Board Member at the Union of Arab Banks (UAB), H.E. Dr. Mohammed Ben Omar, Secretary-General of the Arab organization of Information and Communication Technologies (ICT)
Conference Overview
I. The State of the World Economy
A stronger starting point for the 2021–22 forecast.
Multiple vaccine approvals and the launch of vaccination in some countries in December have raised hopes of an eventual end to the pandemic.
Three questions. These developments raise three interrelated questions for the global outlook.
How will restrictions needed to curb transmission affect activity in the near term before vaccines begin delivering effective society-wide protection?
How will vaccine-rollout expectations and policy support affect activity?
How will financial conditions and commodity prices evolve?
Fiscal policy support set to boost economic activity.
Supportive financial conditions. Major central banks are assumed to maintain their current policy rate settings throughout the forecast horizon to the end of 2022.
Rising commodity prices.
Risks of the Outlook
Although new restrictions following the surge in infections suggest growth could be weaker than projected in early 2021, other factors pull the distribution of risks in the opposite direction.
On the upside, further favourable news on vaccine manufacture (including on those under development in emerging market economies), distribution, and effectiveness of therapies could increase expectations of a faster end to the pandemic than assumed in the baseline, boosting confidence among firms and households.
On the downside, growth could turn out weaker than in the baseline if the virus surge (including from new variants) proves difficult to contain, infections and deaths mount rapidly before vaccines are widely available, and voluntary distancing or lockdowns prove stronger than anticipated. Slower-than-anticipated progress on medical interventions could dampen hopes of a relatively quick exit from the pandemic and weaken confidence.
II. Digital Transformation
Digital transformation is the integration of digital technology into all areas of a business, fundamentally changing how we operate and deliver value to customers. It’s also a cultural change that requires organizations to continually challenge the status quo, experiment, and get comfortable with failure.
The four domains in Digital Transformation.
Technology From the Internet of Things, to blockchain, to data lakes, to artificial intelligence, the raw potential of emerging technologies is staggering. And while many of these are becoming easier to use, understanding how any particular technology contributes to transformational opportunity, adapting that technology to the specific needs of the business, and integrating it with existing systems is extremely complex.
Data The unfortunate reality is that at many companies today most data is not up to basic standards, and the rigors of transformation require much better data quality and analytics. Transformation almost certainly involves understanding new types of unstructured data (e.g., a driver-supplied picture of damage to a car), massive quantities of data external to your company, leveraging proprietary data, and integrating everything together, all while shedding enormous quantities of data that have never been (and never will be) used.
Process Transformation requires an end-to-end mindset, a rethinking of ways to meet customer needs, seamless connection of work activities, and the ability to manage across silos going forward.
Organizational Change Capability In this domain we include leadership, teamwork, courage, emotional intelligence, and other elements of change management.
Pulling It All Together So far, we’ve discussed the technology, data, process, and organizational change capability domains as if they existed in isolation, which of course they don’t. Rather, they are part of a larger whole. Technology is the engine of digital transformation, data is the fuel, process is the guidance system, and organizational change capability is the landing gear. You need them all, and they must function well together. Finally, work on technology, data, and process must proceed in an appropriate sequence. It is generally accepted that there is no sense automating a process that doesn’t work, so in many cases, process improvement or reengineering must come first.
Five Key Lessons:
Figure out your business strategy before you invest in anything. Leaders who aim to enhance organizational performance through the use of digital technologies often have a specific tool in mind. “Our organization needs a machine learning strategy,” perhaps. But digital transformation should be guided by the broader business strategy.
Leverage insiders. Organizations that seek transformations (digital and otherwise) frequently bring in an army of outside consultants who tend to apply one-size-fits-all solutions in the name of “best practices.” Rely instead on insiders — staff who have intimate knowledge about what works and what doesn’t in their daily operations.
Design customer experience from the outside in. If the goal of DT is to improve customer satisfaction and intimacy, then any effort must be preceded by a diagnostic phase with in-depth input from customers.
Recognize employees’ fear of being replaced. When employees perceive that digital transformation could threaten their jobs, they may consciously or unconsciously resist the changes. If the digital transformation then turns out to be ineffective, management will eventually abandon the effort and their jobs will be saved (or so the thinking goes). It is critical for leaders to recognize those fears and to emphasize that the digital transformation process is an opportunity for employees to upgrade their expertise to suit the marketplace of the future.
Bring Silicon Valley start-up culture inside. Silicon Valley start-ups are known for their agile decision making, rapid prototyping and flat structures. The process of digital transformation is inherently uncertain: changes need to be made provisionally and then adjusted; decisions need to be made quickly; and groups from all over the organization need to get involved.
III. Laws and Regulations
Regulation is rising on the risk radar
Regulating Financial Risks
Regulating Non-Financial Risks
AML Regulations
Financial Reporting
Laws and Regulations and the cost of Compliance
Laws and Regulations in the Digital Age
Laws and Regulations and the Competitive Environment
Laws and Regulations and the cost of operations.
Conference Proceedings
Inauguration
On Thursday April 15th, 2021 at 11:00 Beirut time, the “First Banking Executive Online Conference 2021” commenced by an introductory video about the World Union of Arab Banks.
Mr. Wissam H. Fattouh, Secretary General, Union of Arab Banks and World Union of Arab Banker welcomed the participants in his inauguration speech and explained the importance of the conference and the role it aims to play as a platform to share and exchange knowledge and discuss the latest developments the economy and banking sector is witnessing.
Dr. Joseph Torbey, Chairman, World Union of Arab Bankers, and Chairman of the Executive Committee, Union of Arab Banks, had a welcome speech, greeting the participants and highlighting the main effects and repercussions of Covid-19 pandemic on the global economy and the economies of the MENA region. Dr. Torbey then discussed the status of digital transformation and the huge leaps it has achieved especially during the pandemic and role it is playing in financial inclusion. However, Dr. Torbey emphasized that laws and regulation should develop rapidly to keep up the pace with the advancements in financial technology therefore creating opportunities to banks, supervisory bodies and clients as well.
Sessions
World Economy amidst the Pandemic
H.E. Mrs Kholoud El-Saqqaf, Chairman, Social Security Investment Fund – Jordan
Digital Transformation – Roadmap to Implementation
Dr. Leila Dagher, Associate Professor of Economics and the Director of the Institute of Financial Economics, American University of Beirut (AUB)
Dr. Mohammad Fheili, Risk Strategist and Capacity Building Expert
Modernization of Financial Laws and Regulations
Mr. Chahdan E. Jebeyli, Group Chief Legal & Compliance Officer, Bank Audi Group
Dr. Mohamad Hussein Mansour, Consultant at the World Bank Group, Director of the European Middle East Institute for Research, Lecturer at AUB and LAU
The 2021 Annual Meetings of the World Bank Group (WBG) and the International Monetary Fund (IMF) which took place virtually from Monday, April 5, through Sunday, April 11, 2021 brought together central bankers, ministers, parliamentarians, and other public sector representatives and officials along with private sector executives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication and economic development and most importantly the repercussions of the Covid-9 and recovery track.
This year the meetings featured seminars, regional briefings, press conferences, and many other events that focused on several global issues on economy, international development, and the world’s financial system. The meetings main focus was on a pandemic and post pandemic world, vaccination and road to recovery.
The event included meetings of the Development Committee, the International Monetary and Financial Committee (IMFC) and the Coalition of Finance Ministers for Climate Action. The participants identified challenges going forward, including: slowing global growth; insufficient investment rates in developing countries; climate change and extreme weather; fragility, conflict and violence, crisis management, gender inequality, knowledge, regional integration, energy security, biodiversity, illicit financial flows and pandemics.
INTERGOVERNMENTAL GROUP OF TWENTY-FOUR ON INTERNATIONAL MONETARY AFFAIRS AND DEVELOPMENT COMMUNIQUÉ
7 April 2021
Chaired by Abdolnaser Hemmati, Governor of the Central Bank of the Islamic Republic of Iran
The global economy is showing signs of recovering from the COVID-19 crisis. The path to broad-based and inclusive recovery is nevertheless fraught with uncertainty about the availability and access to safe and affordable vaccines for all and the strength of external financial support to developing countries. The pandemic has strained the health systems and severely hit the economies of developing countries, which have had limited policy space to respond. Millions of people have fallen into extreme poverty, and food insecurity has risen starkly especially in the poorest countries and those living in fragile and conflict-affected situations. Our urgent priorities are to contain the pandemic, for which scaling up vaccinations will be crucial, and rebuild our economies to avoid a lost decade of development and a major decline in people’s well-being.
At this critical juncture, international cooperation is essential to secure a better recovery for all countries and promote a strong pace of global convergence of per capita income levels between advanced and developing countries. We will continue to respond with exceptional policy measures, as long as needed and as national circumstances allow it, in order to support economic activity to protect jobs and incomes, provide social protection especially to vulnerable populations, strengthen health systems, accelerate digitalization and maintain financial resilience. Large stimulus packages in advanced countries cushioned the global impact of the pandemic, and we encourage them not to withdraw support prematurely. International assistance for developing countries, however, has fallen short of their estimated $2.5 trillion in additional financing needs. We call on the IFIs, especially the IMF and the World Bank, in coordination with the international community to ensure the availability, to the fullest extent possible, of the necessary liquidity and fiscal support for all developing countries. Concessional financing and ensuring positive net transfers should be essential parts of the global financial response to avoid prolonged damage to development prospects of low-income countries (LICs) and small vulnerable states. It is crucial for all major economies to work together and use all policy tools available to foster an environment of increased trade and investors’ confidence to boost investment growth for all countries.
Early availability of, and equitable access to, affordable vaccines everywhere is the most critical public good at this juncture. It is essential to contain the pandemic and secure a broad-based global recovery. We call on advanced countries to boost financing for the COVAX Facility to help more low- and middle-income countries obtain fair and rapid access to affordable vaccines and move toward patent liberalization for COVID-19 vaccines to boost global production. We welcome the African Union’s vaccine program that procures vaccines to supplement those acquired through the COVAX Facility. Multilateral development banks (MDBs) must also play an important role in financing and delivering vaccines and support efforts to enable vaccine manufacturing in developing countries. We call on MDBs to enhance international cooperation and uniformly adopt the COVAX vaccine criteria or the World Health Organization (WHO) Emergency Use List. At this time, developing countries’ access to vaccines is constrained by existing supply, which has mostly been purchased by advanced economies. We call on the World Trade Organization and MDBs to seek solutions to scale up the production of vaccines, including addressing intellectual property rules to expand the manufacturing of vaccines and other medical products to effectively deal with the COVID-19 pandemic.
We reiterate the importance of a strong global financial safety net, with an adequately resourced, quota-based IMF at its center. We welcome the stronger support in the IMF’s Executive Board for a meaningful new allocation of Special Drawing Rights (SDRs) to address long-term global liquidity needs. This must be made alongside commitments from members with strong external positions to voluntarily channel their SDRs, including from the new allocation, to benefit countries in need of liquidity support in these exceptional times. Recycling mechanisms that boost IMF’s lending capacity will enable the Fund to increase access limits for borrowers and provide additional support to low- and middle-income countries. Going forward, the IMF should take steps to modernize and enhance the impact of SDRs, including considering a more equitable and just way to allocate SDRs across countries to take account of demand. We urge the IMF to ensure utilization of SDRs in a transparent and accountable manner. We further urge the IMF to ensure the timely completion of the 16th General Review of Quotas by end-2023, and look forward to increased quota resources, reduced reliance on borrowed resources and the implementation of long-awaited governance reforms to increase the quota share of emerging markets and developing countries while protecting the shares of the poorest countries.
We commend the swift response of the IMF to support its member countries since the onset of the pandemic. Going forward, it is important for the IMF to flexibly adapt its lending toolkit to the evolving needs of low- and middle-income countries during their recovery. We draw attention to the role of precautionary financing instruments in helping eligible countries deal with tail external risks. Since this is the year for the IMF to review its Access Limits as well as its Surcharge Policy, we urge the Fund to correct the regressive and pro-cyclical character of the Surcharge Policy and consider specific measures, such as suspending surcharges at this time to help countries’ economic recovery. We encourage the IMF to further consider a significant permanent reduction in surcharges or their elimination. In addition to seeking new donor resources, we encourage the Fund to explore non-traditional and predictable funding options to boost the Poverty Reduction and Growth Trust’s resources as well as to increase the IMF’s own resources devoted to capacity development that has been increasingly sought by countries. We urge the IMF to find the means to increase its internal budget resources to ensure that it has the necessary financial and human resources to fulfill its mandate. We look forward to the upcoming review of the IMF’s Institutional View on Capital Flows which should aim to help countries reap the benefits of capital flows while managing risks to ensure stability.
It is crucial to support developing countries in managing their worsening debt vulnerabilities to avoid a debt crisis that retards development progress and enable countries to accelerate growth and regain debt sustainability. The G20’s Debt Service Suspension Initiative (DSSI) has provided short-term breathing space for many LICs, more than half of which are under high risk of debt distress or in distress. Debt treatments may be needed for some countries to put them on the path to achieve debt sustainability. In this regard, we welcome the G20’s Common Framework for Debt Treatments (CF) beyond the DSSI. We look forward to fair, meaningful and expeditious sovereign debt treatments, with participation of private creditors, within the CF. We encourage the IMF and the World Bank Group (WBG) to support the implementation of the CF in line with their mandates, provide exceptional financial support to strengthen the capacity of countries to undertake debt treatments when sought and enhance debt management frameworks, including transparency of debtor and creditor countries and reporting standards. Realistic debt sustainability assessments are necessary to determine the depth of the financing needed. We encourage MDBs to support low- and middle- income countries in need of debt relief, including through innovative instruments to reduce debt burdens and ensuring significant positive net transfers. The effective implementation of the CF in a way that moderates market and credit rating agency reactions could encourage eligible countries to seek timely debt treatment, when needed. We reiterate our call for increased multilateral efforts to improve the architecture for sovereign debt resolution to facilitate expeditious debt treatments.
Severe fiscal constraints and heightened debt vulnerabilities imperil our ability to contain the pandemic and invest to build back our economies in an inclusive, resilient and sustainable manner. The WBG and other MDBs should use the strength of their balance sheets to scale up financial support to both low- and middle-income countries. We commend the WBG’s frontloaded International Development Association (IDA) lending program. We look forward to the successful completion of IDA20 replenishment in end-2021. The WBG should strengthen its financial support for middle-income countries and consider waiving front-end and commitment fees to help countries recover. We urge the WBG to explore options to stretch its balance sheets to the fullest extent possible to boost their medium-term lending capacity, including greater flexibility in implementing individual country lending limits. Shareholders should monitor and address constraints to MDBs’ lending capacity in a timely way.
Developing countries will need to explore all sources of financing to rebuild fiscal buffers as their economies recover and ensure effective use of resources. Countries should explore avenues to ensure that taxes can contribute to raise revenues, address inequality, improve health outcomes and promote a sustainable recovery. We urge the IMF and the WBG to further strengthen support for capacity building for domestic resource mobilization and public debt and expenditure management. We call on the IMF and the WBG to enhance their support to address the challenges faced by small states, fragile and conflict-affected states and countries hosting refugees and experiencing significant migration influx. We urge the WBG and other MDBs to explore innovative and effective solutions, including de-risking instruments, to leverage more private financing in sustainable energy and other infrastructure investments as well as initiatives to support small and medium enterprises.
We call for multilateral cooperation to reform international tax rules and practices to prevent further erosion of our tax bases. On the taxation of the digital economy, we look forward to a fair and equitable multilateral solution that addresses concerns of developing countries and the taxation challenges of digitalization. We seek a solution that yields meaningful and sustainable revenues for developing countries by enabling them to tax their fair share of the profits of multinationals in this digital age. The solution should be simple to implement and comply with. Additionally, we urge the IMF and the WBG to deepen their work to measure, monitor, and contain illicit financial flows.
We welcome the stronger international support for an inclusive and sustainable recovery. Delivering on climate finance by the global community is a critical and fair way to assist developing countries to implement their Nationally Determined Contributions to meet climate goals. Advanced countries should fulfill their commitment, under the 2009 Climate Accord, to provide $100 billion annually by 2020 at the earliest possible time. It is critical to scale up currently meager amounts of concessional resources and finance for adaptation. Adequate financing and technical assistance from MDBs and climate-related funds will be crucial to support sustainable investments, especially infrastructure and energy, and leverage more private financing.
The Bretton Woods Institutions play important roles in assisting developing countries rebuild better and contribute to global climate goals. As they strengthen climate actions in programs, we ask that they tailor their assistance to the diverse circumstances of developing countries. We ask the WBG and other MDBs to support borrower countries pursue paths to a more sustainable recovery that consider countries’ current economic structures. These should result in a balanced integration of climate objectives with the achievement of the sustainable development goals. In this regard, MDBs should also strengthen their work on approaches to increase productivity, diversify economies and foster job-creating inclusive growth. We urge the MDBs and the IMF to articulate better the elements of their assistance strategies, within their comparative advantages and in line with their mandates, to support developing countries of diverse circumstances transition to more inclusive and sustainable economies.
Second G20 Finance Ministers and Central Bank Governors Meeting Communique – Italian G20 Presidency
7 April 2021
After the sharp contraction in 2020, the global outlook has improved mainly due to the roll out of vaccination campaigns and continued policy support. However, the recovery appears uneven across and within countries, fragile and subject to elevated downside risks, including the spread of new variants of the COVID-19 virus and different paces of vaccination. We will address the problem of economic scarring, especially on those most impacted, including women, youth, informal and low-skilled workers. We commit to remaining vigilant and avoiding any premature withdrawal of support measures. We reaffirm our resolve to use all available policy tools for as long as required to protect people’s lives, jobs and incomes, to support the global economic recovery, fight rising inequalities, and enhance the resilience of the financial system, while safeguarding against downside risks and negative spillovers and preserving long-term fiscal sustainability.
Overcoming the pandemic is a precondition for a stable and lasting recovery. We remain committed to strengthening health systems and facilitating equitable and swift access to safe, effective and affordable COVID-19 vaccines, therapeutics and diagnostics and we encourage efforts to rapidly step up their production and distribution. In this regard, we recognize the role of COVID-19 immunization as a global public good and reiterate our support to all collaborative efforts, especially to the four pillars of the Access to COVID-19 Tools Accelerator (ACT-A) and its COVAX Facility. We emphasize the need to enhance cooperation and policy coherence with and among multilateral organizations, especially with the World Health Organization. We look forward to the recommendations of the G20 High Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response in July.
Strong fundamentals and sound policies are essential to the stability of the international monetary system. We remain committed that our exchange rates reflect underlying economic fundamentals and note that exchange rate flexibility can facilitate the adjustment of our economies. We will continue to consult closely on foreign exchange market developments. We recognize that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes.
We acknowledge the important role of open and fair rules-based trade in restoring growth and job-creation. We recall our commitment to fight protectionism and we encourage concerted efforts to reform the World Trade Organization.
The G20 Action Plan, endorsed on 15 April 2020 and updated last October, sets out the key principles guiding our response, taking into account country-specific conditions. We welcome the Third Progress Report (Annex 1), which takes stock of the significant progress made against our commitments so far. Recent health and economic developments and persisting downside risks call for strong policy actions, enhanced multilateral coordination and continued support to the most vulnerable. We therefore endorse the second update of the G20 Action Plan (Annex 2) setting a forward-looking agenda to tackle current and future global challenges. In line with the Riyadh Leaders’ Declaration of November 2020, we reiterate our commitment to keeping the G20 Action Plan a living document and to regularly review, update, track implementation of, and report on it.
We concur on the need to harness the opportunities stemming from technological innovation to boost the recovery and ensure broad-based prosperity. We look forward to the G20 Menu of Policy Options on productivity-enhancing digital transformation, which will provide good practices for harnessing the opportunities offered by digitalization while ensuring that these opportunities are shared within and across countries. We welcome ongoing efforts for strengthening global risk monitoring and look forward to integrating it more systematically into future policy discussions where appropriate. We will continue to closely coordinate our efforts to enhance resilience against future shocks, including pandemics, natural disasters, climate and environmental risks. We also recognize that improving data availability and provision, including on environmental issues, and harnessing the wealth of data produced by digitalization, while ensuring compliance with legal frameworks on data protection and privacy, will be critical to better inform our decisions. We therefore ask the International Monetary Fund (IMF), in close cooperation with the Inter-Agency Group on Economic and Financial Statistics (IAG) and the Financial Stability Board (FSB), to prepare a concept note on a possible new Data Gaps Initiative.
Tackling climate change and promoting environmental protection are increasingly urgent for our economies and societies. Shaping the recovery provides a unique opportunity to develop forward-looking strategies investing in innovative technologies and promoting just transitions toward more sustainable economies and societies, with particular attention to the most affected segments of the population and in line with the Paris Agreement. We look forward to discussing how to better coordinate and deliver such strategies to achieve our shared agenda. We encourage international organizations to monitor recovery strategies and provide further analysis on the impact of climate change and de-carbonization measures on growth and employment, in line with their respective mandates.
We acknowledge that mobilizing sustainable finance is essential for global growth and stability and for promoting the transitions towards greener, more resilient and inclusive societies and economies. We ask the FSB to work on evaluating the availability of data and data gaps on climate-related financial stability risks, and on ways to improve climate-related financial disclosures, and to report on these subjects in July. We agree on the importance of promoting globally consistent, comparable high-quality standards of disclosure for sustainability reporting, building on the recommendations of the FSB’s Task Force on Climate-related Financial Disclosures. We welcome growing private sector participation. We also take note of growing public sector participation and transparency in these areas. We welcome the re-establishment of the Sustainable Finance Study Group, which we are upgrading to a working group, and we look forward to its work, for 2021, on developing, in a collaborative manner, an initial evidence-based and climate-focused G20 sustainable finance roadmap, improving sustainability reporting, identifying sustainable investments, and aligning International Financial Institutions’ efforts with the Paris Agreement. We also look forward to continuing the discussion on these issues at the Venice Conference on Climate, which will be held on 11 July.
We recognize the critical role of quality infrastructure investments in the recovery phase. Promoting resilient, sustainable and inclusive infrastructure will be key to stimulating economic growth and development. We welcome the creation of the InfraTracker by the Global Infrastructure Hub (GIH), which can help to better inform our policy decisions and shape our stimulus packages. We will explore infrastructure potential in creating jobs for supporting a robust and sustainable recovery. We take note of the IMF Note on Environmentally Sustainable Investment for the Recovery. In line with the G20 Roadmap to Infrastructure as an Asset Class and building on the G20/OECD Report on the Collaboration with Institutional Investors and Asset Managers on Infrastructure, we will continue, in a flexible manner, the dialogue between public and private investors to mobilize private capital. We will continue to explore innovative financial instruments to bridge the infrastructure financing gap. We agree to develop a G20 Policy Agenda on infrastructure resilience and maintenance. We will work to improve financing of digital infrastructure and extend coverage of underserved areas, including through fostering investments for high-quality broadband connectivity. We will encourage knowledge sharing with the representatives from local authorities to facilitate enhanced coordination with national governments to achieve more inclusive societies. We welcome advancing the work related to the G20 Principles for Quality Infrastructure Investment (QII). In this regard, we welcome the GIH QII Survey Report. We recall our previous agreement on exploring possible indicators on QII and look forward to the outcome of the Infrastructure Working Group work in this area. We reiterate the need to better inform infrastructure investment decisions, including through the ongoing work of related initiatives by international organizations on access to data, such as the Infrastructure Data Initiative.
We will further step up our support to vulnerable countries as they address the challenges associated with the COVID-19 pandemic. We call on the IMF to make a comprehensive proposal for a new Special Drawing Rights (SDR) general allocation of USD 650 billion to meet the long-term global need to supplement reserve assets. A new allocation would enhance global liquidity and will help the global recovery, building on the last assessment made by the IMF in 2016. We also invite the IMF to present proposals to enhance transparency and accountability in the use of the SDRs while preserving the reserve asset characteristic of the SDRs. In parallel, we ask the IMF to explore options for members to channel SDRs on a voluntary basis to the benefit of vulnerable countries, without delaying the process for a new allocation.
We welcome the progress achieved by the Debt Service Suspension Initiative (DSSI) in facilitating higher pandemic-related spending. All official bilateral creditors should implement this initiative fully and in a transparent manner. In light of the persistence of significant liquidity needs related to COVID-19, we agreed to its final extension by 6 months through end-December 2021, which is also agreed by the Paris Club. We reiterate our call on the private sector, when requested by eligible countries, to take part in the DSSI on comparable terms. This final extension will allow beneficiary countries to mobilize more resources to face the challenges of the crisis and, where appropriate, to move to a more structural approach to address debt vulnerabilities including through an Upper Credit Tranche quality IMF-supported program. Within this context, we welcome the ongoing efforts to implement the Common Framework for Debt Treatments beyond the DSSI to address debt vulnerabilities on a case-by-case basis and look forward to the coming first meeting of the first creditor committee. In each case, we are committed to implementing the Common Framework in a coordinated manner, including through sharing necessary information among participating official bilateral creditors. The joint creditors’ negotiation shall be held in an open and transparent manner and before finalization of the key parameters, due consideration shall be given to the specific concerns, if any, of all participant creditors and the debtor country. In this regard, we note that the need for debt treatment, and the restructuring envelope that is required, will be based on an IMF/World Bank Group (WBG) Debt Sustainability Analysis and the participating official creditors’ collective assessment. We ask the IMF/World Bank (WB) to support the implementation of the Common Framework, in line with their respective mandates. We stress the importance for private creditors and other official bilateral creditors of providing debt treatments under the Common Framework on terms at least as favorable, in line with the comparability of treatment principle. We reiterate the importance of joint efforts by all actors, including private creditors, to continue working towards enhancing debt transparency. We recall the forthcoming work of the Multilateral Development Banks (MDBs), as stated in the Common Framework, in light of debt vulnerabilities. We look forward to progress by the IMF and WBG on their proposal of a process to strengthen the quality and consistency of debt data and improve debt disclosure. We welcome the launch of a second voluntary self-assessment of the implementation of the G20 Operational Guidelines for Sustainable Financing. We look forward to further updates on the implementation of the Institute of International Finance Voluntary Principles for Debt Transparency.
We welcome MDBs commitments of USD 75 billion to DSSI-eligible countries over the period between April 2020 – December 2020, as part of their USD 230 billion commitment to support emerging and low-income countries in response to the COVID-19 pandemic. We also welcome USD 12.4 billion in financing provided to low-income countries by the IMF since the start of the pandemic and mobilization of about USD 24 billion in new loan resources for the Poverty Reduction and Growth Trust (PRGT). We welcome the contributions provided to date to the Catastrophe Containment and Relief Trust (CCRT) and call on more contributions so that debt service relief can be provided until April 2022.
Going forward, the IMF estimates that low-income countries would need to deploy around USD 200 billion up to 2025 to step up response to the pandemic and build external buffers and an additional USD 250 billion in investment spending to accelerate their income convergence with advanced economies. We will deploy all tools to help countries close this financing gap. In recognition of the critical role of the International Development Association (IDA), we welcome advancing IDA-20 by one year. An ambitious and successful IDA replenishment by December 2021, underpinned by a strong policy framework, will support a green, resilient and inclusive recovery in IDA countries as they address both the immediate and longer-term impacts of the pandemic. We call on IDA to explore how to further use its own balance sheet to unlock additional resources for IDA countries in a sustainable manner while maintaining its AAA rating. We call on the WBG to scale up its efforts to mobilize private financing. We also call on the IMF to enhance its concessional lending capacity and to explore, together with its members, additional options to mobilize resources to support vulnerable countries, including through the PRGT and the CCRT. We also call on the IMF to explore additional tools for all vulnerable countries. We encourage MDBs to make the best use of available resources to serve their clients, including by implementing the G20 Action Plan on Balance Sheet Optimisation. We also encourage further progress on exploring potential new measures to maximize their development impact, according to their respective mandates and while protecting their credit ratings. We reaffirm the importance of enhancing coordination among development partners at multilateral, regional and country level. We look forward to further updates by MDBs on progress in implementing country-owned pilot platforms.
We reiterate our commitment to strengthening long-term financial resilience and supporting inclusive growth, including through promoting sustainable capital flows, developing local currency capital markets and maintaining a strong and effective Global Financial Safety Net with a strong, quota-based, and adequately resourced IMF at its center. We look forward to the forthcoming review of the IMF’s Institutional View on the liberalization and management of capital flows. We welcome the preservation of the overall IMF lending capacity recently accomplished through the doubling of the New Arrangements to Borrow and a new round of Bilateral Borrowing Agreements. We remain committed to revisiting the adequacy of IMF quotas and will continue the process of IMF governance reform under the 16th General Review of Quotas, including a new quota formula as a guide, by December 15, 2023.
We will continue our cooperation for a globally fair, sustainable, and modern international tax system. We remain committed to reaching a global and consensus-based solution building on the solid basis of the Reports on the Blueprints for Pillar 1 and Pillar 2, by mid-2021. We acknowledge the progress made to date and urge the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address the remaining outstanding issues with a view to achieving an agreement by the set deadline. We acknowledge the progress made on implementing the internationally agreed tax transparency standards and support the Organization for Economic Cooperation and Development’s (OECD) ongoing work to explore proposals for automatic exchange of information on crypto-assets. We look forward to a constructive discussion at the High Level Tax Symposium on Tax Policy and Climate Change in July. We take note of the OECD updated report on Tax and Fiscal Policy in Response to the COVID-19 Crisis. We reaffirm our engagement to support developing countries in strengthening the capacity to build sustainable tax revenue bases and ask the OECD to prepare a report on progress made through their participation at the G20/OECD Inclusive Framework on BEPS and identify possible areas where domestic resource mobilization efforts could be further supported.
We commit to maintaining a comprehensive and united effort to respond to the COVID-19 crisis and ensuring that the financial sector continues to provide support to the economy, while preserving financial stability. We reiterate our commitment to the FSB’s principles agreed in April 2020 underpinning the national and international responses to COVID-19. Most of the support measures will remain in place for as long as economic and health circumstances require, recognizing that there are potential risks arising from withdrawing them too early. We welcome the FSB report discussing the benefits of a flexible state-contingent approach when considering whether to extend, amend, or end support measures, in a gradual and targeted way, to minimize long-term financial stability risks. We call on the FSB to continue to support international coordination on COVID-19 response measures in relation to financial stability, including through information sharing and through monitoring consistency with the agreed international standards.
We welcome the FSB evaluation report on the effectiveness of too-big-to-fail (TBTF) reforms for systemically important banks. We take note of the key findings that effective TBTF reforms bring net benefits to the society and we will work to address the gaps in reforms identified in the evaluation. We commit to taking stock of the lessons learned from the pandemic from a financial stability perspective. Building upon the FSB “Holistic Review” of the March 2020 market turmoil, we will work to strengthen the resilience of the non-bank financial intermediation (NBFI) sector with a systemic perspective and look forward to the FSB presenting a consultation report on policy proposals to enhance money market fund resilience in July, a final report in October and an update on the broader workplan for NBFIs. We commit to a timely and effective implementation of the G20 Roadmap to enhance cross-border payments, endorsed at the G20 Riyadh 2020 Summit, also to facilitate the flow of remittances. We look forward to the FSB progress report on how regulatory, supervisory and oversight frameworks address so-called “global stablecoins”, and to a broad discussion on the cross-border use of central bank digital currencies and wider implications for the international monetary system. We reiterate that no so-called “global stablecoins” should commence operation until all relevant legal, regulatory and oversight requirements are adequately addressed through appropriate design and by adhering to applicable standards. We look forward to the FSB report on harmonization of cyber incident reporting in the financial sector. We also look forward to a progress report on transition away from LIBOR. We welcome the additional clarity provided by the announcements of cessation dates for LIBOR benchmarks and reiterate the importance of orderly transition before end-2021.
We reaffirm our support for the Financial Action Task Force (FATF), as the global standard-setting body for preventing and combating money laundering (ML), terrorist financing (TF) and proliferation financing (PF). We look forward to the outcomes of the FATF’s current works on opportunities and challenges of digital transformation in tackling financial crime. We acknowledge the relevance of the second 12-month review on the global implementation of the FATF standards on virtual assets and virtual assets service providers, recognising that so-called stable coins are covered by the FATF standards. We welcome ongoing work especially by the FATF on the links between environmental protection and the prevention of corruption and illicit finance associated with the illegal exploitation of natural resources, recognizing the impact of environmental crime on climate and bio-diversity. We confirm our commitment to tackling all sources, techniques and channels of ML/TF/PF, deserving a particular attention to COVID-19-connected financial crimes. We commit to further strengthening the FATF’s Global Network of regional bodies in order to reinforce the effective implementation of the FATF standards.
Building on the G20 Financial Inclusion Action Plan endorsed last year, we support the Global Partnership for Financial Inclusion’s (GPFI) efforts to identify and address the gaps in financial inclusion that may have widened during the COVID-19 crisis, especially for the most vulnerable and underserved, as well as for micro, small and medium-sized enterprises. We also welcome the GPFI continued focus on remittances, including on reducing their transfer costs. We encourage the formulation of a menu of policy options informed by qualitatively robust, and to the fullest extent possible, granular data to help guide the appropriate response, depending on specific country needs, capabilities, and circumstances, including in the areas of digital financial literacy, consumer protection and financial business conduct, leveraging the opportunities offered by responsible digital financial services in enhancing financial inclusion, while safeguarding from risks.
World Bank/IMF Spring Meetings 2021: Development Committee Communiqué
The Development Committee met virtually today, April 9, 2021.
The COVID-19 pandemic has caused an unprecedented public health, economic, and social crisis, threatening the lives and livelihoods of millions. The economic shock is increasing poverty, worsening inequalities, and reversing development gains. As the global economy begins a gradual recovery, uncertainty surrounds near- and medium-term prospects. We call for sustained, differentiated, and targeted financial and technical support for an adequate policy response, strong coordination across bilateral and multilateral organizations, and further support to the private sector. We urge the World Bank Group (WBG) and the International Monetary Fund (IMF), in line with their respective mandates, to work closely together and with other partners to contain the impacts of the pandemic. We also ask the WBG to continue its support to countries in achieving the twin goals of ending extreme poverty and boosting shared prosperity and to promote green, resilient, and inclusive development (GRID), as well as support for the SDGs.
Timely delivery of safe and effective vaccines across all countries is critical to ending the pandemic, especially as new variants emerge. Developing countries need to strengthen their readiness for vaccination campaigns and develop coordinated strategies to reach vulnerable populations. We commend the WBG for supporting client countries’ procurement and deployment of vaccines, and we encourage strong monitoring and accountability mechanisms to ensure fair and efficient distribution. We welcome the WBG’s partnerships with WHO, COVAX, GAVI, UNICEF, and others, including private manufacturers, to help ensure that developing countries have fast, transparent, affordable, and equitable access to vaccines. We welcome WBG’s ongoing revision of the eligibility criteria for vaccine procurement. We call on IFC to redouble its efforts to support manufacturing capacity for vaccines and pandemic related medical supplies in developing countries. The pandemic has triggered far-reaching consequences, and we must strengthen global preparedness for future pandemics, and at the same time make progress in building robust health systems with universal coverage.
As poorer countries face the crisis with increased resource constraints, limited fiscal space, and rising public debt levels, more of them, including small states, are vulnerable to financial stress. The rapid initial response under the Debt Service Suspension Initiative (DSSI) has provided much- needed liquidity for IDA countries. We welcome the progress achieved by the DSSI in facilitating higher pandemic-related spending. All official bilateral creditors should implement this initiative fully and in a transparent manner. In line with the G20 decision, we support a final extension of the DSSI by 6 months through end December 2021, which is also agreed by the Paris Club. We reiterate our call on the private sector, when requested by eligible countries, to take part in the DSSI on comparable terms. This final extension will allow beneficiary countries to mobilize more resources to face the challenges of the crisis and, where appropriate, to move to a more structural approach to address debt vulnerabilities including through an Upper Credit Tranche quality IMF-supported program. Within this context, we welcome the ongoing efforts to implement the Common Framework for Debt Treatments beyond the DSSI to address debt vulnerabilities on a case-by case basis and look forward to the coming first meeting of the first creditor committee. In each case, we also welcome implementing the Common Framework in a coordinated manner, including through sharing necessary information among participating official bilateral creditors. The joint creditors’ negotiation shall be held in an open and transparent manner and before finalization of the key parameters, due consideration shall be given to the specific concerns, if any, of all participant creditors and the debtor country. In this regard, we note that the need for debt treatment, and the restructuring envelope that is required, will be based on an IMF/Bank Debt Sustainability Analysis and the participating official creditors’ collective assessment. We ask the World Bank and the IMF to support the implementation of the Common Framework, in line with their respective mandates. We stress the importance for private creditors and other official bilateral creditors of providing debt treatments under the Common Framework on terms at least as favorable, in line with the comparability of treatment principle. We recall the forthcoming work of the Multilateral Development Banks (MDBs), as stated in the Common Framework, in light of debt vulnerabilities. We look forward to progress by the IMF and WBG on their proposal of a process to strengthen the quality and consistency of debt data and improve debt disclosure. We also reiterate the importance of joint efforts by all actors, including private creditors, to continue working towards enhancing debt transparency. Bank and IMF support remains critical to enhance debt management and transparency, strengthen countries’ domestic revenue mobilization and spending efficacy, and combat illicit financial flows. Looking forward, we urge the Bank and the IMF to help countries design and implement policies to address the root causes of excessive and unsustainable debt. Many middle-income countries also face severe debt distress, limiting their ability to respond to the pandemic. We ask the Bank and the IMF to identify lessons learned and continue working closely with other organizations and policymakers to address the debt challenges facing middle-income countries, on a case-by-case basis. We welcome the launch of a second voluntary self-assessment of the implementation of the G20 Operational Guidelines for Sustainable Financing. We look forward to further updates on the implementation of the Institute of International Finance Voluntary Principles for Debt Transparency.
The effects of the COVID-19 crisis will be felt for years. Mobility restrictions and lockdowns have triggered job losses, especially for women, youth, and vulnerable groups, and can undermine social inclusion. School closures have caused unprecedented disruption to education, especially for girls, damaging human capital, with long-term economic implications. Inflation and depleted incomes have raised household indebtedness and food insecurity. We urge the WBG to scale up its work to address rising levels of food insecurity and to support countries in achieving SDG2 and nutrition for all. It should address the medium and longer-term challenges of food security and nutrition in a programmatic way and in partnership with other multilaterals, while supporting countries in responding rapidly to already deteriorating food security conditions. Fragility, conflict, and violence (FCV) have worsened in many regions. It is urgent to address drivers of FCV, as well as forced displacement and migration. We look forward to the implementation of the FCV strategy. A sustainable and inclusive recovery requires addressing financial sector vulnerabilities, eliminating tax evasion, and mobilizing vital investments. Priorities for investment include quality health care, nutrition, and education; social safety nets; digital and other innovative technologies; sustainable and quality infrastructure; access to energy, including renewable resources; broader opportunities for women and girls; and finance for SMEs and microenterprises. We urge the WBG to help all client countries revitalize trade, support foreign direct investment, and preserve and create jobs. We note the serious impact of the pandemic in many small states and middle-income countries, where new risks and vulnerabilities are arising; and we urge the WBG and the IMF to strengthen efforts to support these countries, in line with their mandates. We welcome the GRID approach and ask the WBG for its effective implementation through country strategies and operations. The WBG is uniquely positioned to tackle the challenges ahead through its convening power, global reach, and capacity to mobilize finance, technical assistance, and knowledge for both the public and private sectors.
We commend the WBG’s scale-up of climate finance over the past two years, its continuing role as the largest multilateral source of climate investments in developing countries, its emphasis on biodiversity, and its technical and financial support for adaptation, mitigation, and resilience. We also welcome the WBG and IMF’s work to assess the impact of climate change on macroeconomic and financial stability. In addressing immediate infrastructure and economic needs, we request that the WBG continue working with clients to address climate change, land degradation, and biodiversity loss, while ensuring affordable and cleaner energy access. We ask the Bank to ramp up its comprehensive work on biodiversity and work on measuring co-benefits and mainstreaming biodiversity in its operations, as appropriate. We further encourage the WBG and IMF to support a measurable impact in the transition to a low-carbon economy, while considering countries’ energy needs and mix, and providing targeted support for the poorest. These efforts will include phasing out of inefficient energy subsidies and other distortive fiscal policies where feasible. The most impoverished and vulnerable populations, including those in FCV situations and small states, are among those most affected by climate change, damaged ecosystems, and natural disasters. We support the WBG’s ambitious new target to direct 35% of its financing to climate on average, its commitment for at least 50% of Bank climate financing to support adaptation and resilience, and its crucial convening and knowledge-sharing role and support to a just transition, for countries that request such support. We look forward to the WBG’s Climate Change Action Plan for 2021-2025 and recognize its work on disaster risk management, preparedness, and response. We welcome the WBG’s proposal to conduct Country Climate and Development Reports and emphasize that Nationally Determined Contributions (NDCs) should be the primary focus of climate strategies. We commend the WBG’s commitment to align its financial flows with the Paris Agreement, and to continue helping countries reach their climate goals, including through NDCs and National Biodiversity Strategies and Action Plans. We also encourage IFC and MIGA’s efforts to mobilize Paris-aligned private sector investments. We support the WBG’s and the IMF’s important role in preparations for the CBD COP15, UNCCD COP15, and UNFCCC COP26 meetings later this year.
A vibrant private sector will be essential for client countries to recover, create jobs, and embrace economic transformation. We urge the WBG to continue its work to help crowd-in private capital and finance, and to support the private sector. This should build on the IFC 3.0 Strategy to create markets. IFC should continue helping companies create jobs, preserve viable businesses, adapt to the changes brought by COVID, and pursue a green recovery. We ask MIGA to continue addressing the needs for short- and longer-term funding of private investors and lenders.
We support the frontloading of IDA19 resources from FY23 to FY22 to help the poorest countries in their immediate response to the COVID-19 crisis. We also welcome advancing IDA20 by one year. An ambitious and successful IDA replenishment by December 2021, underpinned by a strong policy framework, will support a green, resilient, and inclusive recovery in IDA countries as they address both the immediate and longer-term impacts of the pandemic. We ask the WBG to propose ways to optimize IDA’s balance sheet to make the most of donor contributions and IDA resources, while preserving its AAA rating.
The next meeting of the Development Committee is scheduled for October 15, 2021, in Washington, DC.
Communiqué of the Forty-third Meeting of the IMFC
Chaired by Ms. Magdalena Andersson, Minister for Finance of Sweden
April 8, 2021
The Committee expresses its deep appreciation to Governor Lesetja Kganyago for his leadership as IMFC Chair and welcomes Minister Magdalena Andersson as the new Chair.
We express our sympathies for the loss of human lives caused by the COVID-19 pandemic and the suffering it has entailed. We will continue to work together to end the pandemic everywhere and secure a strong, sustainable, balanced, and inclusive recovery.
The global economy is recovering from the crisis faster than expected last October, thanks to an unprecedented policy response and rapid progress in vaccine development. But the prospects for recovery are highly uncertain and uneven within and across countries due to varying policy space, different economic structures and rigidities, preexisting vulnerabilities, and uneven access to vaccines. Elevated financial vulnerabilities could pose risks, should global financial conditions tighten swiftly. The crisis may cause extended scarring and exacerbate poverty and inequalities, while climate change and other shared challenges are becoming more pressing.
We will calibrate our policies and strengthen cooperation to durably exit the crisis. We emphasize the need for strong international cooperation to accelerate vaccine production and support affordable and equitable distribution to all. To that end, we continue to support the work of the World Health Organization, the ACT Accelerator collaboration, and its COVAX Facility. We will maintain our policy support, tailored to country circumstances, until constraints on economic activity ease meaningfully, continuing to prioritize health spending and assistance for the most vulnerable, while preserving long-term fiscal sustainability. Where appropriate, monetary policy should remain accommodative, in line with central banks’ mandates. We will continue to monitor and, as necessary, tackle financial vulnerabilities and risks to financial stability, including with macroprudential policies. We will continue to monitor and cooperate to reduce excessive global imbalances over time through macroeconomic and structural policies that support sustainable global growth.
Strong fundamentals and sound policies are essential to the stability of the international monetary system. We remain committed that our exchange rates reflect underlying economic fundamentals and note that exchange rate flexibility can facilitate the adjustment of our economies. We will continue to consult closely on foreign exchange market developments. We recognize that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes.
We will also strengthen multilateral cooperation to ensure an inclusive and resilient global economy. In line with the Paris Agreement, we commit strongly to addressing climate change through measures to accelerate the transitions to greener societies and job-rich economies, while protecting those adversely affected. These comprise a range of fiscal, market, and regulatory actions, mechanisms, and policy mixes, taking into account country-specific factors. We will continue to collaborate to unlock the potential of the digital economy, and accelerate efforts toward a modern and globally fair international tax system. We reaffirm our commitment to strong governance, including by tackling corruption. We agree on the need to promote more open, stable, fair, and transparent trade policies and to modernize the rules-based trading system under the World Trade Organization, which are key to boosting global growth. We are taking comprehensive action to help vulnerable countries meet their financing needs. We will work together to continue strengthening debt transparency practices by both debtors and creditors, public and private, and supporting countries’ efforts to maintain debt sustainability. Where appropriate, we will facilitate swift debt treatment together with broad participation by official and private creditors in line with the comparability of treatment principle.
We welcome the Managing Director’s Global Policy Agenda.
We welcome the IMF’s efforts to help members toward a sustained recovery from the crisis. We call on the IMF to make a comprehensive proposal on a new Special Drawing Rights (SDR) general allocation of US$650 billion to help meet the long-term global need to supplement reserves, while enhancing transparency and accountability in the reporting and the use of SDRs.
We welcome the IMF’s support to help members transition to upper-credit-tranche-quality programs for countries that move out of the emergency phase of the crisis. We call on the IMF to explore how to further support vulnerable low-income and middle-income countries in line with its mandate. We call on the IMF to work with its members to continue exploring ways for voluntary post-allocation channeling of SDRs to support members’ recovery efforts. We support the IMF to explore reforms to its concessional financing instruments for low-income countries and to increase the lending capacity of the Poverty Reduction and Growth Trust, and to secure sufficient contributions for a final tranche of debt service relief from the Catastrophe Containment and Relief Trust, including from new participants for both trusts. We support the IMF’s enhanced assistance to help address particular challenges faced by fragile and conflict-affected states, small states, and countries hosting refugees. We encourage members to contribute to Sudan’s financing package for the clearance of arrears to the IMF and debt relief under the Enhanced Heavily Indebted Poor Countries Initiative. We welcome the IMF’s work on advancing the debt agenda jointly with the World Bank, including by continuing to support the effective implementation of the G20 Debt Service Suspension Initiative and Common Framework, which are also agreed by the Paris Club, and by reviewing key policies and rolling out enhanced tools to support efficient implementation of sovereign debt restructuring.
We highlight the critical role of surveillance in providing cutting-edge policy advice and macro-financial analysis tailored to country circumstances, supported by targeted capacity development. We look forward to the review of the IMF’s Institutional View on capital flows, informed by, among others, the Integrated Policy Framework. The IMF has an important role in responding to members’ diverse needs for guidance on the macroeconomic and financial implications of climate change issues. We, therefore, support the IMF in stepping up work to help its members identify and manage the macro-critical implications of climate change, digitalization, inequality, and fragility, in close collaboration with partners, and to further integrate these issues into its surveillance, lending, and capacity development in line with its mandate. We will explore the appropriate budget envelope for ensuring that the IMF has the staff and skills required to carry out its mandate. We also support ongoing modernization projects and call for further progress on diversity.
We reaffirm our commitment to a strong, quota-based, and adequately resourced IMF at the center of the global financial safety net. We welcome the effectiveness of the doubling of the New Arrangements to Borrow and of the new round of bilateral borrowing agreements. We remain committed to revisiting the adequacy of quotas and will continue the process of IMF governance reform under the 16th General Review of Quotas, including a new quota formula as a guide, by December 15, 2023. We welcome the start of this work and look forward to the first progress report by the time of the Annual Meetings.
Our next meeting is expected to be held on October 14, 2021.
While the US, China, and other leading economies are on their way to a robust recovery, many others are struggling to return to pre-pandemic GDP levels. In most regions, including Europe and Latin America, the 2020 recession will most likely leave long-lasting scars on both GDP and employment.
The chances for a swift, uniform rebound from the COVID-19 crisis have dimmed, and the world economy now faces sharply divergent growth prospects. Although the latest update of the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) offers some grounds for optimism, it also raises renewed concerns. Vaccination euphoria has been tempered by slow vaccine rollouts in most countries, while fresh waves of COVID-19 infections are threatening many economies’ growth trajectories.
The US and China are shaping up to be the main drivers of global growth in 2021. Household consumption and business investment have surged in both economies, along with measures of private-sector confidence. Industrial production has rebounded in most countries, firming up commodity prices and international trade. Nonetheless, the US, China, India, Indonesia, and South Korea will probably be the only major economies to exceed pre-pandemic GDP levels by the end of this year. In most other regions, the 2020 recession will most likely leave longer-lasting scars on both GDP and employment.
The US economy is poised for a breakout year, as massive fiscal stimulus, loose monetary policies, and pent-up demand translate into rapid GDP growth. Renewed consumer and business confidence has led to generally strong consumption and investment growth, and financial markets have continued to perform well. Even labor market performance has been more encouraging, with 916,000 new jobs added in March, more than double the total for February and the most since last August.
The task for monetary policymakers this year will be to separate phantom inflation (the imminent bounce-back after 2020) from underlying wage and price pressures. The rise in government bond yields – which reflects a combination of better growth prospects, inflation risk, and debt concerns – reflects the challenges that policymakers will face as they try to decipher and manage market expectations. Ideally, any additional stimulus measures will aim to boost aggregate demand and improve long-term productivity simultaneously.
Meanwhile, China’s growth momentum has stayed strong and balanced, with the government turning its attention to medium-term structural issues and the containment of financial-system risks. The recent National People’s Congress backed a renewed focus on rebalancing demand toward household consumption and shifting the sources of output growth toward high-end manufacturing, the services sector, and small and medium-size enterprises.
As such, the Chinese authorities seem to be leaning toward macroeconomic-policy normalization, with some fiscal consolidation and monetary tightening anticipated later in the year. This approach is being accompanied by prudential regulatory measures to manage frothiness in the real-estate sector. While trade tensions with the US appear likely to persist under President Joe Biden’s administration, they no longer seem to be a major factor influencing private-sector sentiment or growth in either country.
By contrast, European economies, both in the core and periphery of the Eurozone, have been struggling with another COVID-19 wave, floundering vaccination programs, and a lack of policy direction. While industrial production, particularly in Germany, has held up well, much of the Eurozone will probably have to wait until late 2022 before it reaches pre-COVID GDP levels.
The United Kingdom, which in 2020 faced a double whammy from Brexit and COVID-19, has made good progress on vaccinating its population, thereby improving its growth prospects. Japan’s recovery, however, appears fragile despite extensive stimulus measures, with consumer confidence remaining weak and export growth subdued.
As for emerging markets, there now appear to be multiple economic trajectories – some much better than others. In India, both the manufacturing and services sectors are contributing to a strong rebound. But a resurgence of the coronavirus, rising inflation, and limited fiscal space (owing to high public debt levels) could sap some of this momentum.
For now, the rebound in oil prices has buoyed the prospects of major producers like Nigeria, Russia, and Saudi Arabia. By contrast, Brazil’s economy is tottering, reflecting the virus’s unchecked spread – the result of ineffectual political leadership. Turkey faces similar concerns, but it at least managed to eke out positive growth in 2020.
Following a marked decline during 2020, the US dollar has firmed up in 2021. In tandem with the upward tick in US bond yields, this bodes ill for many emerging markets and other developing economies, particularly those with heavy foreign-currency-debt exposure. Financial market pressures could intensify if divergent growth patterns (with vulnerable economies registering weaker growth) persist through 2021.
The world economy has thus arrived at a pivotal moment. Many countries are grappling with whether to open up their economies despite the continued spread of the virus, and whether to unleash additional macroeconomic stimulus, which could expose them to an unfavorable tradeoff between short-term benefits and longer-term vulnerabilities. Uncertainties are rife, the stakes are high, and indecisive policymaking would hurt consumer and business confidence in the weaker economies, adding to economic strains.
The recipe for a strong and durable recovery remains the same: resolute measures to control the virus, coupled with balanced monetary and fiscal stimulus and policies that both support demand and improve productivity. In economies that are recovering strongly, it would be premature to ease up in either dimension; elsewhere, policymakers will need to redouble their efforts in both.
By: Dr. Mohamad Hussein Mansour, Consultant at the World Bank Group, Lecturer at AUB and LAU
In early 2017, cryptocurrency became a global ubiquitous topic when Bitcoin value to US dollar increased in over 200 percent from 2014, and by around 4,000 percent by late 2017. This rapid increase is reflected in the nominal value of Bitcoins from less than $0.01 in May 2010 to more than $19,700 on December 17, 2017. Since then, cryptocurrency has been viewed by many as an easy way of making profit, and despite being decentralized and unlinked to any central authority, cryptocurrencies gained trust among individual investors and firms. Recently, as Elon Musk announced his interest in purchasing Bitcoins, and Tesla announced the purchase of $1.5 billion Bitcoins, the cryptocurrency’s value surged with around $12,000 increase to reach $44,000 in February 2021.
With all the hype and positive news on cryptocurrency and the consequent opportunities to make profits, certain questions on the accompanying risks arise. The first natural risk is the possible devaluation of the cryptocurrency like any other currency or commodity due to lower demand or increased supply. In this regard, while Bitcoin is not the only cryptocurrency, but despite its success it still had periods in which its value dropped hundreds and even thousands of US dollars in a short period of time.
In addition to the volatility risk of cryptocurrencies, the risk of technical glitches and hacking remain where the world had witnessed numerous scams and hacking incidents costing firms and individuals hundreds of millions of dollars worldwide. This type of risk also includes the risks of human errors that might lead to sudden loss of huge amounts of money.
However, natural devaluation technical glitches, despite their enormity, are not the only risks nor the main ones. In fact, the greatest risk with cryptocurrency is in the nature of the currency as a decentralized currency with no central authority like central banks or governments’ interference to control or even regulate its use. To this, more than 130 countries as well as international organizations have recently issued laws and policies to regulate cryptocurrencies. These country regulations can be categorized into different groups based on the governments’ approach. Not only did the regulations differ, but also the definition of cryptocurrencies themselves, which includes digital currency (Argentina, Thailand, and Australia), virtual commodity (Canada, China, Taiwan), crypto-token (Germany), payment token (Switzerland), cyber currency (Italy and Lebanon), electronic currency (Colombia and Lebanon), and virtual asset (Honduras and Mexico). Moreover, while governments have issued certain regulations, they still warn their citizens that using these currencies are done at the citizens’ own responsibility, which indirectly raises awareness on the potential risks associated with such business.
The first category of countries is one that goes beyond raising awareness on the risks of cryptocurrencies, but also warns against the use of such currencies for money laundering and financing terrorism. These countries include Australia, Canada and the Isle of Man, which recently enacted laws to bring cryptocurrency transactions and institutions that facilitate them under the ambit of money laundering and counter-terrorist financing laws.
The second category of countries went further in limiting the use of cryptocurrencies by restricting investments. Several subcategories can be found within this category: i) countries banning any and all activities involving cryptocurrencies, like Algeria, Bolivia, Morocco, Nepal, Pakistan, and Vietnam; ii) countries that ban their citizens to invest in cryptocurrencies domestically, but allow them to do so abroad, like Qatar and Bahrain; and iii) countries with less strict measures on citizens, but with restrictions on domestic financial institutions to facilitate the transactions in cryptocurrencies. These countries include Bangladesh, Iran, Thailand, Lithuania, Lesotho, China, and Colombia.
The third category of countries regulate initial coin offerings (ICOs), which use cryptocurrencies as a mechanism to raise funds. While some are less strict in their ICO regulations, others like China, Macau, and Pakistan ban them completely. On the other hand, New Zealand and the Netherlands are more flexible and depend on whether the currency is debt security, equity security, derivative, or if it is a collective investment.
While the above categories have “hostile” measures towards cryptocurrencies, the fourth category views cryptocurrencies as opportunities if approached with “friendly” regulations. The purpose of such policies are to attract investment in technology. Countries in this group include Spain, Belarus, the Cayman Islands, and Luxemburg.
The fifth category includes countries that have went further developed their own system of cryptocurrencies. This list includes Marshall Islands, Venezuela, the Eastern Caribbean Central Bank (ECCB) member states, and Lithuania. This category also includes countries that had previously banned or restricted use of cryptocurrencies, like Belgium, South Africa, and the United Kingdom.
For the countries that allow investment in cryptocurrencies, taxation is one main concern. This requires the identification of how cryptocurrencies are being used and whether they are considered income or capital gains. Countries that are have imposed taxation on the use of cryptocurrencies include: Bulgaria, Switzerland, Argentina and Spain, Denmark, UK. Mining for cryptocurrencies however is not being taxed anywhere, except in Russia if energy consumption exceeds a certain threshold.
Some countries and jurisdictions have went a step further in allowing for the use of cryptocurrencies as means of payment. These include the Isle of Man, Mexico, Antigua and Barbuda and some Swiss Cantons. Lastly, a group of countries have launched their own cryptocurrencies or are planning to do so.
In conclusion, while the popularity and demand for cryptocurrencies is increasing globally, the economic, financial and social threats increase with the lack of regulation of this universal currency/commodity. Cryptocurrencies are criticized for allowing criminals to be involved in transactions and for tax evasion and money laundering through anonymous transactions. Numerous hacking incidents, money laundering and fraud incidents have been recorded in the past years resulting in losses of hundreds of millions of dollars, with no regulatory framework to track and sanction the anonymous responsible parties. On the other hand, the opportunities for countries to attract foreign direct investment and to create revenues from regulating cryptocurrencies are immense. Therefore, it is a responsibility for governments and central banks to be leading in the field of virtual currencies in order to regulate the market based on its terms and keep it a save platform for financial transactions.
The West and specifically the United States of America is troubled by the threat of a technologically dominant China – and keen to ensure it never materializes. And yet, given China’s current status, many argue that little can be done to impede it.
In the United States, and after one of the most intense elections in the country’s history, there is one issue on which both parties seem to agree on: the need to “stop” China.
On a larger geopolitical scale, the US government supported by the EU Commission believe that China has secured its economic and technological gains unfairly due to its government’s persistent influence over the economy. Geostrategists often push this view, imagining that a government can achieve technological superiority by investing in the fashionable sectors of the day.
However other analysts believe that this explanation is deceptive, at best. The most “successful” grand economic-development plans usually go with the grain (i.e. accept something rather than oppose it or fight against it), focusing largely on targets that, given the economy’s fundamentals, would be achieved anyway. Crediting state intervention when those targets are met is thus inappropriate.
Recent history cases studies support the above mentioned idea; Japan is a cautionary example. During its post-1945 growth spurt in the 1970s and 1980s, the Ministry of International Trade and Industry (MITI) acquired an almost mythical global reputation for the apparent success of its efforts to channel resources toward strategic sectors. Many countries were advised to emulate its model.
But in the 1980s, Japan’s real-estate bubble burst, and growth slowed significantly. As it turned out, many of the sectors MITI supported had not actually succeeded. What had really been driving Japan’s growth was not MITI’s prescience, but a high savings rate and the rapidly increasing education level of a disciplined workforce – much the same factors that have driven China’s development.
Not long ago, China’s leaders seemed to understand the limits of state intervention. In fact, the Communist Party of China’s general advice to authorities was to scale back the state’s involvement in the economy, because state-owned enterprises (SOE) generally remain far less efficient than private firms, and only about one-third as profitable. And yet, while SOEs continue to underperform, compared to private firms, China’s leaders have radically changed their views on intervention. Now, the conventional wisdom is that the country owes its progress – and, indeed, its emerging global dominance – in some high-tech sectors to the state’s guiding hand.
The true driver of China’s success, however, is its high savings rate – nearly 40% of GDP, or more than twice the rate in the US and Europe.
This gives China massive resources for investment in establishing the fundamentals for technological leadership. Notably, the country has made enormous investments in improving both the quantity and quality of education.
Regarding secondary education, China has already fully caught up with the West in attendance. And testing by the OECD’s Program for International Student Assessment suggests that Chinese secondary-school students are far better at solving problems than their American or European peers.
Moreover, tertiary education – the real key to technological leadership – has exploded in China over the last two decades. According to the US National Science Foundation, China now produces more than twice as many engineers, and more peer-reviewed science and engineering publications, than the US. Similarly, it has surpassed the European Union in spending on research and development, and on current trends, it should catch up with the US over the next decade (some think it already has).
The US is haunted by the specter of a technologically dominant China – and keen to ensure it never materializes. And yet, given China’s fundamentals, there is little the US could do to hamper, let alone arrest, its progress. Huawei is just one example of a firm that has capitalized on China’s pool of millions of engineers to develop new products. Even if the US manages to destroy Huawei, many other Chinese high-tech companies are destined to emerge, driven by the same talent.
The so-called dual-circulation strategy that is set to shape China’s next Five-Year Plan is perfectly in line with the aforementioned fundamentals. As China’s economy grows and diversifies, it is naturally becoming less reliant on exports, and its newly minted engineers will master a growing number of technologies. In other words, the government’s plans for the coming years would probably materialize, even without state intervention.
By contrast, the US strategy – which begins with an economic “decoupling” from China – has little chance of success. To be sure, the decoupling itself might be feasible. But it would also be counterproductive.
Arab bankers and financial personnel from all over the world meet under the umbrella of the World Union of Arab Bankers to serve the development and advancement of the banking profession, and make the necessary efforts to elevate the participating members by contributing to the development of their professional path. Noting that the active member is entitled to participate and vote in the work of the general assembly.
WUAB Active Members
Egypt
1
H.E. Mr. Abdel Hamid Abou Moussa
Faisal Islamic Bank of Egypt
The Governor
2
Mr. Hisham Ahmed Okasha
National Bank of Egypt
Chairman
3
Mr. Mohamed Mahmoud Eletreby
Banque Misr
Member Of The Board Of WUAB – Chairman
4
H.E. Mr. Hesham Ramez
Arab International Bank
Member Of the Advisory Council of WUAB – Chairman and Managing Director
5
Mr. Mohamed Gamal Moharam
MGM Financial & Banking Consultants
Chairman
6
Mr. Hussein Ahmed Ismaeil Refaie
Suez Canal Bank
Chairman & Managing Director
7
Mr. Mohamed Osman El-Dib
Qatar National Bank Al Ahli
Chairman & Managing Director
8
Mr. Mohamed Abdel Salam Kafafi
The Egyptian Credit Bureau “I-Score”
Chairman & Managing Director
9
Mr. Tarek Fayed
Banque du Caire
Chairman & Chief Executive Officer
10
Mr. Ashraf El-Ghamrawy
Al Baraka Bank – Egypt
Deputy Chairman & CEO
11
Mr. Mohamed Kamal Eddine Barakat
Arab International Bank
Deputy Chairman
12
Mr. Yehia Abou Elfotouh Ibrahim
National Bank of Egypt
Deputy Chairman
13
Mr. Farag Abdel Hameed Farag
United Bank
Deputy Chairman & Managing Director
14
Mr. Mohamed Jamil Berro
Emirates NBD- Egypt
Managing Director & Executive Director
15
Mr. Mohamed Mahmoud Ali Bedier
Bank Audi-Egypt
Managing Director & CEO
16
Mr. Akram Youssef Tinawi
Arab Banking Corporation – Egypt
Managing Director & CEO
17
Mr. El Sayed Mohamed Marzouk El Kosayer
The Ministry of Agriculture and Land Reclamation
Minister
18
Mrs Nevine kashmiry
United Bank
Deputy Managing Director of Business
19
Mr. Amin Hisham Ezz Al – Arab
Commercial International Bank
Chairman & Managing Director (2002 – 2020)
20
Mr. Hasan El-Sayed Abdallah
Central Bank of Egypt
First Assistant to the Governor
21
Mr. Mohamed Hani Seif El-Nasr
Arab Investment Bank
Chairman of Arab Investment Bank (2011 – 2018) Member Of the Advisory Council of WUAB
22
Mr. Mahmoud Abdul Khalek El-Nouri
Member Of the Advisory Council of WUAB
23
Mr. Ismail Farid
Export Development Bank of Egypt
Chief Information Officer
24
Mr. Hassan El Hawary
United Bank
Assistant General Manager – Custoday-Mutual Funds
25
Mr. Tarek Mahfouz
VISA International
Country Manager – Egypt
26
Mr. Ahmed Essam Noureldine
VISA International
Country Manager – Libya and Sudan
27
Mrs. Shaimaa Semary
Export Development Bank of Egypt
Executive Manager of HR and Training Section
28
Mr. Mohamed Ibrahim El Hadidy
Export Development Bank of Egypt
Executive Board Member – Operations Group Head
29
Mr. Mohamed Abul Soud
Export Development Bank of Egypt
Board Member – Chief Risk Officer
Hashemite Kingdom of Jordan
1
H.E. Dr. Ziad Fareez
Central Bank of Jordan
Member Of the Advisory Council of WUAB – Governor
2
Mrs. Khouloud El-Sakkaf
Social Security Investment Fund
Chairman
3
Mr. Hani Abdulkader Al-Qadi
Arab Jordan Investment Bank
Member Of The Board Of WUAB – Chairman
4
Mr. Micheal Faiq Al-Sayegh
Jordan Commercial Bank
Chairman
5
Mr. Shaker Toufic Fakhouri
Bank Of Jordan
Chairman
6
Dr. Mohammad Naser Salem Abu Hammour
Safwa Islamic Bank
Chairman
7
Mr. Saad Nabil Yousef Mouasher
Jordan Ahli Bank
Chairman
8
Mr. Hassan Hamdi Mango
Société Générale De Banque-Jordanie (SGBJ)
Chairman
9
Mr. Musa Abdelaziz Shihadeh
Jordan Islamic Bank
Member Of the Advisory Council of WUAB – Chairman
10
H.E. Dr. Marwan Awad
First Int. For Consultancy & Arbitration
Member Of The Board of WUAB – General Manager
11
Mr. George Sofia
Arab Banking Corporation (Jordan)
CEO/General Manager
12
Mr. Mohammed Musa Daoud
Jordan Ahli Bank
CEO/General Manager
13
Mr. Kamal Gharib Al-Bakri
Cairo Amman Bank
Chief Executive Officer
14
Mr. Nemeh Sabbagh
Arab Bank
Chief Executive Officer
15
Mr. Iyad Ghasoub Asali
Islamic International Arab Bank
General Manager
16
Mr. Saleh Ragab Hammad
Bank Of Jordan
General Manager
17
Mr. Tarek Akel
Egyptian Arab Land Bank
Regional Manager
18
Dr. Ahmed Abdul Halim El-Hussein
Jordan Ahli Bank
First Deputy CEO/General Manager
19
Mr. Daoud Adel Daoud Issa
Jordan Kuwait Bank
Chief Human Resources Officer
20
Dr. Adnan Shaher Al Araj
BLOM Bank
Regional Manager-Amman Branches
21
H.E. Dr. Umayya Toukan
Jordan Ahli Bank
Chairman of WUAB Advisory Council – Deputy Chairman
22
Mr. Haethum Samih Badrdine Buttikhi
Jordan Kuwait Bank
Head of retail and private banking
23
H.E. Mr. Abdel Karim Kabariti
Jordan Kuwait Bank
Chairman
Iraq
1
Mr. Noor Noory Ayyed El-Hanthal
Ashur International Bank For Investment
Chairman
2
Mr. Wadih Noori El-Hanthal
Iraqi private Banks League
Chairman
3
Mr. Tamken Abd Sarhan El-Hesnawi
Mousel Bank For Development & Investment
Chairman
4
Mr. Zead Khalaf Abed
International Development Bank
Chairman
5
Mr. Salar Mustafa El-Hakim Fattah
Kurdistan International Bank For Inv. And Dev.
Chairman
6
Dr. Azad Yahya Saeed Bajger
Cihan Bank for Islamic Investment & Finance
Chairman
7
Mr. Mohamed Sadi Ahmed Mohamed Saeed
Erbil Bank For Investment & Finance
Chairman
8
Mr. Abdul Meneim Mehdi Saleh El-Salawi
Alarabiya Islamic Bank
Member of The Board Of Directors
9
Mrs. Alyaa Amer Majeed Al Mrad
Ashur International Bank For Investment
Administration Board Member – General Director
10
Mr. Ali Tariq Mostaf
Iraqi private Banks League
Executive Manager
11
Mrs. Suha Zaki Abdulrassoul Al Kifaee
International Islamic Bank
Managing Director
12
Mrs. Hayfaa Abbas Baqer Mohamad
Al-Bilad Islamic Bank For Investment & Finance
Managing Director
13
Mr. Adil Nuri Al Alim
Gulf Commercial Bank
Managing Director
14
Mrs. May Mohammed Yas
Investment Bank of Iraq
Managing Director
15
Mr. Mazin Kamil Elias Aziza
Economic Bank for Investment & Finance
Managing Director
16
Mr. Hayder Kadhim Galam Hssain
Al-Qabedh Islamic Finance & Investment Bank
Managing Director
17
Mrs. Rula Falih Ali Dulaimi
Iraqi Company for Bank Guarantees
General Manager
18
Mr. Nameer Abdul Aziz Hussein
Trans Iraq Investment Bank
Manager Of International Division
19
Dr. KhawlahTalib Jabbar Alassady
20
Mr. Ahmed Tareq El-Hameshi
Iraqi private Banks League
21
Mr. Mohamed Fouad Mohamed
Al Seraj Company
22
Mr. Ahmed Yasr Akhdar
Al Seraj Company
23
Mr. Ihsan Sadeq Rashed
Al Seraj Company
24
Mr. Abdul Aziz Hassoun
Member Of the Advisory Council of WUAB
Bahrain
1
Dr. Adnan Ahmed Yousif
Bahrain Association of Banks BAB
Chairman
2
Mr. Hussein El Meeza
Al-Salam Bank-Bahrain
Member of The Board Of Directors
3
Mr. Abdullah A. Saudi
ASA Consultants
Member Of the Advisory Council of WUAB – CEO
3
Dr. Khaled Walid Mohammad El-Gazawi
Ebdaa Bank for Microfinance
Chief Executive Officer
4
Mr. Faisal Mansour Al Alwan
Business consultant/Deputy Chairman of Elaf Islamic Bank-Iraq
5
Mr. Mohammed Isa Al Mutaweh
Kuwait
1
H.E. Mr. Mohammad Y. Al-Hashel
Central Bank of Kuwait
Member Of the Advisory Council of WUAB – Governor
2
H.E. Sheikh Mohammed Jarrah Al-Sabah
Kuwait International Bank
Member Of The Board Of WUAB – Chairman
3
H.E. Mr. Majed Issa Ahmed Al-Ajeel
Burgan Bank
Chairman
4
Mr. Adel Abdul Wahab Al Majed
Boubyan Bank
Deputy Chairman & CEO
5
Dr. Haidar Hassan AlJumah
Kuwait International Bank
Member of The Board Of Directors
6
Mr. Jassem Hasan Ali Zainal
Kuwait International Bank
Member of The Board Of Directors
7
Mr. Jehad Al Qabandi
Bank of Bahrain & Kuwait B.S.C
Chief Executive Officer
8
Dr. Hamad Ali El-Hasawi
Kuwait Banking Association
Secretary General
9
Mr. Raed Jawad Bukhamseen
Kuwait International Bank
Vice Chairman-CEO/General Manager
10
Mr. Walid Sayed AbdelKarim
Member of The Board Of WUAB
11
Dr. Emad Jawad Bou Khamsine
Bukhamseen Group Holding Company
Deputy Chairman of WUAB for The Arab World – Vice Chairman and Managing Director
Lebanon
1
H.E. Minister Raymond W. Audi
Audi Bank sal
Honorary Chairman
2
Mr. Sarkis Damarjian
Demco Steel
Chairman
3
Dr. Naaman Azhari
BLOM BANK s.a.l
Head Of Group
4
Mr. Rami El Nimer
First National Bank S.A.L
Chairman
5
Sheikh Khaldoun Barakat
Lebanese Islamic Bank
Chairman
6
Mr. Elie Torbey
Credit Libanais for Insurance and Reinsurance
Chairman
7
Dr. Salim Sfeir
Bank of Beirut s.a.l.
Chairman & Chief Executive Officer
8
Mr. Joseph Sassine
Banque de L’Habitat
Chairman & Chief Executive Officer
9
Mr. Antoun Sehnaoui
Société Générale de Banque au Liban s.a.l
Chairman & Chief Executive Officer
10
Dr. Khater Abi Habib
The National Co. For Deposit insurance
Chairman and General Manager
11
Mr. Saad Azhari
BLOMINVEST Bank S.A.L
Chairman and General Manager
12
Mr. Tarek J.Khalifé
CREDITBANK S.A.L
Chairman and General Manager
13
Mr. Alexis Saghbini
Credit Card Management
Chairman and General Manager
14
Mr. Roy Khalaf
International Payment Network
Chairman & General Manager
15
Dr. Sami Nseiri
Collect S.A.L.
Chairman & General Manager
16
Mr. Abdulrazzak Ashour
Fenicia Bank
Chairman & General Manager
17
H.E. Mr. Marwan Kheireddine
Al-Mawarid Bank s.a.l
Chairman & General Manager
18
Mr. George Bechara El-Khoury
Credilease SAL
Chairman & General Manager
19
Mr. Salim Y. Habib
Intercontinental Bank of Lebanon S.A.L
Chairman & General Manager
20
Mr. Mohamed Wajih El-Bizri
Credit Libanais S.A.L Group
Member of the Board of Directors
21
Mr. Samih Seaadeh
Banque BEMO
Member of The Board Of Directors
22
Mr. Moustafa Alaedine
Lebanese Islamic Bank
Member of The Board Of Directors
23
Mr. Rabah Jaber
Credit Libanais S.A.L Group
Member of the Board of Directors
24
H.E. Mr. Minister Marwan Hamadeh
Credit Libanais S.A.L Group
Member of the Board of Directors
25
H.E. Mr. Jack Jokhderyan
Credit Libanais Investment
Member of the Board of Directors
26
H.E. Ambasador Micheal Haddad
Credit Libanais Investment
Member of the Board of Directors
27
Mr. Mutassim K. Mahmassani
Al Baraka Bank Lebanon SAL (B.B.L)
General Manager & Board Member
28
Mr. Fadi El-Daouk
Levant Investment Bank LiBank
Chief Executive Officer
29
Mr. Michel Saroufim
Fransa Invest Bank SAL
General Manager
30
Mr. Najib Semaan
First National Bank S.A.L
General Manager
31
Dr. Chafic Moharram
Lebanese Islamic Bank
General Manager
32
Mr. Alain Hakim
Credit Libanais S.A.L Group
Asst. General Manager
33
Mr. Georges Karkabi
Credit Libanais Investment
Deputy General Manager
34
Dr. Michel Khadige
Credit Libanais S.A.L Group
Deputy General Manager
35
Mr. Georges El Hajj
Credit Libanais S.A.L Group
Regional Manager
36
Mr. Nadim Issa
Credit Libanais S.A.L Group
Regional Manager
37
Mr. Maroun El-Khoury
Arab African International Bank
Regional Manager
38
Mr. Mounir Lyan
Banking Control Commission of Lebanon (BCCL)
Executive Board Member (2015 – 2020)
39
Dr. Haroutioun Y. Samuelian
Banque Du Liban
Former Fourth Vice-Governor
40
Mr. Samir Hammoud
Banking Control Commission of Lebanon (BCCL)
Chairman (2015 – 2020)
41
Mr. Ahmed Safa
Banking Control Commission of Lebanon (BCCL)
Executive Board Member (2015 – 2020)
42
Mr. Sami El-Azar
Banking Control Commission of Lebanon (BCCL)
Executive Board Member (2015 – 2020)
43
Dr. Nabil Soubra
First National Bank S.A.L
Chairman’s Advisor For Foreign Affairs
44
Dr. Francois Bassil
Byblos Bank S.A.L
Member of WUAB Advisory Council – Head of Group
45
Mr. Khaled T. Chahine
Bank MED
Head of Legal Compliance-Data Protection Officer
46
Mr. Sleiman Daoud
CREDITBANK S.A.L
Assistant General Manager – Head of Risk Management Department
47
Mr. Sarkis Yoghourtdjian
Federal Reserve Board
Former Deputy Director (Federal Reserve Group) Member Of the Advisory Council of WUAB
48
Mrs. Maya Takkoush Chehab
Fransabank Group SAL
Head of group Governance and Capital Management Department
49
Mrs Isabel Mansour
BLOM Bank
Advertising, Media and Sustainability Director
50
Mr. Antoine El Msan
CREDITBANK S.A.L
Executive Senior Manager
51
Mr. Marwan Khawand
First National Bank S.A.L
Head of Information Technologie Depart.
52
Mrs. Nahla Bou Diab
Al-Mawarid Bank s.a.l
Deputy General Manager – Chief Operations Officer
53
Mr. Ghassan Abou AdAl
Al-Mawarid Bank s.a.l
Directeur Risk Management
54
Dr. Joseph Torbey
Credit Libanais S.A.L Group
Chairman of WUAB – Chairman General Manager
55
Mrs. Alhan Ahmad Sleiman
MEAB sal
Deputy Manager
56
Mrs. Nada Rizkallah
Credit Libanais S.A.L Group
Deputy General Manager – Head of Risk Management and Strategy
57
Mrs. Hayat Nader
Credit Libanais S.A.L Group
Governments and Public Institutions Relations Coordinator
58
Mrs. Randa Bdeir
Credit Libanais S.A.L Group
Deputy Director General of the Department of Electronic Payments and Payment Card Technology
59
Mr. Georges Toufic Gerios
Credit Libanais S.A.L Group
Assistant General Manager – Operations Management
60
Mr. Jhonny Torbey
Credit Libanais S.A.L Group
Assistant Global Treasurer – Bank Consultant
61
Mr. Meguerditch H. BOULDOUKIAN
Credit Libanais S.A.L Group
Head, Global Business Development Desk (2012 – 2020)
62
Mr. Chahdan Jebeyli
Audi Bank sal
General Manager – Group Chief Legal & Compliance Officer
63
Mr. Adel Macaron
Credit Libanais S.A.L Group
Head of Legal Affairs
64
Mr. Alexandre J.Salem
Credit Libanais S.A.L Group
Assistant General Manager – Head of Treasury and Capital Markets Division
65
Mr. Elie Abi Mrad
Credit Libanais S.A.L Group
General Controller-Head of Group Internal Audit
66
Mr. Charbel Mourad
Credit Libanais S.A.L Group
AGM – Group CFO
67
Mr. Fadlo Choueiri
Credit Libanais Investment
Assistant General Manager – Head of Corporate Finance & Economic Research
68
Mr. Mohamed Ali Beyhom
Bankmed
Former CEO
69
Mr. Michel Ruwayheb
Federal Bank
Former General Manager
70
Dr. Fadi Joumaa
72
Mr. Habib Rahhal
BLOM Bank
Former General Manager
Libya
1
Mr. El-Seddiq Mohamed Abdullah Khanfar
National Commercial Bank
General Manager
2
Mr. AbdulRazzak Beleid El-Tarhoni
Gumhouria Bank
General Manager
3
Mr. Abdulrazak Mohamed Elhoush
First Gulf Libyan Bank
General Manager
4
Mr. Bashir Mabrouk Zahmour
Gumhouria Bank
Asst. General Manager
5
Mr. Al-Brane Mohamed Hasn Al-Brane
National Commercial Bank
Director of Public Affairs Department
6
Mr. Ali Atiya Omar
National Commercial Bank
Administrative Manager
7
Mr. Emhemad El-Bourawi Krir
National Commercial Bank
Chargée du Bureau du Directeur général
8
Mr. Abdulrazaq M. Lagha
Gumhouria Bank
Director International Relations
Maroc
1
M. Redouane Najmeddine
Al Barid Bank
Président du Conseil
2
M. Othman Benjelloun
Groupement Professionnel des Banques du Maroc
Deputy Chairman of WUAB For The Expatriate World – Chairman
3
M. Mustafa BENABBOU
Groupe Crédit Agricole du Maroc
Directeur du Pôle Banque Digital
Qatar
1
Sheikh Fahad Bin Mohd J. Al-Thani
Doha Bank
Chairman
2
Mr. Abdulbaset Ahmed Abdulrahman El-Shibi
Qatar International Islamic Bank
Chief Executive Officer
3
Mr. Abdulaziz Nasser Al-Khalifa
Qatar Development Bank
Chief Executive Officer
4
Sheikh Abdulrahman Ben Jaber Althani
Doha Bank
Directeur Générale Délégué
5
Sheikh Hamad Ben Naser Al Thani
General Secretarait for Ministry Cabinet
6
Mr. Abdulla A. Al-Asadi
Doha Bank
Head of CRM & Private Banking
Republic Djibouti
1
Mr. Ahmed Humaid Al Deib
CAC International Bank
Member of The Board of WUAB – Executive Director
Republic of Yemen
1
Mr. Mahmoud Ata Hasan Al Refaei
Tadhamon Bank
General Manager
2
Mr. Basheer Sultan Almaqtari
Tadhamon Bank
Deputy General Manager
Saudi Arabia
1
Mr. Ayman Sajiny
Islamic Corporation for the Development of Private Sector (ICD)
CEO/General Manager
2
Dr. Mustafa El-Sabban
Islamic Development Bank
Cheif of Staff
Sudan
1
Mr. Abbas Abadalla Abbas
Tadamon Islamic Bank
Member Of The Board of WUAB – General Manager
2
Mr. Ahmed Mohamed Galal
Export Development Bank
Deputy Chairman
3
Mr. Moawia Ahmed Elemin Abdul Rahman
Faisal Islamic Bank (Sudan)
Chief Executive Officer
4
Dr. Amer Abed El Wahab El Alawi
El-Jazeera Sudanese Jordan Bank
General Manager
5
Mr. Alnour Ajabna Izalarab Ismael
Alsalam Bank
General Manager
6
Mr. Mohamed ElTahir ElTayeb
Faisal Islamic Bank (Sudan)
Director of Total Quality Management
7
Mr. Khalid Mohammed Zeain El-Sheikh
Faisal Islamic Bank (Sudan)
Head Of Marketing Department
8
H.E. Dr. Mohamed Kheir El-Zobeir
Central Bank of Sudan
Former Chairman (Central Bank of Sudan) Member Of the Advisory Council of WUAB
9
Mr. Salah Mohamed Abdelrahim Ali
10
Mr. Abdala Ahmed Ali Fadl
11
Mr. Osman Abdel Azeem Mohamed Huissein
12
Mr. Othman El-Toum Mohamed El-Hasan
El Nilein Bank (Sudan)
Former Managing Director
Sultanate Of Oman
1
H.E.Sheikh Khalid bin Mustahail Al Mashani
Bank Muscat SAOG
Member Of the Advisory Council of WUAB – Chairman
2
Mr. Sulaiman Hamad Hamood Al Harthi
Alizz Islamic Bank
Chief Executive Officer
3
Mr. Khalid Jamal El-Kayed
Bank Nizwa
Chief Executive Officer
4
H.E.MR. Hamoud Ben Sangour Al-Zadjali
The Arab Academy for Banking & Financial Sciences
Member of The Advisory Council of WUAB – Chairman of The Board of Trustees
5
Mr. Abdul Razzak Bin Ali Bin Issa
Member Of the Advisory Council of WUAB
6
Dr. Adnan Ben Haider Ben Darwish
Oman Housing Bank S.A.O.C
Member of The Advisory Council of WUAB – General Manager
Tunisia
1
Mrs. Mouna Saaied GHATTOUFI
Association Professionelle Tunisienne des Banques&des Etablissements Financiers
Member of The Board of WUAB – Delegue General
Turkey
1
Mr. Walid Alameddine
Amdeya Group
Member of The Board of WUAB – Executive Chairman
United Arab Emirates
1
Mr. Mohamed Ahmed Abdalla Mohamed
Sharjah Islamic Bank
Chief Executive Officer
2
Mr. Walid Tabbal
Abu Dhabi Commercial Bank
Division Head Corporate Banking DNE
United Kingdom
1
H.E. Dr. Farouk El-Okdah
National Bank of Egypt (UK) Limited
Chairman
United States of America
1
Dr. George T. Abed
Institute Of International Finance (IIF)
Member Of the Advisory Council of WUAB-Distinguished Scholar in Residence
By: Dr. Mohammad Ibrahim Fheili, Risk Strategist & Capacity Building Practitioner
Lebanon walked out of Paris II in November of 2002 with US$4.5 billion in soft loans from countries friends of Lebanon. This represented, at the time, 25% of the country’s Gross Domestic Product (GDP). It must’ve been a much needed fund but it was not properly utilized. After that, political class’s appetite to spend grew stronger with little to no reforms to report or claim. The nature and magnitude of the debt problem couldn’t be made clearer with the statement of, then the chairman of the Board or Directors of the Association of Banks in Lebanon (ABL), in February of 2012, Dr. Francois Bassil, came out strong against banks continuing on the path of lending the government. It was utterly clear that Lebanon’s public debt is getting out of hands, and it is no longer sustainable. With banks operating in Lebanon bearing half of the public debt in foreign currencies, and over two-third of the debt denominated in domestic currency, that put them in the eye of the storm! The government’s disorderly default in early March 2020 turned Bassil’s legitimate fear into a horrible reality. The nature of the crisis and its magnitude make a government rescue and recovery plan very complex, and it will most definitely fall short of dealing with the causes of the crisis.
THE BANKING LANDSCAPE
Banks under-estimated the risks associated with buying in Lebanese government debt instruments, and over-invested in these securities. Isn’t it time to ask if the state of banking in Lebanon, the way it’s been, is healthy and sustainable? I doubt it is. I can think of a few areas that banks need to revisit, look long and hard to identify weaknesses, and effectively deal with them.
The Banking Model. The excessive reliance on deposits as the only source of fund for banks makes managing liability more challenging relative to a banking sector with more diversified sources of funds. Banks, in recent years, spread their wings very thin knowing the volatility of their sources of funds. Banks’ uses of funds have been effortlessly allocated as follows:
Required Reserves (25% on Lebanese Pound – LBP, and 15% on Foreign Currency – FC, which comes in the form of Mandatory Placements with Banque Du Liban, BDL, the country’s central bank) are balances held at the central bank earning no explicit return. However, what was supposed to be ready reserves failed in 70% of it when that much turned into long-term subsidized loans as a part of an expansionary monetary policy initiative which turned sour because, in pursuit of explicit returns, banks failed to match the high quality of this reserve with high quality loans! Banks utilized every penny in regulation, and, by doing so, the mandatory reserves effectively dropped from 25% to less than 18% leaving banks exposed.
Excess Reserves which, to date, remained as ready reserves in the purest sense of liquidity. Banks allocate this liquidity between cash in Automated Teller Machines (ATMs) and with tellers.
Loans to private sector. Retail (car, personal, housing, … loans to individuals), commercial (overdraft facility, term-loans, project finance, … to business enterprises). For most banks in Lebanon, the loan-to-deposit ratio jumped over 65%. Not all banks followed best practices in lending. The problems of adverse selection and moral hazard became obvious when at the first sign of deteriorating economic conditions in late 2017, non-performing loans jumped up with little impact on bankers’ appetite to lend more; lending continued until up mid-2019, right before the ‘big bang’ – the uprising of October 2019. On the other hand, in order to avoid being penalized through provisions for loan loss reserves, banks practiced a worrisome rigidity in downgrading the quality of their loans; a practice the Board of Directors and the external auditors found no harm in it. Finally, since loan sales is not a viable option here in Lebanon, loans are, by far, the most illiquid form of uses of funds even a simple delinquency in settling a payment on a loan is easily felt in the bank’s realization of ready liquidity derived from the settlement of debt.
Placements with non-resident banks, mostly correspondent banks. These placements are used [as a cushion] to facilitate the financing of international trade. Although these deposits are, in principle, ready liquid assets for the banks, today, most of them are held against off balance sheet facilities (e.g., letters of Credits, Bank Guarantees, etc.) extended by the correspondent banks (to the banks). The downgrading of the country’s credit risk rating eats away from the power of these placements in terms of their ability to support international trade.
Placements with resident banks, most of these are referred to as overnight placements but with an actual maturity of one week. This is settled quickly and it is used to manage short-lived surpluses and/or deficits in liquidity. Recent events rendered the overnight market to no use since all banks have been suffering from shortages in liquidity.
Investments in Treasury Securities and Eurobonds. The exposure that bears the higher risk is the one denominated in foreign currency. The latest awakening by the people of Lebanon over years of corruption and irresponsible spending by the fiscal government brought concerns over the interdependency between the availability of depositors’ funds, the quality of Banks’ uses of fund, the extent of the Central Bank’s exposure to the public sector, and the health of the fiscal government and its ability to honor its commitments. That describes the nature and extent of complexity the financial system in Lebanon has been enduring since early 2020. These securities are mostly held till maturity where banks benefit from the coupon payments, and a small portion is held for trading. However, recent years witnessed a noticeable conversion of Eurobonds into placements with BDL as an expression of the disapproval of banks over the conduct of the fiscal government. These forms of investments suffered immensely with the disorderly sovereign default in March of 2020. Best practices call on banks holding these types of investments to write these assets off completely and immediately! Instead, however, banks continue to consider, to date, these government securities as a part of their high quality assets in their calculations of the Liquidity Coverage Ratio (LCR), and Net Stable Funding Ration (NSFR). That’s the kind of false sense of safety and security which I spoke of earlier.
Placement with the central bank of Lebanon. These placements are over and above both the mandatory placements with BDL and the reserve requirements. They are distributed between small clearing balances, and the rest in certificates of deposit. These are, in principle, risk-free placements had the Central Bank kept them as liquid as they ought to be. But, in recent months, it became apparent that BDL used a large portion of these placements, in both domestic and foreign currencies, to bail out the government’s ailing public finance filling in the void that banks created by pulling away from lending the government.
The banking model deployed by most banks has been rigid, and outdated for being based on originate-to-hold with most of the assets. In addition, it strictly relies on short- to medium-term deposit funding; it’s very restricted with respect to banks’ ability to convert assets into cash; and weak in properly and effectively assessing the risks associated with the uses and sources of fund. I attribute that to the false sense of safety and security that banks have received from the country’s regulatory authority. I recommend that every bank should intentionally differentiate between what is required for regulatory compliance and effective risk management:
In fact, the data produced by most, if not all, banks is done just enough to satisfy BDL reporting requirements. Banks’ MIS is guided by the data reporting templates provided by the central bank; these templates that have never been challenged not in form nor in content or substance. The figures in regulatory reporting clearly understate the true risks since it is not risk-driven.
However, the bank’s own identification and assessment of all risks is what matters to its solvency. These numbers show if the bank is adequately capitalized or not; and if more needs to be done to cushion the true risks. This is at the heart of what should be expected out of the risk management unit at a bank. Banks have not been paying close attention to risks because it is not a profit-generating activity. Instead, they feel content with just compliance. Compliance is definitely not the job of the Chief Risk Officer!
The Board of Directors should introduce and enforce rules to remove incentives for excessive profit-taking behavior, and ensure that the bank is adequately cushioned against true risks at all times.
The rules of engagements between the banks and their clients. Banks ought not promise more than they can credibly, sustainably and profitably deliver. For most clients, what is possible today becomes mandatory tomorrow! This is the case in normal times, and crisis time should have its own rules of engagement. Unfortunately, banks failed to include “communication strategy” in their crisis management and business continuity plan. Ever since day one of the crisis and banks have been forcing all kind of controls on movements in clients’ accounts:
controls on withdrawals,
controls reaching the level of complete cancelation of credit and debit cards,
controls on fund transfers out of Lebanon
banks stopped opening new accounts, giving new loans, and cut working hours by half.
All of this happened with no prior notice and/or an explanation to clients why it happened! In addition, not all banks applied the same controls; each bank acted on its own, and these measures were not guided nor mandated by the regulatory authorities. The enthusiasm with which banks mobilized their resources (people, call centers, social media, etc.) to introduce new products and services all collapsed during the most recent crisis. It has been a complete communication breakdown between banks and their clients. In fact, even the Association of Banks in Lebanon, the banking community’s well-endowed lobbyist, has been an absent actor on the banking crisis scene!
The relationship between banks and the Central Bank. The Central Bank of Lebanon (BDL) failed to effectively supervise banks because the manner with which the sitting Governor planted the seed of this relationship and helped it grow, it presented BDL as a chaperone not a whip. It made banks live under the impression that compliance shall set them free not necessarily effective risk management! With the blessing of the Banking Control Commission, banks left it up to the regulators to size their (banks’) risks. In effect, this recent crisis showed that:
Commercial banks and the central bank of Lebanon are reflections of each other.
The activities of both are inextricably intertwined, and the institutions undeniably share a commonality of interests.
Central bank supervision of commercial banks, helping to assure maintenance of standards and sound banking practices, contributes to the health of the industry and to the trust and confidence upon which banking depends. This quickly tumbled on that morning after the crisis ignited; a testimony of failure!
Finally, the extent to which the Special Investigation Commission (SIC) was accommodating to banks on anti-money laundering (AML) issues resulted in the death of two banks so far, the Lebanese Canadian Bank in 2011, and Jammal Trust Bank in 2019. In most jurisdictions, the “undo” button on AML issues has been disabled long time ago; expect in Lebanon with the SIC culture, we can “undo” and do over again and again until we get it right, or we get caught by the US Treasury!
Lending practices. Banks focused more on the Credit Approval Process (CAP) and less on the Asset Life Cycle (ALC). The CAP concentrates the power of decision in the hands of one or two who are either most familiar or most intimate with clients and with a strong tendency to socialize the decision-making process; and it helps the bank score a loan with little attention to what happens after origination and recognition of the facility. However, the ALC engages the bank with proper planning ranging from developing a target market to securing that the facility is in line with the bank’s strategic objectives, all the way to securing a good performance and timely settlement of the debt leading to repeat businesses. Considering that the bank originates an asset to hold till maturity, it is the better approach to focus on the asset life cycle.
LOOKING AHEAD
A clear plan to reschedule and/or restructure public debt is undoubtedly necessary but it is not sufficient. A strong prerequisite for improving Lebanon’s capacity to recover and reclaim its economic power is a sound banking sector. Banks have failed to properly assess the risks associated with their sources and uses of funds. Today, banks are carrying loads of troubled assets which severely constrained banks’ ability to meet deposit outflows; and it most likely will drain their capital at a time the government is completely handicapped and not capable of providing the much needed bailout. Prompt restructuring, and adequate recapitalization are a must; although there shall be consequences!
Recapitalization involves a major change in the way banks are funded, and it, essentially involves providing the banks with new capital. This improves the banks’ balance sheet and prevents them from going bust. Since the start of the economic crisis and the resulting credit crunch, banks operating in Lebanon have lost much money because:
First and for most, the government of Lebanon took the irresponsible decision to default on its debt in the absence of a plan to restructure or reschedule the debt. Banks operating in Lebanon are major creditors (Banks hold 50% of the debt denominated in foreign currency, and over 70% of the debt denominated in domestic currency).
BDL’s decision to continuously bail out the bankrupted government with depositors’ money made the problem worst, and rendered recovery and BDL’s capacity as lender of last resort near impossible.
The recession was exacerbated by the un-legislated capital controls, and led to more defaults by individuals and business entities which expanded the portfolio of non-performing loans.
The credit crunch meant that banks are no longer able to lend to each other; they cannot meet the demand for deposit withdrawals; and they lost confidence. This created the need for recapitalization. Recapitalization is necessary, but not sufficient, for the rescue and recovery of banks. Over and above the drive to adequately capitalize, banks should agree to an improvement course of actions (self-imposed or imposed by the regulatory authority):
Accurately assess the true volume of non-performing loans, and maintain reasonable levels of lending since excess lending created problems in the first place,
Ensure proper identification and assessment of all risks on all placements,
Freeze the payment of bonuses and dividends until capital is restored to an adequate level,
Consolidate, downsize, and/or merge. What is important at this juncture is the health of the financial sector, and not the health of any one particular financial institution,
Reassess the capacity of key management positions to deliver. Positions such as Corporate Banking, Chief Financial Officer, Chief Risk Officer, Treasury, Chief Internal Audit, and Head of Branch Network,
Reassess the Composition of the Board of Directors, and the capacity of each member to deliver as expected and required,
Limit the period of engagement between each financial institution and its external auditors to no more than five years only,
Cleanse your institution from all political contamination, and detach from dependency on politically exposed persons.
Fresh fund can help improve bank liquidity, but it doesn’t necessarily improve nor sustain its performance. There is more to healthy banking sector than just recapitalization and the extra fresh fund.
CONCLUSION
Banks, as profit-maximizing firms, did not fail on the profit-maximizing objective but they fell short of effectively considering the constraints encountered in this optimization process. Managing risks, and abiding by regulatory guidelines constrain banks’ strive for profits. The regulatory authorities and Bank Management have always claimed success on the regulatory front. However, the state that banks are in today clearly points in the direction of an utter failure when it comes to managing risks: on lending, banks went for volume and played down the importance of quality; they were fully aware of the corruption which infested the political landscape, but despite that they continued on lending the government; on the liquidity front they did not do any better.
With the recent crisis, serious problems in the banking model and the conduct of bankers emerged and recovery is no longer about what the government should do; restructuring and reorganizing the banking sector has become urgently needed.
The year 2020 has been dictated by the ever-growing spread of the pandemic. The exponential proliferation of Covid-19 has caused entire economies to cease operations as the number of cases and subsequent deaths keep rising. As policymakers weigh the health costs of the pandemic to its economic losses, and as they frantically try to decide the extent and intensity of lockdowns, the global economy has endured a devastating shock. With the frequent shutting down of businesses, education centers, and restrictions on travel, confidence levels have plummeted as consumption and investments have reached new lows. As a result, supply chains, world trade, and the touristic sector were heavily disrupted and the financial, commodity, and stock markets experienced extreme volatility. The efforts exerted in controlling the pandemic and containing it have triggered exceptional demand and crash in oil prices. Considering the speed of which the crisis has dominated the global economy may give us a perception on how devastating the recession will be, and how difficult it might be to overcome it.
According to early estimation, major economies were expected to lose at least 2.4% on average of the value of their GDP. This led economists to decrease their 2020 forecasts of global economic growth to 2.4 percent, down from around 3.0 percent. In order to understand this estimation better, global GDP was estimated at around 86.6 trillion U.S. dollars in 2019, this translates to a mere drop of. 0.4% in economic growth amounts to almost 3.5 trillion U.S. dollars lost in economic output. Nevertheless, these estimations were made before covid-19 erupted, and long before the efforts to contain it were implemented. Ever since then, the global economy has suffered from a dramatic decline due to the outbreak, with the actual growth in global GDP for 2020 now confirmed having been -3.5%.
Sector Performances in 2020
Services: The Services sector, incorporating everything from trade, investments, industrial, tourism, and social life, has been one of the worst affected industries in 2020. The reason for its demise is that it relies mainly on face-to-face interactions, and its growth is disproportionate to the length and severity of lockdowns, something the vast majority of people have grown accustomed to in 2020. Nevertheless, not all subsectors of the services sector have been equally affected, and unfortunately aid was not distributed proportionately. In the US for example, while the accommodation and food services industry lost 32% of all jobs in 2020, the financial and insurance sector only lost 0.2% of vocations. Yet, the former only got 8.1% percent of aid distributed – equivalent to $7,800 per job loss from February to April 2020- while the latter obtained a total of $8billion in grants equaling $350,000 per job loss. Other extremes were the real estate sector totaling 91,300$ in funding per job loss and the arts and entertainment sector obtaining $8,000 per job loss.
Industry
Jobs Lost (%)
Grants (%)
Finance & Insurance Services
0.2
2.3
Real Estate Services
1.1
3.0
Information Services
1.2
1.8
Professional, scientific & technical Services
2.5
12.7
Arts & Entertainment
6.3
1.6
Accommodation & food services
31.8
8.1
Manufacturing: While the manufacturing sector also suffered, the sector was relatively better off during 2020 than services. In fact, 94% of all manufacturing plants were operational during peak pandemic times, with 56% of them operating at full-operational capacity and 44% at partial capacity. Nevertheless, global Foreign Direct Investment in the manufacturing service sharply decreased as the pandemic caused investors to become more risk averse. In general, global FDI decreased from a high of $29,823 million for a total of 233 projects in the month of November 2019 to a low of $2,513 million across 49 projects in July 2020.
IT and Communications: As expected, the IT and communications sector had one of its best years in 2020 in terms of global adoption. From the consumer side, online shopping has increased by 15%. Amazon, an the largest IT-based company roughly doubled its entire workforce by adding 400,000 extra jobs. As for corporate adoption, a study by McKinsey and Company claims that “funding for digital initiatives has increased more than anything else—more than increases in costs, the number of people in technology roles, and the number of customers”. In fact, that same study also concluded that the pandemic has led to the percentage of North American digital consumers to rise by 58%.
Oil and Transportation: Air-travel’s decrease of 60% owing to the pandemic has left the airline industry with losses amounting to $370billion. With aviation being the primary consumer of 7.8% of all total oil consumption worldwide, it is then no surprise to see that the commodity price of oil has fallen by -32.7% in the year of 2020, with a portion of that fall reflecting the decrease in oil demand by manufacturing plants as well.
Global Trends 2020
As the pandemic primarily emerged, imposing increasing and surging human costs worldwide, the global economy was projected to decline by 3% in 2020. This is much worse than what had occurred during the 2008-2009 financial crisis. These numbers were preliminary and were based on the assumption that pandemic was supposed to fade in the second half of 2020 and lockdown measures would eventually unwound. Additionally, the global economy was projected to grow by 5.8% in 2021 as the economic activity returns to its normal pace. However, the reality is that the pandemic had a more negative impact in the first half of 2020 than anticipated and the recovery is predicted to be slower than previously estimated. Secondary estimations have predicted a further decline of growth projected at -4.9%, and a global growth of 5.4% in 2021. The stricter the lockdown measures, and the wider spread of the pandemic, the greater the uncertainty around this forecast. The baseline of the projection rests on key assumptions about the fallout from the pandemic. Specifically, among emerging markets, the first quarter GDP was worse than expected, with a catastrophic hit to the global labor market, a contraction in a global trade and weaker inflation. Nevertheless, while the impact is different across the different sectors and different regions.
Recovery: Sectors Projections
Sectors:
Services: The recovery of the service sector will depend largely on how effective vaccines are in achieving herd immunity, and how fast they are distributed. If vaccines are distributed in bulk and lockdown measures begin to fade, advanced economies would reach herd immunity by mid 2021, and the services sector would directly rebound. There is also an opportunity for developing economies to permanently shift to a more digitalized service sector, as the pandemic has given them the opportunity to familiarize themselves with appropriate technology, which has vastly increased growth in services by complementing traditional means of work.
Manufacturing: For 2021 and beyond, Covid-19 might have been a blessing in disguise for the manufacturing sector. Yes, output has vastly decreased as global trade and supply chains took a grand hit, forcing many manufacturing companies to either exit the industry completely or temporarily suspend operations. But for those that survived, 96% of manufacturing CEO’s have claimed that the pandemic has sped up their digitization plans, thus allowing them to increase outputs for a lower cost. And with the promise of better 5G networks, AI systems, and virtual reality models, the future of this industry seems promising.
IT and Communications: This sector can be seen as a hero of the pandemic. From virus heat maps and virtual clinics, to online learning and corporate meetings, the IT and communications sector helped humanity endure lengthy economic shutdowns. As for the future, the world has now embraced technology more than ever before and is not going to look back. Automated manufacturing plants and AI service robots are both set to change the manufacturing and service sectors in the near future, causing various low-to-medium skilled jobs to become obsolete while high-skilled opportunities increase.
Oil and Transportation: 2021 doesn’t look like the year in which oil rebounds, in fact, oil prices might take as long as 2023 to go back to pre-pandemic levels. This pessimistic outlook is related to the transportation sector, with new strains of the virus emerging and vaccines set to take a long time before being properly distributed in developing nations, meaning that the travel industry, and overall demand for oil, will remain stagnant. Additionally, OPEC+ producers have already agreed to increase oil output by 500,000 barrels per day at the beginning of 2021, with further discussions to possibly re-increase output by an extra 500,000 barrels per day beginning 1st of February 2021. If these increases prove to be too impulsive, oil prices could even see a further decrease in 2021.
Anticipated Growth by Regions 2021:
MENA Region:
In 2020, and after being forecasted to grow by 2.6 percentage points, the MENA region’s growth instead contracted by 5.2%. Due to the duality of the Covid-19 pandemic and oil crisis, oil exporting countries in MENA suffered incredible losses while the gains of oil-importing economies were offset by the hit of the tourism sector and the substantial decrease in remittances. In fact, output loss in the region is expected to exceed $230 billion. And as countries have to rely on expansionary monetary and fiscal policies to support struggling businesses, public debt in the region is expected to reach 58% of GDP in 2022, up from 45% in 2019. According to data from the United Nations Conference on Trade and Development, trade is also projected to have fallen by 40% in the region in 2020. In 2021 though, The MENA region is expected to bounce back strongly with a growth percentage of 3.2%, with all economies in the region expected to grow in some capacity (except for Lebanon which is expected to contract by a further 6.4%). Yet after the initial rebound, growth in the region is expected to heavily stagnate owing to the following risks.
Weak Fiscal and Health Care systems
Having populations at a constant risk of displacement (eg: Syria)
Increase in short-term inequality owing to the oil sector being the first to recover
Increased US-Iran tensions
Conflicts in Libya and Syria exacerbating and Yemen’s Peace talk imploding
Delays in the formation of governments in many MENA countries
Europe
In Europe, real GDP growth is projected to have decreased by 7.4% in 2020, more than during the global financial crisis. The impact was felt most by the region’s more advanced economies, including Spain (-12.8%), Italy (-10.6%), France (-9.8%), and the United Kingdom (-9.8%). These contractions were mostly caused by the drop in demand, exports, and tourism, as well as the volatility faced in the financial markets and supply chains. Nonetheless, the situation could have been more dire still if not for the economic support that governments showed. Job-subsidizing policies, for example, are thought to have preserved a minimum of 54million jobs and kept demand relatively higher. In 2021, Europe is expected to start its recovery with a forecasted growth of 3.6% founded by enhanced covid-19 management and preliminary vaccine rollout. In the coming years, it is also advised that Europe re-focus its policies on products instead of people, aiming to solve the continent’s long-standing problems of increasing income concentration, low productivity growth, and the short-term struggles in shifting to more climate-friendly corporate standards. The risks that might stand in the way of such progress include:
Insolvency of firms leading to a weakened banking sector at best and a financial crisis at worst
The loss of global chain partnerships
Brexit dampening trade within Europe
The continuance of the current drought affecting large parts of Eastern Europe
Asia
Remarkably, Asia was perhaps the continent that most effectively handled the pandemic. On average, Asian economies were the fastest to enforce strict lockdown measures, closing after an average of five days following an outbreak. These measures proved fruitful, as Asia is set to contract only 2.2% in 2020 and then grow by 6.9% in 2021. In fact, some Asian economies actually grew in 2020, most notably China (1.9%) and Vietnam (1.6%). What is perhaps even more astounding that despite the growth in 2020, China is still set to grow by a further 8.2% in 2021, making it the world’s most resilient economy during the pandemic. In fact, China is also Asia’s most relatively open economy, with schools and the industrial plants fully open, retail and services open with restrictions, and travel partially open. Quite a few lessons can be learned by the way most Asian economies mitigated Covid-19, for on average, Asian countries exited lockdown with the fewest new cases, showing that it is better for both overall health and the economy to only ease lockdown once the virus has been suppressed. Asian countries, on average, also had the most testing and tracing percentage in the world, highlighting the importance of government initiative in trying times. Nevertheless, some risks still remain for Asian economies to beware off in 2021 and are the following:
An escalation in the US-China trade war, and overall tensions between the two political behemoths, could be potentially disruptive to the region’s trade, financial, and technological sectors.
While Asia was relatively effective in curbing the pandemic, the crises that ensued were disproportionately impacting the most vulnerable classes, with little-to-no government action to prevent the poorest from suffering the largest burden of the costs.
An expected tightening of monetary policy directly after the pandemic could be extremely risky to small and medium enterprises in particular, and to the overall credit and debt markets in general.
An increase in regional geopolitical tensions between India and Pakistan, India and China, and the parties involved in the South China Sea dispute, could lead to a race to the bottom.
China
Despite being the pandemic’s pivot, China has become the first and only major economy to recover from the consequences of 2020 and enter 2021 with a rather optimistic outlook. The implementation of stable and “time-sensitive” policy responses has allowed China’s economic growth in the last quarter of 2020 to return to its pre-pandemic levels.
In the first quarter of 2020, China’s growth shrank 6.8%, but it bounced back in the second and third quarters with a rate of 3.2% and 4.9% respectively. This bounce back can be attributed to several strategies, one of them is the reprioritization of macroeconomic objectives, and a focus on enhancing exports, connected to the high demand for medical supplies, equipment and electronics. Factors also include a great deal of investment in infrastructure and real estate. Despite hitting a low in 2020, several experts predict China’s GDP growth will reach 8 to 9 percent in 20201.
US-China Relations: Old vs New Administration
China’s economic pre-pandemic normalization is strongly linked to its tension with the U.S. The US-China trade war was launched back in 2018 with President Trump, when the US trade deficit widened. However, because of the pandemic, there has not been much improvement from the trade war’s retaliatory tariffs. In 2019, the US trade deficit with China decreased by 8.5%, and then increased again by 5.4% in 2020. Currently, it accounts for about 37% of the US total trade deficit. Should China achieve 8% of growth this year, with predicted currency appreciation and domestic inflation, IMF forecasts that the size of China’s economy relative to the US could be higher than 75%. So, it is expected that newly elect president Joe Biden’s stance on China will remain tough. Biden has previously explained that he will not cancel the Trump’s administrational additional tarrifs on China. Also, analysts expect that Biden might seek collaboration the U.S.’s well known allies to jointly contain China.
USA
In 2020, the United States faced a truly tough year. Even though its economic contraction of 4.3% tracks with that of the rest of the world (4.4%), the U.S. faced one of the worst health scenarios as it had over 20% of world-wide Covid-19 deaths even though it accounts for roughly 4.25% of world population. Prior to the pandemic, Trump’s economy was faring quite spectacularly, with unemployment reaching a 50-year low and inflation below the target of 2%, but it soon came crashing. During the second quarter of the year, real GDP sharply fell by a tremendous 31.4% while unemployment levels reached 14.7%. But what is perhaps most astonishing is the financial markets’ nonalignment with the economic reality. Even though U.S. stocks dipped during the beginning of the pandemic, they have now peaked and are estimated to be a record-breaking 83.8% overvalued. In comparison, stocks were only 49% overvalued during the Tech Bubble in 2000. Yet, the U.S. economy is still expected to grow by 3.5% in 2021, which is 0.5% lower than what was previously projected. Nonetheless, the following risks make it clear that while U.S. GDP might fully recover, welfare will take a longer time to do so:
The U.S.A. is projected to have a K-shaped recovery. Meaning that like the letter “K” that diverges in its strokes, so will the fortune of different classes in the U.S. economy. The rich are projected to get even richer while the poor still poorer.
The “K” economic recovery will also prevalent be in the job market. Sectors such as banking, telecommunications, and real estate now offer wages at levels 50% higher than before the pandemic while jobs in the leisure and hospitality sectors suffer from lower wages and a loss of 25% of employment.
Increased divide between the U.S. population’s political affiliations might cause serious social skirmishes, not unlike the recent Trumpian storming of the capitol
Potentially dangerous escalations in the conflicts between the U.S. and North Korea, Iran, and China.
U.A.E.
2020 has been a mixed year for the United Arab Emirates. With 30% of its GDP coming from gas and oil extracts, there is no wonder that the commodity’s fall in price had damaging effects on the economy, with oil output in Q3 reaching an almost decade low. As Covid-19 cases recorded new daily highs, the U.A.E government has done everything in its power to avoid extreme lockdown measures, including authorizing the emergency use of Chinese-owned company Sinopham’s vaccines, which have so far proven to be effective in the first two clinical trials. Whilst the economy is set to contract by 6% in 2020, U.A.E. officials can take comfort in the resilience of their non-oil private sector, which has reached a 16-month PMI high. This was not at all a stroke of luck but rather a result of careful planning and decision making.
Domestic markets: The Central Bank of the United Arab Emirates announced specific policies to deliberately ensure the survival of local businesses. It launched the Comprehensive Economic Support Scheme, with a goal to use a total of $27.23 billion to relieve private businesses and retail consumers of interest accumulated on outstanding loans, which is meant to act as a monetary stimulus to both strengthen supply and demand in the economy. Fiscal policies were also adopted, with the Central Bank launching the Targeted Economic Support Scheme and the UAE Cabinet declaring a further $4.36 billion stimulus package. The policies’ main objective being the support of domestic companies by cutting the cost of doing business and investing heavily in infrastructure projects. U.A.E is already one of the most diversified oil-exporting economies, and the country plans to further strengthen more non-oil related sectors in a bid to shift to a more modernized strategy. The financial sector will be pivotal in determining the success of such plans with the U.A.E counting on their easygoing lines of credit to fund projects mounting to a total value of $868 billion. $672 billion of the aforementioned valuation are pipeline projects of which $417.7billion are construction related. Moreover, the U.A.E also aims to revolutionize its travel and health care industries through heavy digitization. Country officials aim to continue introducing and expanding AI systems into these sectors to improve productivity, facilitate data collection and redistribution, and reduce human error. The U.A.E has already tested these AI models in their National Unified Medical Record, an AI central database in Dubai that was successful in redefining the region’s health care industry, and that is now being implemented nation-wide
Cross-border operations: The UAE’s recent success in negotiating an agreement with Israel to build a pipeline in Ashkelon is projected to substantially increase Emirati oil demand as the pipeline will be used to transport oil into Europe. On the 6th of January 2021, the U.A.E and Qatar agreed to fully reestablish diplomatic ties, which were severed on the 5th of June 2017 as part of the Qatar diplomatic crisis. Consequently, the U.A.E should see first quarter boosts to its trade and travel sectors. Lastly, it is predicted that the UAE will find itself largely unaffected by regional political instability, despite heavy Iranian tensions. As for domestic politics, the system is also expected to prove itself stable with a possible transfer of power from Abu Dhabi ruler His Excellency Khalifa bin Zayad Al Nahyan to Crown Prince Mohammed bin Zayed Al Nahyan expected to flow smoothly if the former’s health issues are to further deteriorate.
Political reality: In 2021, UAE’s economy is set for a recovery of 2.5% in real GDP, as well as a much-anticipated political reform. His Highness Sheikh Mohammed bin Rashid Al Maktoum has announced that the U.A.E will alter, merge, and change a number of governmental bodies in a bid to facilitate future governmental reforms by creating a more “agile, flexible, and speedy government”.
Possible Risks: Economists have been predicting a harsh expat exodus facing the UAE, with the UAE losing approximately 10% of its residents owing to a loss of 900,000 jobs. Due to expats having no welfare schemes and no permanent-citizenship routes, the loss of jobs has left most of them unable to bear the burden of the pandemic and contemplating a move back to their original countries. Nevertheless, the UAE once again acted swiftly to mitigate the effects of such a disaster by passing a decree that allows expats to use their native laws instead of the Sharia when dealing with personal affairs. It has also launched a virtual visa scheme that allows working professionals to relocate to Dubai and enjoy access to unfettered services, and started a retirement program for foreigners over 55, all in the hopes of encouraging foreign labor. On the supply side, Dubai has commenced an e-commerce platform called the Virtual Company License that allows businesses from all over the globe to freely explore the UAE market, with the platform set to attract over 100,000 companies in the near future. However, all of the aforementioned schemes, stimuli, and policies to protect the economy from the effects of the pandemic may backfire. As a result of these generous measures, Dubai’s governmental debt is estimated to have reached 77% of GDP ($80billion), and if we were to add government-related entity debt to that number, ratings agency S&P predicts that total debt is an astronomical 148% of GDP($153.8 billion).
To summarize, the UAE will start recovering in 2021 but future growth might slow down as a result of Dubai’s growing debt and the possibility of an Abu Dhabi bail-out similar to the one in 2009. A shift to increased diversification and fast vaccine rollout has helped the economy resist a further contraction of GDP but oil still remains fundamental. As such, lower-for-longer commodity prices are set to also contribute to the economy’s slow growth, even if the U.A.E does manage to capture a larger share of the European oil market.
Other Countries worth mentioning
Turkey: Turkey’s case in 2020 is an interesting one to say the least. Even though it contracted by 3.8%, and even though its Lira was heavily devalued when measured against the US dollar, Turkey still managed to avoid a bigger contraction as a result of intense policies oriented towards increasing credit. Nevertheless, Turkish businesses still suffered from the pandemic, especially those affiliated with the touristic sector and those that had limited solvency before the currency devaluation. And even though Turkey’s policies were an overall success, the nations’ restricted monetary reality left it incapable of carrying out all of the procedures it had originally planned.
KSA: In comparison, Saudi Arabia has had a relatively less rosy year. Stringent lockdowns coupled with a decrease in oil prices throughout 2020 has left the economy in shambles, with a growth rate of -5.4%. While some investors are optimistic that KSA’s economy is set for a rebound in 2021, others are warry seeing that growth in Saudi Arabia will largely depend on the recovery of global demand and the price of oil, which is expected to face another dip. The pandemic may also leave quite a lasting scar in the economy as the instability of financial markets and the country’s rising public debt might hamper the KSA’s plans to increase economic diversification in the near future. Still, save an exogenous shock or increased non-compliance by OPEC+ countries, KSA’s economy is set to grow by 3.1% in 2021.
Russia:Following its worst recession since World War II, the Russian economy is set to contract by 3.6% in 2020, with the hardest hit industries being retail, manufacturing, and construction. The pandemic has had a spillover effect on most Russian livelihoods, with the shrinking of businesses estimated to thrust 130 million people into extreme poverty by 2021. The Russian government, however, acted swiftly and have put in place several countercyclical fiscal policies raging from substantial macro-monetary support for struggling corporations to targeted social safety net policies meant to alleviate the burden of carried by the most vulnerable. Nonetheless, Russia was still helpless to combat certain issues, such as disrupted trade with the EURO zone -its largest trading partner- due to the pandemic’s effect on global value chains. In 2021, Russia is expected to start a strong rebound of 3%, followed by a complete recovery in 2022 when it is estimated to grow by a further 3.9%. Russia’s relative ease in rebounding from this pandemic lies in its still largely unfulfilled potential, with a gradual shift towards more technological driven manufacturing the basis for Russia’s expansion in the coming few years.
Global Trends:
Trade
We know that trade tends to be volatile and extremely susceptible to such crises (Bussière et al. 2013). In fact, total trade has decreased by 18.5% this year, the “steepest drop on record”, according to WTO Director General Roberto Azevêdo. Causes for such a deep contraction are various. Covid-19’s impact on travel has adversely affected the tourism sector, which is in turn responsible for the consumption of approximately 6.5% of world-wide goods and services. Moreover, the closure of borders between countries, accompanied by stricter import inspections, have resulted in an unwanted strain on the production and delivery of durable goods, most notably on electrical and automotive industries. As delivery time increases, most businesses that rely on day-to-day transactions have suffered from an increase in costs, and the air freight industry has been barely avoiding total ruin. Finally, disturbances in the credit market has had a rippling effect throughout trading economies, and as such, many agreements have fallen through. While the growth of global trade is imminent in 2021, complete recovery is less so. As borders gradually start the reopening process, airlines will start refilling their seats, and manufacturers will go back stocking their inventories. Nonetheless, trade’s recovery path depends on both overall confidence level, which will take time to go back to pre-pandemic levels, and the time needed to replace firms that have either contracted or shutdown due to low demand. In short, global trade should expect nothing more than a slow, L-shaped recovery
Food Crisis
The corona virus could not have come at a worse time for the 2030 zero hunger goal. With global food chains being hampered by the pandemic and job losses caused by economic tolls leading to more poverty, a large percent of the population will become food deprived in the coming years. The most vulnerable countries so far are Afghanistan, Burkina Faso Cameroon, The Central African Republic, Congo, Ethiopia, Haiti, Lebanon, Mali, Mozambique, Niger, Nigeria, Sierra Leone, Somalia, South Sudan, Sudan, Syria, Venezuela, Yemen and Zimbabwe. The UN estimates this crisis to be the worst food-related calamity in half a century. In fact, more people are now projected to die from Covid-associated food shortages than from the actual virus itself.
A potential debt crisis: Dangers of the Fourth Wave of Debt
The global recession triggered by Covid-19, along with the economic policy response, have generated a rise in debt levels, especially in emerging market and developing economies (EMDEs). Pre-pandemic, however, there has been an increasing concern about a “fourth wave” of debt accumulation, specifically in these economies, that can spark the possibility of financial crisis. This pandemic merely added to the risks and consequences of this fourth wave by intensifying this crisis. In 2019, global debt has increased to 230, an alltime high, and government debt to a record of 83% of GDP. In EMDEs specifically, total debt reached 176 percent of GDP and government debt is expected to rise by 9% of GDP in 2020.
As a result of substantial financial stimuli, accrued interest on loans, and weaker capital flows, world debt has risen to 365% of global GDP, growing by more than $15 trillion in 2020 alone. Even though the global financial system is less inter-connected today than pre-2008 levels, six countries (Argentina, Belize, Ecuador, Suriname, Lebanon, and Zambia) defaulting in 2020, along with the IMF disbursing aid to 81 nations, has left a fiscal strain that could soon burst. The G20 has already identified this potential risk and has tried to address it by creating a “Common Framework” to oversee the management of a debt relief system but has so far been undermined by the U.S.’ unwillingness to endorse further IMF resource support.
Concluding Remarks
2021 holds a great many uncertainties, challenges, and confusion as policymakers have to decide on whether or not to pursue recovery-inducing expansionary stimuli at a risk of ever-increasing debt and an imploding financial system. And while advanced economies generally have the means to induce economic activity, international organizations fear that this pandemic will hurt emerging countries’ prospects for decades to come. Not only will this crisis roll-back years of hard-work in reducing poverty, but the overall impact on welfare cannot be measured. Research has shown that a great number of college graduates that do not immediately find a job will suffer from related consequences for the rest of their lives, as evident by Japan’s lost generation where limited job opportunities between 1991 and 2003 has caused 3.4million 40 to 50 year-olds to remain jobless today. Prolonged mental health issues caused by either the health or economic toll of the pandemic is also something we find difficult to measure and is an unaccounted welfare cost of the virus. If all goes according to pre-set plans and no new crises emerge, the global economy is set to grow back by 5.2% in 2021 in real GDP. Alternatively, this number, along with actual welfare, could even prove to be too low if the global community was to cooperate and come up with collaborative solutions. Making sure that vaccines are manufactured and distributed swiftly, providing a safety cushions for the most vulnerable classes, sharing expertise on the navigation of Covid-19 induced calamities, and setting up an international framework to build up global resiliency to future crises through sustainable growth will not only allow for faster world-wide recovery, but might also prevent future disaster scenarios by building global ties able to withstand pressure.
During the first week of March 2021, the first official and legitimate transfer of money from Sudan to the United States of America took place ending 24 years of economic sanctions.
In December 2020, the United States announced that it had officially removed Sudan from its list of state sponsors of terrorism after the country was added in 1993. Subsequently, the process to re-establish direct transactions between the two countries started when the U.S. Department of Treasury sent a message encouraging banks to do transactions with Sudan.
H.E. Nureldin Satti, Ambassador of Sudan to the USA received the test wire transfer from Qatar National Bank in Khartoum to his personal account at Wells Fargo in the United States.
H.E. Satti commented “One of the banks was Qatar National Bank which responded favorably to this request and got in touch with Well Fargo which also accepted the request and the offer”
H.E. Satti added in an interview with Voice of America “A trial money transfer will also be carried out from a US bank to Sudan, and should it succeed, Sudanese Nationals in the US would be able to transfer money to their country”
A Brief History: From Sanctions Imposition to Lifting
In 1993, and during his first year as President of the United States, Bill Clinton, placed Sudan on the list of State Sponsors of Terrorism for harboring international terrorists.
In 1997, through an executive order, President Bill Clinton banned all U.S. investment in Sudan and most bilateral trade citing Sudan’s continued support to international terrorism, its poor human rights record including lack of religious freedom, and its efforts to destabilize the region.
However, by the end of the second Obama administration term, it began the process of lifting economic sanctions on Sudan citing Sudan’s cooperation with the United States on counterterrorism and its efforts to improve its human rights record. The U.S. officially rescinded Sudan’s designation as a State Sponsor of Terrorism in December 2020 following the political change the country witnessed and the transitional government’s agreement to compensate terror victims.
Economic Reforms Required
Many local and international economic experts argue that direct bank transactions to Sudan remain problematic because of “distortions” in the Sudanese economy and the multiple and widely varying exchange rates of the Sudanese pound to the U.S. dollar.
The huge gap between Sudan’s official exchange rate, which was 55 pounds to the dollar, and the black-market exchange rate, which stood at nearly 400 pounds to the dollar was at heart of this distortion.
Accordingly, Sudan’s Central Bank has sharply devalued its currency, the Sudanese pound, in an attempt to get debt relief, crack down on the black market, and attract money back to the country. The bank unified the price of the currency with the black market at 370 pounds for one U.S. dollar.
This action was implemented as part of broader economic reforms that Sudan’s transitional government made under a plan endorsed by the International Monetary Fund in October 2020.
Sudanese officials look forward to the fact that the unification of its multiple exchange rates will boost direct trade and investment in Sudan and enable transactions between Sudan-based banks and the outside world through official channels.
