Debt
Reserve managers see politics shaping currency allocations
European political uncertainty weakens confidence in euro, with sterling pressured by Brexit; dollar’s popularity resurgent, despite Trump’s economic policies
Sarb will take ‘defensive posture’ to debt downgrade, says Ballim
South Africa’s central bank is unlikely to respond to country’s junk debt status unless rand volatility starts to affect prices; Fitch joins S&P in downgrading country’s sovereign debt
Paraguay’s Valdovinos: bond issuance ‘not all about the money’
$500 million issuance was six-times oversubscribed, but the Paraguayan governor says its success lies in the message it sends to investors overseas
Build-up of public debt causes longer recessions for EMs – paper
“Less supportive” fiscal policy makes emerging markets more prone to problems associated with accumulation of public debt; authors highlight the importance of fiscal buffers
Positive shock could still trip up advanced economies – Blanchard
Former IMF chief economist warns high debt levels could interact with positive shocks to cause problems; backs Rogoff’s plan for a cashless society
Denmark pays off all foreign debt for first time in 183 years
Government pays off its last foreign currency loan, leaving it free of foreign debt for the first time since at least 1834
New factors driving EM corporate leverage – RBI paper
Changed macroeconomic backdrop has taken over from firm-specific factors in driving the build-up of corporate leverage in emerging markets, RBI economist finds
IMF stays tough on debt relief as it prepares to return to Greece
Maurice Obstfeld and other top officials stress the fund’s demands on debt sustainability; mission to return to Greece next week
Alan Greenspan says gold standard would have reined in debt
Former Fed chair says US would not be so indebted if it was on the gold standard; gold is the “primary global currency”, Greenspan says
BIS authors identify tipping point in household debt impact
Researchers trace the effects of household debt on the real economy, identifying thresholds beyond which the long-run impact on consumption and growth intensifies
Davos panellists highlight risks posed by strong dollar
At the World Economic Forum, experts underline the risks of a strengthening dollar on not only US monetary policy, but also on emerging markets’ economies
Leveraged markets not a financial stability risk – Powell
Powell examines state of highly leveraged markets with eye to financial stability, judging they are not yet a problem
Completing reform agenda may not be enough – Caruana
BIS chief urges continuous effort to finish reforms, but says they need to be backed by policies that raise earning and debt-repayment capacities
Sri Lankan government to restructure central bank
Central bank is to be restructured with amendments to the Banking Act, but disagreements remain between the finance minister and governor; inflation-targeting framework appears to be on track
BIS’s Caruana: fiscal space is ‘slippery’
Fiscal authorities should not overestimate the available room for manoeuvre, as less obvious factors may pose constraints, BIS chief says
Malawi governor announces plans for central depository system
New system will provide security for transactions taking place in the market, Chuka says; governor hopes project will increase market liquidity in the long run
MAS warns of risks surrounding households
Prudent financial and debt management is crucial, the regulator says, to entrench the gains made through macro-prudential measures implemented earlier
Bank of Zambia closes fourth bank this quarter
Commercial bank deemed insolvent by the regulator; Bank of Zambia takes over control of the institution to “safeguard” depositors
Central banks may be partly to blame for low real rates, says BIS’s Borio
Ever-bolder attempts to raise inflation could push down on real rates, generating little inflation but worsening the risk of instability, Claudio Borio says
Demands on central banks have created critical juncture – El-Erian
Economist says burden placed on central banks has created economic and political instability across the globe, and something must soon give
IMF paper seeks to quantify debt bias
Tax systems create “pervasive” debt bias, authors find, arguing for policy action before the problem worsens
Norges Bank deputy warns of vulnerabilities in financial system
“Sharp rise” in property prices and high household indebtedness are a concern, the latest financial stability report reveals; banking sector’s largest corporate exposure is to the real estate market
Public sector balance sheet poses risks for Dominican Republic – paper
IMF working paper analyses balance sheet developments in the South American nation’s economy; foreign currency exposure could amplify risks, authors say
China has room to regulate local government financing – IMF paper
Government can and should rein in fiscal risks posed by public-private partnerships, authors say, as they outline “four pillar” regulatory framework