Financial policymakers from the world’s 20 biggest economies have agreed to suspend debt repayments from the world's poorest countries, giving them headroom to dedicate cash to fight the coronavirus.
Both principal repayments and interest payments will be suspended from May 1 until the end of the year, the G20 said in a joint statement following the group’s finance ministers and central bankers' virtual meeting on Wednesday. They also asked private creditors to join the initiative "on comparable terms".
The initiative accommodates all International Development Association-countries that are currently on any debt service plan to the International Monetary Fund and the World Bank. All of the least developed nations, as defined by the UN, will also benefit, and creditors will consider a possible extension to the debt freeze later this year, it said.
"We are determined to spare no effort, both individually and collectively, to protect lives, overcome the pandemic, safeguard people’s jobs and incomes, support the global economy during and after this phase and ensure the resilience of the financial system," the G20's finance ministers and central bankers said in a communique.
All G20 members agreed to an action plan that includes a comprehensive IMF package and support measures proposed by the World Bank and other multilateral lenders that collectively amounts to $200 billion (Dh734bn).
All bilateral official creditors will participate in the initiative. The G20 also called on multilateral development banks to further explore options for the suspension of debt service payments over the period, according to the statement.
“Our aim with the action plan is to support the necessary health response and [take] measures … preventing a liquidity crisis turning into a solvency crisis and global recession becoming a global depression, Saudi Arabia's finance minister Mohammed Al Jadaan said at a joint teleconference with the country’s central bank governor, Ahmed Al Kholifey, after the meeting. Saudi Arabia has the G20 rotating presidency this year.
The G20 move is part of efforts to support the global economy during the pandemic and ensure financial stability. The group has already poured more than $7 trillion into the global economy to support businesses and stem job losses as Covid-19 continues to spread across Asia, the Middle East, Europe and North America. The United Nations last month called for a separate $2.5tn package by the G20 to help developing economies cope with the pandemic.
Covid-19, as the illness is called by the World Health Organisation, has infected more than 2 million people globally and killed about 129,000, according to the Johns Hopkins University, which is tracking its spread. More than 500,000 people have recovered.
The global economy is facing its greatest crisis since the Great Depression in the 1930s and is projected to shrink 3 per cent in 2020, the IMF said on Tuesday. The Washington-based fund’s growth forecast for this year has been revised down more than 6 percentage points, relative to its October 2019 estimates and updated January 2020 projections of a 3.3 per cent increase in global gross domestic product.
The IMF managing director Kristalina Georgieva and the World Bank Group’s president David Malpass welcomed the G20's move to suspended debt servicing from nations in need of support.
“This is a powerful, fast-acting initiative that will do much to safeguard the lives and livelihoods of millions of the most vulnerable people,” they said in a joint statement. “The World Bank Group and [the] IMF will move quickly to respond to the G20’s request for us to support this action by working closely with these countries in ways that make the best use of this vital lifeline.”
Mr Georgieva earlier said that the IMF is discussing a new “short-term liquidity line for countries with strong policies”. To assist its low-income members, the lender plans to triple its concessional lending.
“We are … urgently seeking $18bn in new loan resources for the Poverty Reduction and Growth Trust, and will also likely need at least $1.8bnin subsidy resources,” she said in a separate statement issued earlier on Wednesday.
The IMF executive board on Tuesday approved an immediate debt relief package for 25 countries struggling to cope with the economic effects of the coronavirus pandemic. The relief package, under the fund's revamped Catastrophe Containment and Relief Trust, provides grants to its most vulnerable members to cover their IMF debt obligations for an initial phase over the next six months.
Of the IMF's 189 members, 100 countries have approached it for emergency financing.
"That's the kind of support that will be needed," the IMF's chief economist Gita Gopinath told The National on Tuesday.
The fund is looking to double its emergency financing to $100bn to help struggling economies. It will make its entire $1tn financial capacity available to meet requests for funding.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
The language of diplomacy in 1853
Treaty of Peace in Perpetuity Agreed Upon by the Chiefs of the Arabian Coast on Behalf of Themselves, Their Heirs and Successors Under the Mediation of the Resident of the Persian Gulf, 1853
(This treaty gave the region the name “Trucial States”.)
We, whose seals are hereunto affixed, Sheikh Sultan bin Suggar, Chief of Rassool-Kheimah, Sheikh Saeed bin Tahnoon, Chief of Aboo Dhebbee, Sheikh Saeed bin Buyte, Chief of Debay, Sheikh Hamid bin Rashed, Chief of Ejman, Sheikh Abdoola bin Rashed, Chief of Umm-ool-Keiweyn, having experienced for a series of years the benefits and advantages resulting from a maritime truce contracted amongst ourselves under the mediation of the Resident in the Persian Gulf and renewed from time to time up to the present period, and being fully impressed, therefore, with a sense of evil consequence formerly arising, from the prosecution of our feuds at sea, whereby our subjects and dependants were prevented from carrying on the pearl fishery in security, and were exposed to interruption and molestation when passing on their lawful occasions, accordingly, we, as aforesaid have determined, for ourselves, our heirs and successors, to conclude together a lasting and inviolable peace from this time forth in perpetuity.
Taken from Britain and Saudi Arabia, 1925-1939: the Imperial Oasis, by Clive Leatherdale
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
UAE currency: the story behind the money in your pockets
Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
Our Time Has Come
Alyssa Ayres, Oxford University Press
Company profile
Name: One Good Thing
Founders: Bridgett Lau and Micheal Cooke
Based in: Dubai
Sector: e-commerce
Size: 5 employees
Stage: Looking for seed funding
Investors: Self-funded and seeking external investors
