News : Chaos looms over IMF-World Bank meetings

Thursday, April 6, 2023

Chaos looms over IMF-World Bank meetings

Apr 06, 2023

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Finance ministers and central bank leaders are about to descend on Washington for the spring meetings of the IMF and World Bank. "It's going to be chaotic," says Douglas Rediker, a former U.S. representative on the IMF’s executive board.

A recession is lurking as the world reels from Covid-19, persistent inflation, rapidly rising interest rates, commodity volatility and a weakened banking system.

That’s on top of a growing list of international conflicts. China, the U.S. and Europe are at odds with each other for various reasons, not to mention that the world continues to be divided over Russia’s invasion of Ukraine.

Your MM host has a new piece on the mood surrounding the meetings and how it might weigh on the agenda. The uncertain outlook and rising tensions set up major challenges for world leaders as they try to address food and energy constraints, figure out how to ease debt burdens on developing countries and tackle climate change.

U.S. officials led by Treasury Secretary Janet Yellen will try to project cautious optimism, but will also face questions about Washington’s response to last month’s regional bank failures and to what extent there is potential spillover in the global economy.

A big set of issues looming over the meetings is the role of China, which just underwent a major government shakeup and is increasingly at odds with the U.S. over trade and technology.

Questions include whether China should have a larger say in the governance of international institutions commensurate with its economic power, and whether it will help with efforts to ease the debt load of developing countries.

The stakes are high. The IMF on Wednesday warned that the world could lose trillions of dollars of future economic output if it splits into competing geopolitical factions.

"There are a lot of different threads going into these meetings and they're not necessarily harmonized in one narrative," said Rediker, now managing partner of International Capital Strategies. "You've got them all happening at once at a time when there's no particular leadership that is driving the agenda or the narrative in one direction or another."

The mood, he said, will be “disjointed.”

What’s your take on the IMF-World Bank get-together? — Let us know: Zach Warmbrodt, Sam Sutton.

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Driving the Day

Jobless claims are out at 8:30 a.m. … POLITICO’s Ryan Heath interviews IMF Managing Director Kristalina Georgieva at 9 a.m. … St. Louis Fed President Jim Bullard speaks at the Arkansas State Bank Department at 10 a.m.

Are we headed for recession or more bank failures? — Ahead of the IMF and World Bank spring meetings — the world's biggest annual gathering of finance ministers and central bankers — POLITICO's Ryan Heath is interviewing IMF chief Kristalina Georgieva at 9 a.m. on politico.com. This official curtain-raiser interview will be Georgieva's first grilling after returning from Beijing where she met with China's new economic leadership team.

Top Biden economic aide departs – Victoria Guida reports that Ben Harris, a longtime adviser to President Joe Biden, has stepped down as the Treasury Department’s chief economist. He was a key player in developing the Russia oil price cap.

BlackRock to assist FDIC with unwinding SVB — The asset management giant will handle the sale of nearly $115 billion of investments belonging to Silicon Valley Bank and Signature Bank, Sam reports.

Economy

Kevin McCarthy: Wall Street should worry about the debt ceiling — The House speaker told Bloomberg TV he is “very concerned” about reaching a deal with Democrats on the debt limit.

“We are never going to move a bill that just raises the debt ceiling,” McCarthy said.

Climate

Banga hits back at World Bank climate critics — Zack Colman reports that Ajay Banga, Biden’s pick to lead the World Bank, defended the institution’s approach to addressing climate change at an appearance Wednesday.

Banga rattled off a list of clean power and environmental projects the World Bank has financed — geothermal in Kenya, solar in Delhi, pollution control in Brazil — to underscore that climate and energy is part of its core competencies.

“But guess what gets written up? ‘Not doing enough, can’t do enough, don’t know what they’re doing — dumbos.’ That’s not fair,” he said. “Now, that doesn't mean they shouldn't be doing 10 times what they’re doing, don’t get me wrong.”

Markets

Regional lender Western Alliance tries to calm deposit jitters — Western Alliance Bancorp saw its share price tumble Wednesday after it omitted deposit figures from a late Tuesday financial report, according to Bloomberg.

The regional bank followed up by disclosing that deposits were down by 11 percent in the first quarter and that balances increased this month. Its share price ended the day down 12 percent, after falling as much as 19 percent earlier Wednesday.

Crypto

Cash App founder killed — Bob Lee, 43, was reportedly stabbed early Tuesday morning in San Francisco. He had been serving as the chief product officer of crypto and digital payments startup MobileCoin.

ECB official calls for scrutiny of Binance and its ilk — “Even firms that claim to have no headquarters, such as Binance, need to be ‘supervisable’,” Elizabeth McCaul, a board member of the European Central Bank’s supervisory arm, said in a blog post. “In this respect, no jurisdiction should allow entities to run their business without disclosing their legal status and who is responsible for the business.”

Fly Around

Swiss government slashes Credit Suisse bonuses — FT: “The Swiss government has cut bonuses for about 1,000 senior bankers at Credit Suisse, with the executive team losing their outstanding variable pay entirely, after the lender’s rescue by its rival UBS last month.”

Bankers fret over job prospects — Reuters: “Wall Street bankers face an increasingly gloomy job market after last month's banking crisis worsened an already bleak outlook for pay and staffing.”

Somalia aims to print first new cash since 1991 — Bloomberg: “The Central Bank of Somalia’s top priority is to reestablish the nation’s currency, which will enable it to take full control of monetary policy, its governor said.”

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