CREDIT MANAGEMENT JULY and August 2022

Debt crisis in emerging markets
ACCORDING to MoneyWeek, ‘slowing
global growth, surging inflation and rising
interest rates are squeezing emerging
economies harder than most’.
The IMF (International Monetary Fund)
is one organisation that is concerned. It
thinks that these issues, when combined,
will hit poorer and highly indebted
countries harder as inward investment is
cut and their currencies are battered.
These emerging markets will not only
face debt crises but could suffer from
broader economic and social strife which
will be worsened by Government belt
tightening. In turn this will lead to what
Sri Lanka is facing – food and power
KNOW YOUR END-CUSTOMER
BRITISH exporters have been warned by the Government about the importance of
conducting due diligence on customers and suppliers following reports that British-made
components have been found in Russian weapons used in the war in Ukraine.
Services Institute, Operation Z: The Death Throes of an Imperial Delusion, noted
a ‘consistent pattern’ of western parts being found in abandoned Russian kit. The
Government is now investigating how British products have been found in Russian weapon
systems.
The problem for exporters is that some parts have dual use – they have civilian and
military uses. Firms ought to be aware that export licences for dual use items destined for
Russia were suspended at the start of March and an arms embargo on exports to Russia
was introduced following the annexation of Crimea in 2014.
Of course, it doesn’t help that product may have been sent to a customer who then reexports
them to Russia. Even so, UK control regulations requires British firms to do due
diligence on the sales and onward sales of their goods to ensure they do not end up being
used by banned users. Exporters must be aware of where their goods end up.
SAUDIS WANTS MORE
TOURISM
WITH oil a finite resource, Saudi Arabia
is looking to grow its economy in other
ways and tourism is one sector being
targeted; the country is hoping for more
than 70m tourists this year – up from
62m in 2021.
Saudi Arabia is lucky to be a major
religious destination with millions
visiting Islam's two holy cities of Mecca
and Medina annually to perform the hajj
and umrah pilgrimages.
But beyond that Saudi Arabia has, in
recent years, been promoting leisure
travel as part of a strategy aimed at
diversifying the economy away from oil.
The Saudi Tourism Authority reckons
that tourism is now at 130 percent of
pre-pandemic levels.
If you’ve a play in the tourism sector,
now’s your time to make yourself known.
shortages, social unrest, and political
meltdown.
According to the Institute of
International Finance, emerging-market
bonds and loans maturing by the end of
next year total around $9trn of which
over $1trn is directly exposed to rising US
rates. Debt servicing is manageable when
interest rates are virtually zero. But rising
rates could impoverish emerging markets.
The IMF thinks that the number of
low-income countries at or near debt
distressed levels has doubled from 30
percent in 2015 to 60 percent now.
So, if you’re trading in an emerging
market, take care to protect your position.
GERMANY FACES POSSIBLE
DEEP RECESSION
ONE thing on the mind of Germany’s
Government is how deep a recession
might be if Russia cuts gas supplies.
For Achim Truger, a member of
Germany’s Council of Economic Experts,
German industry could suffer serious
damage in the long term if a cut is put
in place. He thinks – and was quoted
in the Rheinische Post – that ‘by most
calculations, an end to gas supplies from
Russia would trigger a deep recession. Half
a million jobs could be lost.’ He also thinks
inflation will stay high well into 2023.
The precedent was set in April when
Russia’s Gazprom cut off Poland and
Bulgaria after they refused to pay in
roubles. With German inflation at its
highest level in more than four decades,
those exporting there will have to price
goods carefully.
India becomes a ‘go to’
destination for European leaders
INDIA is not only a huge country with a
population of nearly 1.4bn people, but the
war in Ukraine has put it firmly in the
sights of many countries. The West is very
keen to supply weapons; it has been buying
discounted oil and other commodities from
Russia desperate for hard currency; and it’s
also been talking to China.
Now both Germany and the UK have
made it a go to destination. Boris Johnson
visited in April. More recently, at the
start of May, German chancellor Scholz
described India as a “central partner for
Germany in Asia in terms of the economy,
defence and climate policy” and invited
prime minister Modi as a special guest to
the G7 leaders’ summit in June.
With European Commission president
Ursula von der Leyen visiting too, these
trips are apparently being seen as a
coordinated campaign to encourage
India to take a less neutral position over
Ukraine. It also means that there may be
potential for more international business
to be done.
Pakistan bans imports of all
non-essential luxury goods
JUST as Nepal recently limited imports,
so Pakistan has done the same; its foreign
exchange reserves have fallen while the
Pakistani rupee has dropped to historic
lows against the US dollar.
Effectively, all non-essential luxury
items that are not used by the wider
public can no longer be imported. The
goal is to address fiscal instability, which
the Government blames on the previous
Government of Imran Khan.
Among the imports to be banned are
cars, cellular phones, home appliances and
cosmetics. It is not clear how long the ban
will be in place. Fuel and edible oil and
pulses remain unaffected.
CURRENCY UK
EXCHANGE RATES VISIT CURRENCYUK.CO.UK
OR CALL 020 7738 0777
Currency UK is authorised and regulated
by the Financial Conduct Authority (FCA).
HIGH LOW TREND
GBP/EUR 1.18591 1.14705 Down
GBP/USD 1.26630 1.19825 Down
GBP/CHF 1.22811 1.17834 Down
GBP/AUD 1.78015 1.73018 Flat
GBP/CAD 1.61799 1.55160 Flat
GBP/JPY 168.583 158.418 UP
This data was taken on 21 June and refers to the month
previous to/leading up to 20 June 2022.0
Brave | Curious | Resilient / www.cicm.com / July & August 2022 / PAGE 33