C. P. Chandrasekhar’s Blog

Early October provided yet more evidence of the breakdown of multilateralism and the lack of international commitment from countries, to work together to address shared national challenges. The 2023 pledging Conference for the second replenishment of the Green Climate Fund, the largest climate-dedicated multilateral funding source, generated only $9.3 billion of commitments from 24 countries. That is lower than $10.3 billion pledged by 45 countries when the fund was created in 2014, and $10 billion committed by 32 countries during the first replenishment in 2019. This failure to mobilise even a nominally higher sum for the second replenishment for the…

Unlike many low- and middle-income countries (LMICs), the Indian economy is not characterised by external debt stress or distress that could lead to default. It does record almost consistent current account deficits on the balance of payments, but these are not at unsustainable levels. They can be easily financed with ‘normal’ net capital inflows. Given the recent spate of external shocks affecting all countries, inflicted by the COVID pandemic and speculative increases in global oil and food prices, this is surprising. This is especially so, because India is not among the developing countries that have successfully diversified into manufacturing exports…

In the fringes of the opaque world of “innovative finance,” there is much excitement over recent efforts to swap the distressed foreign debt of less developed governments in return for a promise to protect biodiversity or “green the economy.” The excitement stems not the least from the fact that though debt-for-nature swaps had been experimented with as far back as the 1980s, only to lose momentum, there has been a sudden spate in such deals in recent times Belize concluded a deal in 2021 (involving bonds valued originally at $553 billion); Barbados struck a deal to buy back a fraction,…

As news broke that the monsoon month August was the driest since 1901, when records began to be kept, fears of inflation gathered strength. At 161.7 mm across the country, rainfall that month was well below the previous record low of 191.2 mm recorded in 1905. This August’s 36 per cent deficiency in rainfall relative to normal comes after shortfalls of 9 and 13 per cent shortfalls in June and July. So, the projection is that the overall monsoon would be well below normal. That could imply that the level of agricultural, especially food grain, production, which has been reasonable…

On July 14 this year, the shaky government of a debt-stressed Pakistan, won itself a surprising reprieve. The country had experienced a collapse in foreign reserves to less than one month worth of imports and was on the verge of defaulting on its external debt of more than $120 billion. The government had been in negotiations for months with the IMF for the release of a tranche of $1.1 billion out of a $7 billion loan programme, which had stalled because of failure to meet IMF conditions. But in a turnaround, the IMF has now granted Pakistan a larger-than expected,…

Severe external debt stress in several low- and medium-income countries (LMICs) has raised two questions. The first is whether we are on a trajectory that would result in a generalised debt crisis of the kind that preceded debt write-offs under the Heavily Indebted Poor Countries (HIPC) Initiative of 1996 and the complementary Multilateral Debt Relief Initiative (MDRI) of 2005. The second is that, if the less developed countries are once again vulnerable, what needs to be targeted in current restructuring efforts to prevent such recurrence in the future. In addressing these questions, it is necessary to step back from the…

At first look, the evidence is worrying. Goods exports from India in June dropped to an 8-month low of $33 billion having fallen sharply by 22 per cent year-on-year. Moreover, that decline was not a one-off event. The June fall was the seventh monthly, year-on-year export decline in nine months. That belies the government’s claim that the June 2023 growth figure was an outlier, resulting from a high base value, since in June of the previous year India recorded high monthly shipments of $42.3 billion. Rather, the downturn in exports appears to be a medium-term trend, marking the reversal of…

Even as the war in Ukraine and intensifying hostility between China and the US and its allies have increased global geopolitical uncertainties, less developed countries that host a majority of the world’s population have gained voice in an increasingly multipolar, even if less liberal, world. In utilising that space, the leadership of the G20 has proved to be an advantage, with the Presidency of that grouping shifting to ‘emerging market countries’ for a prolonged period; it was held by Indonesia over much of 2022, then taken over by India for much of 2023, and would shift to Brazil in 2024.…

Nothing, not even Hindenburg Research, seems to stop the advance of Indian big business. The Adani Group continues with its acquisitions, even if at a slower pace, and has been able to persuade financial markets to lend it more money, notwithstanding assessments that it is over-dependent on debt. Reliance Industries Limited has announced the demerger of its financial services arm to establish a new entity, which media speculation sees as a bid by the group to establish a dominant presence in the financial services industry. The demerger is being seen as a repeat of the strategy adopted by the group in…

On July 1, Sri Lanka’s parliament approved through a majority 122-versus-62 vote, a plan to restructure the government’s domestic debt totalling 15.4 trillion Sri Lankan rupees (SLR) at the end of March 2023. That is not all of Sri Lanka’s public debt though. At that point in time, of the government’s debt of $86.5 billion, only $46.9 billion was domestic debt denominated in Sri Lankan rupees, with external, foreign currency debt amounting to $36.1 billion. Sri Lanka’s crisis stems from its inability to service external debt, the interest and amortisation for which must be paid in foreign exchange. As a…