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Explainer-Syria's economy: The devastating impact of war and sanctions
Explainer-Syria's economy: The devastating impact of war and sanctions

Yahoo

time14-05-2025

  • Business
  • Yahoo

Explainer-Syria's economy: The devastating impact of war and sanctions

By Karin Strohecker, Libby George and Marc Jones LONDON (Reuters) -U.S. President Donald Trump has said he will lift long-standing sanctions on Syria that severed the country from the global financial system under toppled former President Bashar al-Assad. The European Union and Britain have already lifted some of their sanctions, but if Washington now goes ahead with a wholesale removal it will pave the way for others to follow. Below is a round-up of the current state of Syria's economy and how 14 years of civil war, ending with Assad's fall in December, reshaped trade and government finances. WHAT IS THE STATE OF SYRIA'S ECONOMY? The World Bank estimates Syria's economy is worth around $21 billion - that is roughly on par with Albania and Armenia, which both have more than 20 million fewer inhabitants than Syria. Official Syrian data shows the economy more than halved in size between 2010 and 2022. The World Bank believes even that is likely to be an underestimate given that nighttime light emissions - a proxy for overall economic activity - indicated an even sharper 83% contraction between 2010 and 2024. Syria was reclassified as a low-income country in 2018, with more than 90% of its near 25 million population living below the poverty line, according to UN agencies. WHAT HAS HAPPENED TO SYRIA'S CURRENCY? Syria's economic turmoil worsened in 2019 when neighbouring Lebanon, with which it has extensive economic and financial ties, also descended into crisis. Damascus then introduced a plethora of exchange rates for different transactions to safeguard scarce hard currency. Following the new government's takeover in December, the central bank pledged to adopt an official unified exchange rate for the Syrian pound. It also appointed Maysaa Sabrine as central bank governor - making her the first woman to head the bank in its more than 70-year history. On Wednesday, the exchange rate was at 11,065 pounds to the dollar. That compares to black market rates of around 22,000 around the time of Assad's fall last year and just 47 to the dollar in March 2011 when civil war engulfed the country. HOW MUCH DEBT DOES SYRIA OWE? The government has stated its owes between $20 billion and $23 billion mostly in bilateral loans, although it could be considerably higher given it may face claims from Iran and Russia for between $30 billion to $50 billion. Leading sovereign debt lawyers say those Assad-era obligations could be struck off as "odious" war debt — debt incurred without the consent of the Syrian people or for their benefit given much it went to funding arms for the Assad government. The composition of Syrian obligors - such as the government, central bank, state-owned enterprises, or commercial organisations - also needs to be pinned down, a recent Peterson Institute report adds, as different types of debt may need to be treated differently when restructured. WHAT ARE THE CENTRAL BANK'S RESERVES? The central bank only has foreign exchange reserves of around $200 million in cash, sources previously told Reuters, a huge drop from the $18.5 billion that the International Monetary Fund estimated Syria had before its civil war erupted. It also holds nearly 26 tonnes of gold too, worth over $2.6 billion at current market prices. The new government has said it expects to retrieve up to $400 million of its frozen assets to help fund reforms, including recent sharp increases in some public sector salaries. Western governments froze the assets during Assad's rule, but the exact value and location of them now, and how quickly they could get repatriated, remains unclear. Switzerland has said some 99 million Swiss francs ($118 million) worth are currently in banks there. The Syria Report newsletter also estimates that 163 million pounds worth ($217 million) are in the UK. HOW HAVE WAR AND SANCTIONS AFFECTED TRADE AND THE ECONOMY? Dwindling oil and tourism revenues decimated Syria's exports from $18.4 billion in 2010 to $1.8 billion in 2021, according to the World Bank. The pressured government finances prompted it to pay for some key imports with illicit cash from sales of an addictive amphetamine-like stimulant commonly known as captagon, or from fuel smuggling, experts say. Captagon production became the most valuable economic sector, with World Bank last year putting the total market value of the drug originating from Syria as high as $5.6 billion. WHAT ARE THE ENERGY CHALLENGES? In 2010, Syria exported 380,000 barrels per day (bpd) of oil. This source of revenue all but evaporated after the civil war began in 2011. Various factions - including Islamic State and Kurdish fighters - seized oilfields. While the latter signed deals with U.S. companies, sanctions made other legitimate exports difficult. The loss left Syria reliant on energy imports - mostly from allies Russia and Iran. Rachel Ziemba, senior adviser on sanctions with risk consultancy Horizon Engage, said the roughly 1-3 million barrels of fuel per month Syria had been getting from Iran stopped in late December as Tehran pulled back. HOW HAS AGRICULTURE SUFFERED? Conflict and drought reduced the number of farmers, damaged irrigation and cut access to seeds and fertilizers. Agricultural production sank to record lows in 2021 and 2022, with wheat alone falling to a quarter of the around four million tonnes per year pre-war. Syria imported around one million tonnes of cereal annually from Russia. Flows paused when the government changed but resumed last month. Ukraine has also signalled willingness to supply wheat, but it is unclear how Syria could pay. ($1 = 0.7931 pounds) ($1 = 0.8387 Swiss francs) (Compiled by Marc Jones; Editing by Toby Chopra)

Analysis-Pope's death, US aid cuts complicate Vatican's debt relief push
Analysis-Pope's death, US aid cuts complicate Vatican's debt relief push

Yahoo

time01-05-2025

  • Business
  • Yahoo

Analysis-Pope's death, US aid cuts complicate Vatican's debt relief push

By Libby George, Karin Strohecker LONDON (Reuters) -The death of Pope Francis and global aid cuts led by the United States could complicate the work of a group of experts assembled by the Vatican to bring debt relief and a fairer financing system to the world's poor. Developing countries are already grappling with shrinking concessional financing and difficulty accessing bond markets due to the selloff triggered by U.S. President Donald Trump's sweeping tariffs. The challenges were highlighted when the Vatican-assembled group, known as the "Jubilee Commission", presented its draft plan for debt relief and affordable finance at the IMF and World Bank spring meetings last week in Washington. Less than a year ago, liquidity concerns for the developing world were a priority at such meetings. But in D.C., concrete, high-level talks to increase the amount of development and finance cash for emerging economies took a backseat. "For any finance minister, central bank governor of a developing country, it is a depressing takeaway from the meetings," said Reza Baqir, head of sovereign debt advisory at Alvarez & Marsal, and a former Pakistan central bank governor. Notably, U.S. Treasury Secretary Scott Bessent told the gathering that the world's richest nation had not yet decided whether it would meet a $4 billion commitment to a lending arm for the world's poorest countries. Experts say the shifts could sow the seeds for slow growth and the next cascade of debt defaults. "More countries will be forced to choose between honouring their debt and ensuring their future," Paolo Gentiloni, co-chair of the U.N. Expert Group on Debt, said at a panel discussion on the sidelines of the meeting. Investment bank JPMorgan, in a note summarising the meetings, said that "a new default wave cannot be ruled out by next year" if risks continue rising. 'HAND GRENADE' The group drafting the Jubilee report has postponed its plans to present the initial proposals to the Vatican on May 16 due to Pope Francis's death and the conclave to select his successor scheduled to start on May 7. Those involved said the work - which will include proposals to help defaulted countries restructure more quickly and to expand access to affordable lending - will continue. They are playing a long game, not focusing on quick wins, Commission Chair Joseph Stiglitz said. "It is clear that we haven't solved the problem in any way," Nobel laureate Stiglitz told Reuters about the developing world's debt problems, adding that tariff wars amount to a "hand grenade" whose explosion would hit developing nations the most. The Commission's work this year sharply contrasts with the last "Jubilee" year in 2000, which yielded billions in historic debt forgiveness to dozens of countries, enabling them to access lending to help their economies grow. China also lent billions to developing economies in that time, leaving a more complex slate of creditors. Now, emerging economies that had been limping out of a default wave sparked by external shocks such as the COVID-19 pandemic and the fallout from Russia's invasion of Ukraine are facing a global economic growth slowdown. A spike in U.S. Treasury yields has shut many out of global bond markets, and made it expensive for the others. The World Bank lists 59 countries worldwide as in or at risk of debt distress, and that does not include some that have run into issues more recently, including countries such as Senegal, Colombia and Indonesia. David McNair, executive director of non-profit advocacy group ONE Campaign, said some of them were putting in place "very stringent austerity measures" to avoid default. South African Finance Minister Enoch Godongwana told Reuters that the developing world's liquidity problems were high on the agenda for the G20 top economies, which South Africa is chairing, citing an increase in the number of countries requesting IMF balance of payments assistance. But countries with cash - like the United States, the United Kingdom, Germany and France - are cutting aid to boost defence spending. According to the OECD, official development assistance fell 7.1% in real terms last year, and is estimated to drop between 9% and 17% this year. The ONE Campaign estimates it could shrink by 23% by 2027. China's lending is also in flux, after the developing world's default wave and as Trump's tariffs threaten its economic recovery. World Bank President Ajay Banga warned that if the U.S. withholds its pledged funds for the International Development Association (IDA), and Europe also cuts, the $100 billion funding round for the lending arm for the poorest countries could drop to $80-$85 billion. Vera Songwe, chair of the Liquidity and Sustainability Facility who is working with the Jubilee Commission, said the environment for concessional finance and debt forgiveness was undeniably tougher. But some work, such as getting global south development banks to step up funding and pressuring the IMF to include climate in debt sustainability calculations was progressing, though she added the progress was not fast enough and at scale. S&P Global Ratings has warned countries are likely to default more frequently in the coming decade due to higher debt and rising borrowing costs. Rising costs to service debt could cut spending on education, infrastructure and health, which help economies grow. "Sixty percent of growth is happening in the developing world, middle economies," Songwe said. "If there is slowing down, the world slows down with them." (Reporting By Libby George and Karin Strohecker; Editing by Emelia Sithole-Matarise)

UK bill aims to speed debt restructuring for poor countries
UK bill aims to speed debt restructuring for poor countries

Yahoo

time09-04-2025

  • Business
  • Yahoo

UK bill aims to speed debt restructuring for poor countries

By Libby George LONDON (Reuters) - A British lawmaker has introduced a private member's bill that would set new rules around debt restructurings in a push to speed up negotiations for poor countries struggling with unsustainable debt. Bambos Charalambous, who introduced the bill late last year, said support from other members of parliament had grown since the UK and the United States slashed aid spending. He represents the ruling Labour party in parliament, but neither it nor the opposition conservatives have thrown their support behind the bill. Charalambous said his party may be persuaded to back it and it was being studied by some in governmemt. His effort follows similar proposals in New York state, which supporters say would enable poor nations to emerge faster and stronger from debt distress, while opponents warn they could make future borrowing more expensive. Lawyers and investors following the debate on both sides of the Atlantic expect debt campaigners to keep pushing until some iteration of the proposals becomes law. Trillions of dollars in bonds - accounting for nearly all tradeable sovereign debt issued by developing governments and companies on international capital markets - are issued under the laws of either New York state or England. English law governs a disproportionate share - estimated at up to 90% - of those bonds issued by the poorest nations, such as Ethiopia and Ghana. "It would, number one, compel private creditors to negotiate in good faith, and quickly, with the debt-distressed countries," Charalambous told Reuters regarding the bill. "And it could be worth billions to (the countries), and that money could be reinvested into health and education projects." Charalambous's bill would allow countries to seek debt payment freezes while restructuring negotiations are underway, and also enable a stay on legal proceedings during the process. It would also cap the claims that private creditors can make via lawsuits after restructurings are concluded, aiming to prevent holdout creditors from blocking or slowing debt deals. STATES VULNERABLE Currently, if a country defaults on its bonds, creditors can go to court in the jurisdiction governing the contract to force repayment; some of Ethiopia's bondholders have said they could undertake legal proceedings. Such court cases typically spark lengthy legal proceedings that can delay or complicate a broader restructuring. A wave of developing countries, from Ghana to Sri Lanka, have defaulted since 2020, weakened by the COVID-19 pandemic and a global interest rate hiking cycle. The G20 created an initiative called the Common Framework to try to bring together diverse lenders - from China to New York investors - to speed up poor countries' debt reworks. But it took Zambia more than three years to restructure its primary debts, and critics say the debt relief it and other nations have secured leaves them vulnerable to future crises. No iteration of the New York bill has made it to the governor's desk, but emerging market bond investors have begun to include clauses in bond deals that would allow them to switch jurisdictions to avoid potential curbs. Sign in to access your portfolio

トルコ財務相と中銀総裁、市場安定化に全力注ぐと外国投資家に説明
トルコ財務相と中銀総裁、市場安定化に全力注ぐと外国投資家に説明

Reuters

time26-03-2025

  • Business
  • Reuters

トルコ財務相と中銀総裁、市場安定化に全力注ぐと外国投資家に説明

[イスタンブール/ロンドン 25日 ロイター] - トルコのシムシェキ財務相とカラハン中央銀行総裁は25日に開催した外国投資家との電話会議で、エルドアン大統領最大の政敵が逮捕されたことに伴う市場の混乱を静めるために必要なことは何でもする、と伝えた。 最大都市イスタンブールのイマモール市長が汚職などの容疑で逮捕・収監されて以降、これに反発した人々の抗議デモが拡大し、そうした政治情勢が嫌気される形でトルコ資産に対する売りが広がった。 2人の関係者によるとシムシェキ氏は、これらの事態や司法の問題には直接コメントしないと断りつつ、経済への影響は長続きしないだろうし、自身は財務相の職務にとどまるつもりだと語ったという。 またシムシェキ氏は、2023年半ばに自ら導入した経済改革プログラムを推進する意向は変わらないと説明した。 トルコ財務省は、シムシェキ氏が必要なら対策を講じると発言したことも確認した。 関係者の1人は、カラハン氏もこの会議で市場の混乱を一時的とみなしていると述べたと明かした。 これまでに財務省や中銀、銀行監督当局などは市場参加者との会合を重ね、既にさまざまな市場安定化策を打ち出している。 それもあって25日のイスタンブール証券取引所では株価 (.XU100), opens new tab が上昇し、通貨リラは落ち着いた動きになっている。 私たちの行動規範: トムソン・ロイター「信頼の原則」, opens new tab Jonathan Spicer トムソン・ロイター Turkey Bureau Chief overseeing political, economic and foreign policy coverage. Work spans the country's diplomatic balancing act, landmark elections, historic earthquakes and the mainstream media, as well as reporting on Syria, Lebanon and Ukraine. Previously covered the U.S. economy, Federal Reserve and Wall Street including award-winning work on financial-market trading and a global cyber heist. Marc Jones トムソン・ロイター Marc Jones is a senior global markets correspondent based in London with a focus on economics, central banks, policymakers, and crises. Previously he worked in Frankfurt covering the European Central Bank at the height of the euro zone turmoil, the UK companies desk during the initial phase of global financial crash. He started his Reuters career on the sports desk covering everything from soccer to cycling. Libby George トムソン・ロイター Libby George is a London-based journalist on the Reuters emerging markets team. She was part of a team named as Pulitzer finalists in 2023, and who won the Selden Ring Award for International Investigative Reporting, for a series of stories revealing abuses by Nigeria's military. After launching her career as a political journalist in Washington, D.C., she joined Reuters in 2015 covering oil, and from 2019-2023, she was senior correspondent and acting bureau chief based in Lagos, Nigeria.

Analysis-Rush to Russian assets belies 'permafrost' some investors fear
Analysis-Rush to Russian assets belies 'permafrost' some investors fear

Yahoo

time24-03-2025

  • Business
  • Yahoo

Analysis-Rush to Russian assets belies 'permafrost' some investors fear

By Libby George, Karin Strohecker and Alexander Marrow LONDON (Reuters) - Large fund managers expect the bulk of Russia's assets to remain closed to Western investors, despite a flurry of "exotic" trades betting on a rapprochement between Moscow and Washington. The diplomatic thaw, ushered in by U.S. President Donald Trump's perceived openness to Russia's Vladimir Putin, has prompted bets on Russian-linked financial assets, including the rouble, Kazakhstan's tenge currency - a rouble proxy - and the bonds of Russian energy companies Gazprom and Lukoil. But rather than a gold rush back into Russia, which has been isolated from the global financial system since it invaded Ukraine in 2022, veteran players say they expect a longer-term hiving off of key parts of Russia's economy from foreign investors. "We see maybe some asset swaps," said Gunter Deuber, head of research for Austria's Raiffeisen Bank International - one of the few Western banks still operating in Russia. "There are still a lot of assets of Russia that are in the West and of the West that are in Russia. And I think having asset swaps is now a rather nice way to de-risk on both sides." Last week, Putin issued a decree allowing U.S. hedge fund 683 Capital Partners to buy securities in Russian companies from certain foreign stakeholders. But the order also authorised their future sale to two Russian funds, quashing hopes this indicated an impending reopening. RUSH TO POSITION Still, investors said there are increasing queries from brokers dealing in Russia-related assets. One of the favourites is roubles via non-deliverable forwards (NDFs) - derivatives traded and settled in dollars that shield investors from sanctions complications, although much like the rouble, their value is linked to Russia's economy. The rouble is the top performer among emerging currencies this year, having strengthened some 30% against the dollar. Data from UBS showed hedge funds betting on directional trends held $8.7 billion worth of rouble NDFs in early March, the second-largest long position across major currencies - indicating funds expect the currency to strengthen. These bets allow traders to cash in if Russia's markets surge amid a Trump/Putin rapprochement. "Investors can definitely try to get exposure to some end of sanctions without having some direct Ukrainian or Russian exposure," said Anton Hauser, senior fund manager with Erste Asset Management, calling the NDF trade "very niche". But for now - and for years to come, Hauser expects - Erste is unlikely to get involved, despite holding some sanctions-frozen local Russian currency bonds. "It's extremely exotic at the moment," he said. Analysts estimate the average daily volume in rouble NDF trade at $25 million to $40 million - a fraction of the $2-2.5 billion in daily pre-war rouble trading. POOR LIQUIDITY Investors said interest had also spiked for still-tradeable corporate hard-currency bonds issued by Russian firms - such as Gazprom, Lukoil and fertiliser company Phosagro. But poor liquidity means buyers demand a discount. "They still pay you coupons, but tradability is very, very poor," said Sergey Dergachev, portfolio manager at Union Investment Privatfonds. Hard-currency debt issued by Russian corporates was once an emerging market mainstay; the nearly $100 billion outstanding accounted for 4% of indexes in 2022, and international investors held roughly a fifth of that, according to JPMorgan calculations at the time. Proxy trades have also strengthened since Trump's return, including the sovereign bonds and currencies of Uzbekistan and Kazakhstan - Russian neighbours with closely linked economies. Investors say brokers in Central Asian, Middle Eastern and Latin American nations with access to Russia's domestic markets - and deemed "friendly" by the Kremlin - have increased offers of Russian-related trades. Brokers say investors, including U.S. and European distressed asset managers, are more interested in exposure to Russia's still-sanctioned rouble-denominated OFZ bonds, even though sanctions on Russia's National Settlement Depository and Moscow Stock Exchange MOEX mean direct ownership is impossible. Ararat Mkrtchian, CEO of Armenian broker Sirius Capital, said yields of around 15% are enough to spark interest in domestic government bonds despite the hefty losses many foreign investors suffered when sanctions took effect. "In general, there is a desire from foreign capital to return because this is a highly depreciated but high-quality financial asset - if you forget about politics," said Mkrtchian. EUROPE VS UNITED STATES A growing gap between Europe's approach to Russia and that of the United States under Trump could complicate hopes to trade sanctioned assets, such as Russian government bonds, more actively. "The friendliness that we see on the highest levels between Washington and Moscow doesn't exist between most European leaders and the Kremlin," said Petar Atanasov, Gramercy Funds Management's co-head of sovereign research. While Trump has held direct talks with Putin, Europe is now making its largest defence spending push since World War II and has doubled down on sanctions. And one of the biggest obstacles is Russian law: Amid the sanctions onslaught, Moscow passed laws restricting asset ownership and trading by parties in "unfriendly" countries. This combination has transformed Russia's economy, with a much larger state role, said ProMeritum Investment Management's Pavel Mamai, and there are no clear signs yet Moscow is willing to open up again. "I don't believe that the Russian market and the international market will be merged again in short future." Sign in to access your portfolio

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