"Tidbits From TNT" Wednesday Morning 2-17-2021
TNT:
Tishwash: Iraqi government: oil price rises to $75 a barrel can address deficit
The prime minister's financial advisor, Mazher Mohammed Saleh, said that a rise in the price of a barrel of oil to $75 could address the fiscal deficit in the 2021 federal budget.
"The point of parity or balance in the budget requires that the average price of an annual oil export abroad should be at least 75-80 dollars a barrel," Saleh was quoted as saying.
"The government is benefiting from the current high oil prices, which have reached more than what was written in the budget, especially as the country moves to close again," he said. link
Tishwash: Highlight the items of the second part of the white paper
The government warned of the "dangers" of not adhering to the reform plans contained in the "white paper", noting that the paper works to create the appropriate conditions for the country's economy to recover and grow.
The paper is divided into two parts, the first in "Governance of the reform program, including the structures and processes responsible for overseeing, follow-up and evaluation of the implementation of the plan, and linking the program with the executive body of the state to ensure the availability of the necessary powers."
As for the second section, it "included transferring the components of the white paper to the reform program, which includes a group of projects, the number of which reached 64, each of which includes a set of objectives that lead the process of their implementation in an integrated manner to the completion of each project, and the projects are integrated with each other to complete the reform program as a whole." .
The white paper enjoys the full support of the international community, which is embodied in the establishment of a special committee for support called "The Economic Contact Group for Iraq IECG ", whose mission is to provide support for the economic reform process in Iraq within the framework of the White Paper.
This group includes the seven industrialized countries, the G7, the World Bank and the International Monetary Fund, in addition to the European Union.
This group was established following the prime minister's visit to Britain, and one of the primary tasks of this group is to coordinate the appointment of international specialists and advisors to assist the Iraqi government in the basic areas of reform, and whenever there is a need for technical and administrative assistance.
According to the paper, international support provides important opportunities to benefit from advanced international expertise in various areas of implementing the reform plan, as well as providing the appropriate conditions to facilitate support for international institutions to deal with the various complications that may accompany the implementation process.
The paper recommends "the existence of representation of the Economic Contact Group for Iraq and the World Bank in the Supreme Committee for Reform by representatives who do not have the right to vote, and in a manner that is closely coordinated by the continuation of international support for the plan."
The paper also recommended the formation of a high-level committee of economists and statesmen, to provide advice to the implementation team on the strategy that affects the trends of the Iraqi economy.
The paper stated that the committee may meet quarterly, or when needed, to evaluate the pathways for implementing the reform plan, and to suggest remedies and amendments that may be required by the plan. The number of members of the committee does not exceed 10 persons from different countries and experiences of different proven success. "
Over a period of 4 years, the paper aims to complete 64 projects and reduce the budget deficit to 3% from 20%, in addition to liquidating the losing government companies and reducing financial support for public companies by 30%.
It also aims to reduce the salary bill from 25% to 12.5%, reviewing the salary scale for employees, as well as ending reliance on imported gas and investing associated gas instead of burning it and implementing gas licensing mobile contracts.
The paper seeks to reform the collection of electricity wages by re-activating the privatization of taxation companies, and their inclusion in uncovered areas, in addition to other goals. link
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Tishwash: An economist confirms that the banking sector, both public and private, is not positive about the country's economic process
Economic expert Saleh Al-Hamashi confirmed that the banking sector, both public and private, was not positive towards the economic process in the country.
He told the Iraqi National News Agency ( NINA ): The role of the banking sector in Iraq, both public and private, was not positive towards the economy in the country, despite the presence of more than 72 private and governmental banks.
Al-Hamashi attributed this to many reasons, the most important of which is corruption, quick profit, and the lack of a law to protect investors, so this sector resorted to safer investments such as the window for selling currency, short-term loans to employees, and the real estate sector in the field of housing because of the safety and the great guarantees that preserve the capital of the worker.
He added: The government represented by the Ministry of Finance and the Central Bank is comfortable with this investment despite its lack of feasibility towards the Iraqi economy to solve the housing crisis.
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Harambe: Bloomberg: Millennium Spinoff Fund Bets on Indonesia (Rupiah), Singapore Currencies
(2/16/21)
A macro hedge fund spun out of Millennium Management LLC is building bullish positions in the Indonesian rupiah and Singapore dollar, betting that measures adopted by the two countries could boost their currencies.
The Indonesian currency (Rupiah) may appreciate as much as 4% this year, bolstered by its drive to become a regional electric vehicle hub, said Jimmy Lim, chief investment officer of Modular Asset Management, which manages nearly $1 billion of assets. In other trades, the Singapore-based firm is counting on the Singapore dollar to strengthen on a faster vaccine rollout, while the Thai baht and Philippine peso will weaken.
Lim is expecting Indonesia to see a production boom in battery-grade nickel, the metal for lithium-ion batteries most likely to face supply constraints over the next five years. Indonesia is the world’s top nickel miner with nearly a quarter of the global reserves. BloombergNEF forecasts the Southeast Asian country will be able to more than triple its production capacity for high-grade nickel by 2025.
Between September 2018 and late January this year, Indonesia attracted $22 billion of foreign direct investments in electric vehicle and battery making, 86% of them yet to be finalized. To access the nickel, battery makers Contemporary Amperex Technology Co. and LG Chem Ltd. have pledged investments in the country, while Tesla Inc. is exploring plans to start an electric vehicle battery project there.
Such investments will initially raise demand for the country’s currency and improve its current account, said Lim. That will represent a reversal from 2020 which saw the rupiah depreciate 1.3% against the greenback. The bullish bet on the rupiah may deliver a nearly 10% return, inclusive of currency appreciation and extra yields from borrowing money at lower interest rates in dollars to buy the Asian currency, he added.
The rupiah is already one of the strongest Asia currencies this year, according to data compiled by Bloomberg.
Once the plants start to hire people and produce revenue, it could increase tax income and reduce the Indonesian government’s fiscal burden, he said, adding that assuming demand remains stable, a smaller supply of new debt may in turn boost its sovereign bonds, which could rally by as much as 75 basis points.
His investment thesis for Singapore is based on projections that Singapore will be able to finish inoculating all adults by the second quarter, which may help it open up borders by June, ahead of Asian neighbors, Lim said, citing internal estimates. The government has pledged to vaccinate everyone by the third quarter, or at least by the end of the year.
Combined with Singapore’s drive to attract family office money, it could pave the way for more capital inflows from the U.S., Europe, Thailand and the Philippines. Its currency may appreciate as much as 8% to 1.22 to the dollar this year, Lim said.
Lim worked at BlueCrest Capital Management and JPMorgan Chase & Co. before joining Millennium. Modular was spun out of Millennium at the start of 2020. Focusing on Asian fixed-income and currency markets, it was one of the largest new hedge funds in the region in recent years. It returned around 1% before fees in January.
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