MIGA’s Guarded Guarantee Gallop
The World Bank’s MIGA political risk insurance arm increased guarantees almost $3 billion the latest fiscal year, bringing the total portfolio to quadruple the amount, as post-crisis focus on Europe’s financial sector turned to capital market support for frontier country infrastructure projects. The agency extended its commercial debt product coverage to include state-owned firms without explicit government backing, in keeping with a development mandate beyond traditional Berne Union private capacity. Over half of business was in Sub-Sahara Africa and oil and gas was the second industry line, with a $150 million facility joining with OPIC for Apache Corporation operations in Egypt. Power investment also featured in two other major deals for a combined $650 million in Angola and Bangladesh where HSBC was the chief lender. One-third of outstanding exposure has been reinsured and no expropriation claims were submitted in FY 2013. On a net basis Central Europe takes a large portion with Croatia, Russia, Serbia and Ukraine each with 5 percent-plus shares, while the biggest African risks are in Ghana and Cote d’Ivoire. The group is also responsible for underwriting transactions in the West Bank and Gaza under a separate international arrangement. Ukraine’s stock market with a 15 percent MSCI loss through September still owes the IMF $8 billion from the previous lapsed accord as prospects for renewal remain remote. Reserves sank another 5 percent in August on repayment and currency intervention to just over $20 billion as a mini-trade war erupted with Russia with the Kremlin trying to pre-empt an EU customs agreement. Candy imports were banned by Moscow on health concerns and steel shipments encountered delays and extra inspections. President Yanukovych wants to enter Europe’s free trade zone despite his Russian counterpart’s objection to the “suicidal move.” Brussels has first insisted on tariff as well as political and judicial changes, including the possible jail release of opposition party head Tymoshenko. Recession lingers although the corn harvest is up 35 percent putting the country just behind Argentina and Brazil in the world export ranks, with shifts toward Asian and Middle Eastern buyers. Agri-business multinationals have expanded their local presence, with Monsanto just launching a seed production unit, despite slipping global commodity prices.
The chronic budget and current account deficits have worsened this year as the winter natural gas season and the stretch into the next presidential election cycle approach. The central bank is expected to further stiffen rules on foreign exchange surrender and trading as foreign ownership of domestic debt is barely one percent despite double-digit yields. Croatia recently inked an EU partnership as heavy public debt spurred a negative ratings outlook assessment and unemployment touched 20 percent. It will immediately be placed under the excess deficit procedure, but the Finance Minister looks to privatization rather than outside official rescue to mobilize resources. Serbia on the other hand just completed another cabinet reshuffle hoping to regain IMF program access and enlisted former Managing Director Strauss-Kahn as an adviser as both seek image rehabilitation.
