Saudi flexes lending muscles as bilateral cheques pose challenge to new IMF boss

Bilateral investment from rising powers such as China, Russia and Saudi Arabia has been gratefully received by needy nations such as Pakistan but the inflow of new money threatens to make the IMF look less relevant just as the multilateral has acquired a new boss

  • By Lewis McLellan, Owen Sanderson, Rashmi Kumar
  • 19 Oct 2019
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New IMF boss Kristalina Georgieva must grapple with the revival of government-to-government lending, with Saudi Arabia and the UAE joining the cast of major creditors that stand outside the Paris Club. Big cheques from bilateral lenders can help the IMF’s funds go further, but can obscure countries’ true debt position.

Major financings such as the $20bn of support Saudi Arabia pledged for Pakistan earlier this year, and the joint $3bn package with UAE to support Sudan through its likely restructuring, have shown that the middle eastern Kingdom is now a cornerstone lender for countries seeking funds — provided they line up with the Saudi state politically.

When Pakistan applied for its 23rd IMF programme this summer, it already owed $23bn of outstanding debt to countries outside the Paris Club, mainly China.

“Our relationship to China is an important relationship, China has been of tremendous help at times when we needed help and not many friends were around, but we don’t have any favourites,” said Pakistan central bank governor Reza Baqir, speaking at the IIF conference in Washington. “We want more friends, we want our other friends who were previously more active and are now less so to come back, we don’t want to discourage anyone.”

Financing shortfall

In Pakistan’s case, bilateral commitments helped unlock the Fund’s intervention, rather than competing with it. Willingness to roll over their existing loans, plus $6bn commitments from Saudi Arabia and China during the first year of the programme, helped convince the Fund to lend.

Alamine Ousmane Mey, minister of economy, planning and regional development for Cameroon, said: “The fact is that we need financing beyond the help offered by multilaterals. If there is a financing shortfall for Agenda 2030, 90% of the world’s poor will be in Africa, which would be a development disaster. The IMF offers important resources, but its role is to create the conditions that allow us to borrow money from other sources and fund development.”

Russia is also said to be boosting bilateral lending efforts. It is running the first Russia-Africa economic forum next week, chaired by Russian president Vladimir Putin and Egyptian president Abdel-Fattah el-Sisi. The programme includes a session on “sovereignty and traditional values as crucial elements of a development strategy”, suggesting a hands-off approach.

China has been the main focus of concerns about bilateralism, thanks to the large volume of lending provided under the Belt and Road Initiative, and through its state-owned banks and corporates. Economist Ken Rogoff said it had poured money into Africa and parts of Asia “like we haven’t seen since the US after World War Two”.

Antoinette Sayeh of the Center for Global Development and a former director in the IMF’s African department and former Liberian minister of finance, defended China’s lending. “Non-concessional borrowing can bring debt vulnerability but, if well managed, it brings development objectives,” she said. “There’s often a knee-jerk reaction to blame China for debt surprises, but China is also deeply concerned with debt sustainability in its loans. The Mozambique debt surprise, for example, was nothing to do with China.”

Meanwhile, some believe the BRI project has slowed recently. Shaun Roache, Chief Asia Pacific Economist at S&P, said: “Government to government lending is maybe less of an issue now than it was two years ago when the BRI was really peaking.”

  • By Lewis McLellan, Owen Sanderson, Rashmi Kumar
  • 19 Oct 2019

All International Bonds

Rank Lead Manager Amount $bn No of issues Share %
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1 JPMorgan 144.72 488 10.06%
2 BofA Securities 116.53 399 8.10%
3 Citi 111.31 395 7.74%
4 Goldman Sachs 88.15 252 6.13%
5 Barclays 75.38 304 5.24%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $bn No of issues Share %
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1 Deutsche Bank 8.33 35 7.62%
2 BofA Securities 7.00 27 6.40%
3 UniCredit 6.71 30 6.14%
4 BNP Paribas 5.11 35 4.67%
5 HSBC 5.06 31 4.62%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $bn No of issues Share %
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1 Credit Suisse 3.10 7 10.48%
2 Morgan Stanley 2.55 14 8.63%
3 JPMorgan 2.53 18 8.56%
4 Goldman Sachs 2.43 15 8.20%
5 Citi 2.07 16 6.99%