(Financial Express, Noida, 18 January 2024) An Indian inter-ministerial meeting on Red Sea crisis on Wednesday has asked the Department of Financial Services (DFS) in the finance ministry to monitor the credit requirements of exporters and ensure that credit flows to them are maintained, a senior official said Wednesday. Different reports have said the conflict in the Red Sea is leading to increased shipping costs by 40-60%, insurance premiums by 15-20% and delays of up to 20 days due to rerouting of some ships away from Suez Canal. The cost and turnaround time of shipments have increased as two shipping lines including Maersk have stopped services but volume is not affected, the official said.He said so far there has just been time and cost impact, nothing else. In the rapidly escalating situation in the region the shipping rates on some routes have gone up by six times. Exporters fear that the impact could come in a big way if the situation does not normalise. The government may have to look at alternate routes. On its part the ministry of commerce has asked Export Credit Guarantee Corporation (ECGC) not to increase the premium on credit insurance and other related services.The insurance covers enable the banks to extend timely and adequate export credit facilities to the exporters. [Around 80% of India’s merchandise trade with Europe passes through the Red Sea and substantial trade with the US also takes this route. Both geographies account for 34% of India’s total exports. The Red Sea strait is vital for 30% of global container traffic and 12% of world trade.]
India
SACE Meets India: Facilitating $1.6 Billion for Green Transitions
(Livemint, Mumbai, 17 October 2023) Italy’s Export Credit Agency, SACE, brought together a hundred leaders in Mumbai to explore trade and industrial synergies. SACE is currently evaluating $1.6 billion of new projects to facilitate the green transition in India. These projects are expected to promote and grow trade and industrial synergies between Italy and India in a diversified range of sectors including green technologies & renewable energy, infrastructure, automotive, and steel amongst others. In this scenario, SACE brought together a hundred leaders from the Indian and Italian business and finance communities in Mumbai for its event, “Italy meets India – A Push towards a Sustainable Future”, to explore new potential business opportunities between Italy and India. SACE has an overall transaction portfolio of $173 billion and a presence in India through its office in Mumbai since 2012,
Israel-Hamas conflict: Indian exporters may face higher risk premiums, shipping costs
(Devdiscours, New Deli, 8 October 2023) Indian exporters shipping goods to Israel may face higher insurance premiums and shipping costs due to the Israel-Hamas conflict, according to experts. For merchandise exports of India, the war may lead to higher insurance premiums and shipping costs. Indian ECA ECGC may charge higher risk premiums from Indian firms exporting to Israel, think tank Global Trade Research Initiative (GTRI) said on Sunday. ECGC Ltd (formerly Export Credit Guarantee Corporation of India Ltd) is wholly owned by the government of India. Mumbai-based exporter and founder chairman of Technocraft Industries India Sharad Kumar Saraf said the conflict may have an impact on Indian exporters in the short run. ”But if the war escalates, things may get bitter for our exporters of that region,” Saraf said.
India’s Reliance Jio Secures $2 Bn In Largest FY24 Offshore Loan with Finnvera backing
(Business World, Delhi, 3 October 2023) Reliance Jio, Indian telecom giant, has successfully raised nearly USD 2 billion (approximately Rs 16,640 crore), marking India’s largest offshore loan in FY24, as reported by a media house. HSBC played a leading role in arranging this initiative, which is intended to finance the recent purchases of 5G network equipment from Nokia, a Finnish technology company. The report also reveals that Finnish export credit agency Finnvera has provided a similar insurance cover to safeguard Nokia, the supplier of Jio’s 5G equipment and the global lenders associated with the telecommunications company. The inclusion of Finnvera insurance is expected to reduce Jio’s overall funding costs for its 5G equipment. Such arrangements offer greater reassurance to global lenders and major 5G network suppliers involved in substantial deals.
The BRICS come of age [But what role for ECAs?]
(Project Syndicate, Cairo, 18 August 2023) by Hippolyte Fofack, Chief Economist and Director of Research at the African Export-Import Bank (Afreximbank). Given the BRICS’ economic success, more than 40 countries have shown an interest in joining the group and 22 have formally applied for membership. Expansion, trade and investment facilitation will be high on the agenda of the group’s summit scheduled for August 22-24 in Johannesburg. They include many issues on which the bloc’s views diverge from those of the G7, such as sustainable development, global governance reform (especially reform of the IMF), and de-dollarization. An enlarged grouping could deepen trade and settlement in local currencies, accelerate de-dollarization, and lead the transition to a more multipolar world. The economic potential of Brazil, Russia, India, and China, the group – called the BRICS since the addition of South Africa – contributes more to global GDP (in purchasing-power-parity terms) than the G7. Since 2014, Russia’s trade with G7 countries has fallen by more than 36%, owing to unprecedented Western sanctions, while its trade with the other BRICS has increased by more than 121%. The International Monetary Fund forecasts that China and India alone will generate about half of global growth this year. With geopolitical tensions running high, and the weaponization of the dollar for national-security purposes continuing to escalate, the BRICS have taken on new significance, offering trade diversion and other relief to weaken the effectiveness of sanctions and fast-tracking the transition to a multipolar world. Read the Summit Declaration here.
India’s Reliance Jio ties up $2.2 bn funding from Sweden’s EKN for 5G equipment
(Business India Today, Noida, 6 August 2023) “Reliance and its subsidiary Jio Infocomm JIL tied up its first ever Swedish Export Credit Agency (EKN) supported facilities of $2.2 billion equivalent making it the largest cover ever provided by EKN for a deal to a private corporate globally,” Reliance Industries said, adding that the proceeds of the facilities shall be utilised to finance the equipment and services in relation to JIL’s pan-India 5G roll out. Jio has committed to an investment of Rs 2 lakh crore to fulfill its ambitious pan-India 5G rollout plan, the company said. Jio started 5G network rollouts in October 2022. “Jio has launched its True 5G services across 2,300-plus cities/towns as of March 2023 and targets to achieve pan-India coverage by December 2023,” the annual report said.
India’s ECGC may permit Sri Lanka to repay debt over 12 years
(MINT, New Delhi, 6 July 2023) India plans to allow Sri Lanka up to 12 years to repay its debt to help ease the financial burden on the island-nation, India’s Export Credit Guarantee Corporation (ECGC) Ltd’s chairman-cum-managing director M.Senthilnathan said. Sri Lanka, facing its worst economic and political crisis in over seven decades, owes $7.1 billion to bilateral creditors— $3 billion owed to China, $2.4 billion to the Paris Club and $1.6 billion to India. Senthilnathan added that the National Export Insurance Account, managed by the ECGC, has received close to ₹4,500 crore worth of claims from exporters facing default in countries such as Sri Lanka, Zambia, Suriname and Ghana which faced extreme economic hardships after covid-19 and the Ukraine war. China has so far not joined the common platform of negotiators on Sri Lanka’s debt restructuring, though it has joined as an observer. In response to Sri Lanka’s request for long-term relief from major creditors like India, Japan, and China, the Chinese Exim Bank has agreed to grant Sri Lanka a two-year moratorium. It said it would support the country’s efforts to secure a $2.9 billion loan from the International Monetary Fund according to a report by Reuters.
Piyush Goyal meets bankers on export credit to MSME exporters aiming to achieve $1 trillion merchandise exports
(India Times, New Delhi, 30 June 2023) Minister of Commerce and Industry Piyush Goyal on Wednesday urged Indian banks to provide MSMEs with improved and inexpensive loans in order to meet the aim of 1 trillion dollars in product exports. According to the official statement, the meeting was convened by the Department of Commerce in coordination with Export Credit Guarantee Corporation Limited, (ECGC) in New Delhi. The Commerce and Industry Minister also mentioned at the meeting that the ECGC might look into expanding the programme that was proposed for nine banks to all banks in order to improve the export credit offtake for MSME Exporters. The Commerce and Industry Minister further informed that in the next four months, all the ECGC services would be digitised so that physical interaction can be minimised, it added.
Quad summit discusses ECA cooperation In Indo Pacific
(Deccan Herald, Bangalore, 21 May 2023) The leaders of the US, Japan, Australia and India met for the Quad Summit on the sideline of the G7 conclave in Hiroshima and agreed to work on a Memorandum of Cooperation (MOC) between the export credit agencies of the governments to strengthen collaboration for the promotion of trade, financing of trade-enabling projects, economic development, and knowledge-sharing with respect to the export of goods and services. The MOC underscores the importance of economic development of the Indo-Pacific region and of increasing business opportunities, they said. “We emphasise the importance of adherence to international law, particularly as reflected in the UN Convention on the Law of the Sea, and the maintenance of freedom of navigation… including those in the East and South China Seas,” the leaders stated in a joint statement, tacitly hitting out at China. India on Saturday joined Japan, Australia and the US to denounce China’s “destabilising and unilateral actions” to change the status quo in the Indo-Pacific region and its move to militarise the disputed features in the East and the South China sea.
Lessors & ECAs lead rhuge Air India jet order while Kenya Airways defaults on EXIM
(Reuters, Bengaluru, 15 February 2023) As global aerospace savours a record Air India 500-plane deal cheered by world leaders, it is the turn of leasing companies to line up for a piece of the action. “The large majority of these aircraft are likely to be financed through sale-and-leasebacks with perhaps 20% of the financing come from the (Western) export credit agencies,” said aviation adviser Bertrand Grabowski. Experts say the mainly Dublin-based lessors, who rent jets out for a monthly fee, could play a significant role in financing the Tata-owned airline’s Airbus and Boeing spree. In other news, the Export-Import Bank of the United States issued Kenya a default notice for delayed payment of a $454 million loan that the government borrowed to fund Kenya Airways. The flag carrier defaulted on the part of its $525 million loan from Exim, which the Kenyan government guaranteed. The Kenya National Treasury plans to reduce Kenya Airways’ state funding by $79.8 million, taking it from $239.5 million to $159 million, according to its 2022-23 supplementary budget. The treasury is reducing its support for the flag carrier in line with the government’s strategy to lessen the airline’s dependency on state funds by the end of 2023, although the airline will receive $283 million in financial aid from the state to continue operations.
