Melnett Financial Services

11/10/2021

WHY STATE-OWNED ENTERPRISES MATTER

The IMF’s Middle East and Central Asia department has just released a paper examining the costs and challenges associated with the region’s state-owned enterprises (SOEs). The paper assesses SOEs’ footprint in the region, their performance and associated fiscal costs, and tackles important related issues, including state support, SOE corporate governance, and the impact of COVID-19 on SOEs. It also recommends policy actions that policymakers can take today to ensure SOEs are delivering on their objectives and lay the ground for strong, sustainable, job-rich, and inclusive growth. In particular, given the sizable footprint of SOEs in the region, the paper recommends redefining their strategic role, reducing their involvement in economic activities that would be better performed by private-sector firms, and leveling the playing field for all economic agents to help open fiscal space for more growth-enhancing needs and increase opportunities for the private sector.

06/07/2021

REGIONAL ECONOMIC OUTLOOK FOR SUB-SAHARAN AFRICA 2021 AND BEYOND

06/07/2021

DANGOTE GROUP FOUNDER (ALIKO DANGOTE) ON AFRICAN TRADE TRANSFORMATION 2021 AND MOVING FORWARD

06/07/2021

FACT #4: GLOBAL FOOD PRODUCER PRICES HAVE RALLIED REACHING MULTI-YEAR HIGHS.

From their trough in April 2020, international food (producer) prices have increased by 47.2 percent attaining their highest (real) levels on May 2021 since 2014 (highest level ever in current dollar terms). Between May 2020 and May 2021, soybean and corn prices increased by more than 86 and 111 percent, respectively.

There are three main factors behind the recent rally in producer prices:
(1) Demand for staples for both human consumption and animal feed has remained high, especially from China, as countries have stockpiled food reserves due to pandemic-related worries about food security.
(2) The recent 2020-2021 La Niña episode—a global weather event occurring every few years—has led to dry weather in key food exporting countries, including Argentina, Brazil, Russia, Ukraine, and the United States. This has caused, in some cases, harvests and harvest outlooks to fall short of expectations. As demand has outpaced supply, US and world stocks-to-use ratios—a measure of market tightness—reached multi-year lows for some staples.
(3) Strong demand for biofuels increased speculative demand by non-commercial traders, and export restrictions are additional factors supporting world producer prices.

06/07/2021

FACT #3: SOARING SHIPPING AND TRANSPORT COSTS.

Ocean freight rates as measured by the Baltic Dry Index (a measure of shipping costs) have increased around 2-3 times in the last 12 months while higher gasoline prices and truck driver shortages in some regions are pushing up the cost of road transport services. Higher transport costs will eventually increase consumer food inflation.

06/07/2021

FACT #2: EARLY LOCKDOWN MEASURES AND SUPPLY CHAIN DISRUPTIONS INDUCED A SPIKE IN CONSUMER FOOD PRICES.

At the start of the pandemic, food supply chain disruptions, a shift from food services (such as dining out) towards retail grocery, and consumer stockpiling (coupled with a sharp appreciation of the US dollar) pushed up consumer food price indices in many countries—with consumer food inflation peaking in April 2020—even though producer prices of primary commodities, including food and energy, were declining sharply as demand for primary food commodities was disrupted. By early summer 2020, however, various consumer food prices had moderated, pushing down consumer food inflation in many countries.
So, while food prices at your grocery store (i.e., consumer food prices) may have increased, it is an exaggeration to say that they are currently rising at their fastest pace in years. They are also not currently contributing to headline inflation, though they may do so later this year and in 2022 (see the outlook below). Producer prices, on the other hand, have recently soared (see fact #4). But it takes at least 6-12 months before consumer prices reflect changes in producer prices. Also, on average, the pass-through from producer to consumer prices is only about 20 percent. This is because consumer food prices include the shipping costs of primary food commodities, the processing, marketing and packaging of food, and final distribution costs such as transport costs.
The last two facts will help us understand what to expect for consumer food prices.

06/07/2021

FACT #1: FOOD PRICE INFLATION STARTED INCREASING BEFORE THE PANDEMIC.

The increase in consumer food price inflation predates the pandemic. In the summer of 2018, China was hit by an outbreak of African swine fever, wiping out much of China’s hog herd, which represents more than 50 percent of the world’s hogs. This sent pork prices in China to an all-time high by mid-2019 creating a ripple effect on the prices of pork and other animal proteins in many regions around the world. This was compounded by the introduction of Chinese import tariffs on US pork and soybeans during the US-China trade dispute.

06/07/2021

FOUR FACTS ABOUT SOARING CONSUMER FOOD PRICES

Rising world food prices for producers are making headlines and causing concerns among the public. The most recent data show a moderation in consumer food price inflation globally, but as we explain below, that could change in the coming months. This would only add to the high prices that consumers in many countries already lived through last year.
If prices eventually rise again, there will likely be sizeable differences between countries. Due to various factors, it is probable that the effect would be felt most by consumers in emerging markets and developing economies still wrestling with the effects of the pandemic.

17/06/2021

2021 FINANCIAL SECTOR ASSESSMENT PROGRAM REVIEW—TOWARDS A MORE STABLE AND SUSTAINABLE FINANCIAL SYSTEM

The Financial Sector Assessment Program (FSAP) Provides In-Depth Assessments Of Financial Sectors. FSAPs Are Usually Conducted Jointly With The World Bank In Emerging Market And Developing Economies And By The Fund Alone In Advanced Economies. Fsaps Provide Valuable Analysis And Policy Recommendations For Surveillance And Capacity Development. Since The Program’s Inception, 157 Fund Members Have Undergone Individual Or Regional Fsaps. In Recent Years, The Fund Has Been Conducting 12–14 Fsaps Per Year At A Cost Of About 3 Percent Of The Fund’s Direct Spending.
https://drive.google.com/file/d/1yXnywygkQggHJVpX8f6DmSOZiDGfHHqH/view?usp=sharing