Under the influence of weak economic recovery, sovereign debt risks, and high inflation, the downside risks of the global economy have increased sharply. Many countries currently have bottomed out foreign exchange, are unable to pay for imports, and even require exporters to give them an account period of about 180 days. A large number of imported cargo containers are stranded at the port. Freight forwarders and cargo owners must pay attention to risk prevention when shipping!
01 Pakistan: L/C180 days, 20,000 containers stuck at the port
A January 23 document from the Central Bank of Pakistan suggested that importers could extend their payment terms to 180 days (or longer). Pakistan’s central bank said a large number of containers filled with imported goods were piling up at Karachi’s port because local buyers were unable to get the U.S. dollars from banks to pay for the goods. Khurram Ijaz, vice-president of the Federation of Pakistan Chambers of Commerce and Industry, said an estimated 20,000 containers were stuck at the port.
The Pakistan Ship Agents Association (PSAA), concerned about the rapidly deteriorating situation, issued notices to the State Bank of Pakistan and government leaders, warning shipping companies represented by them that they may consider suspending services in the country.
A spokesman for Pakistan’s Ministry of Maritime Affairs said in Karachi recently: “The government has decided to waive demurrage and detention charges, and these costs will now be borne by the national finance ministry.” However, industry insiders said this move will be a drop in the bucket and this crisis It is possible that many trading companies will go bankrupt.
The latest news shows that Pakistan’s foreign exchange reserves are only $3.09 billion, the lowest since 1998, and can only meet 18 days of import needs. For a country that relies heavily on imports, this is simply a wake-up call.
02 Egypt: Nearly 10 billion US dollars of goods are stranded at the port
Not long after the beginning of 2023, Egypt’s local currency, the Egyptian pound, suddenly collapsed. On January 11, the exchange rate of the Egyptian pound against the U.S. dollar plummeted by more than 16%, once again hitting a record low. In 2023, the cumulative depreciation rate will be close to 20%.
Egypt is the world’s largest wheat importer, about 80% of which relies on Russia and Ukraine. In February 2022, the conflict between Russia and Ukraine escalated, and wheat imports from the two countries were significantly reduced. Soaring wheat prices and energy sources made Egypt one of the countries most negatively affected by geopolitics in the world.
At the same time, due to the continuous appreciation of the US dollar, the Egyptian government has repeatedly used foreign exchange reserves to intervene, causing it to face the most serious foreign exchange shortage in five years. Many businesses are facing import difficulties, with $9.5 billion worth of goods still stuck in the country’s ports.
Facing a series of crises, the Egyptian government turned to the International Monetary Fund (IMF) for help for the fourth time in six years.
03 Bangladesh: Difficulty in issuing letter of credit
According to the relevant regulations on foreign exchange management of the Bangladesh Bank, external payments for import and export must generally be made in the form of bank letters of credit, except under special circumstances.
Recently, Bangladeshi importers have been complaining about the difficulty in opening letters of credit caused by the shortage of US dollars.
Data from the Bangladesh Central Bank shows that from July to December 2022, the issuance of letters of credit dropped by 14% year-on-year, and the settlement volume dropped by 9%. Among them, the amount of letters of credit issued for industrial raw materials dropped by 27%. Some companies said that at present, the central bank has taken measures to prevent the import of non-essential goods, which has destroyed the continuity of business. If the import of industrial raw materials and machinery and equipment cannot be guaranteed, production will be greatly affected, and the next step will be to lay off workers.
According to a report by Bangladesh’s “Daily Star” at the end of last year, data from the Bangladesh Central Bank showed that as of September, 11 commercial banks in Bangladesh faced a total funding shortage of 326.06 billion taka.
These banks are Bangladesh Krishi Bank, Agrani Bank, Rupali, Janata, Sonali, Rajshahi Krishi Unnayan Bank, BASIC Bank, National Bank, ICB Islamic Bank, Bangladesh Commerce Bank and Padma Bank.
Among them, Bangladesh Krishi Bank has the largest funding gap of Tk 13,491 crore. State-run Agrani Bank has a shortfall of Tk 2,851 crore. State-run Rupali Bank is Tk 23.9 billion and another government-owned Janata Bank is Tk 23 billion. At the same time, Bangladesh’s commercial banking industry has seen a significant increase in defaulted loans. Defaulted loans of the 60 commercial banks operating in Bangladesh surged to a record Tk 1.34 trillion, accounting for 9.36% of outstanding loans.
04 Argentina: 80% of companies encounter problems with imports
Economic downturn, hyperinflation, debt problems, and social unrest have once again plunged Argentina into a “storm” in 2022. Since the beginning of 2022, the cumulative devaluation of the Argentine peso has exceeded 40%.
A large amount of Argentina’s foreign exchange reserves are spent on imports, so starting from the end of 2021, the Argentine government has frequently introduced import restrictions. In March last year, the Central Bank of Argentina issued an announcement requiring that Class B imported goods with a SIMI import license must be cleared by Argentine customs for at least 180 days before they can be exchanged with the foreign exchange market. In October 2022, the Afghan government launched a new import declaration system, resulting in longer delays in relevant import procedures.
According to a survey by the National Chamber of Commerce of Argentina (CAC), after the Argentine government implemented the new import monitoring system (SIRA), less than 25% of the import licenses applied by importers were approved by the government, and the issuance delay period was as long as 90 days. .
A survey report by the Argentine Industrial Federation shows that 80% of Argentine companies encounter problems with imports, and companies face multiple difficulties in obtaining financing and production development. investigationIt shows that only 28.2% of companies have positive expectations for their operating conditions.
Argentina and Brazil are currently preparing for a common currency and will invite other Latin American countries to join, aiming to establish the world’s second largest currency bloc after the European Union.
05 Lebanon: The currency devalued by 90%
2023 is the fifth year that Lebanon has fallen into a financial and economic crisis. After experiencing the banking crisis in 2019 and the Beirut Port explosion in August 2020, the situation has continued to deteriorate since then. Over the past three years, due to the combined effects of multiple factors such as political economy and the COVID-19 epidemic, the black market exchange rate of the Lebanese pound against the US dollar has fallen by more than 96%.
On February 1 this year, Lebanese money became even more “worthless.” The day before, Lebanese Central Bank Governor Riyad Salama announced that Lebanon would adopt a new official fixed exchange rate. The Lebanese pound to US dollar exchange rate will be adjusted from 1,507.5:1 to 15,000:1. After adopting the new exchange rate, the Lebanese pound will depreciate by 90%.
Today, in Lebanon, where even eating is a problem, the hottest transaction is currency exchange. While Lebanon has never formally implemented capital controls, banks have implemented their own controls since 2019, severely limiting U.S. dollar and Lebanese pound withdrawals. Locals and businesses now rely almost exclusively on cash transactions, and the economy is increasingly dollarized. Now even the Lebanese Ministry of Finance is beginning to consider letting importers pay the additional tariffs in cash.
Who is the most vulnerable?
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