France vulnerable to economic shock, national audit office says

France's ailing public finances and its deficit of €154 billion (US$168 billion) leave the euro zone's second-biggest economy ʺdangerously exposedʺ in the event of a new macroeconomic shock, the national public audit office – known as the Cour des Comptes – has warned.

The alert comes at a delicate time for President Emmanuel Macron's government after this month's parliamentary election. The election resulted in a hung parliament but while no party won an outright majority, the far-right National Rally (RN) and the New Popular Front left-wing coalition performed well, with both blocs promising big public spending programmes.

The audit office reiterated it was vital for France to reduce its public deficit, which rose to €154 billion in 2023 from €125.8 billion in 2022.

ʺDue to delays in making real structural reforms, the cost of public debt, which has been exacerbated by recurring deficits and the weight of these deficits, has become more and more expensive,ʺ it said.

This ʺhas hampered other spending, hinders the ability to make investments and leaves the country dangerously exposed in case of a new macroeconomic shock.ʺ

Pierre Moscovici, the former French finance minister who heads the Cour des Comptes, highlighted the rising costs of servicing France’s debts.

ʺWe already pay €52 billion a year to pay it back. We will be paying €80 billion to repay it in 2027. This means that there is no longer any room for manoeuvre to do the rest, for education, justice, security and financing the ecological transition,ʺ Moscovici stated.

The audit office said France's public financing programmes did not adequately take into account costs linked to policies aimed at protecting the environment, such as using more renewable energy, and that this marked a "major negative shock".

It said the extra investments needed for such policies were estimated to bring further annual costs of €60 billion a year by 2030.

Last September, France's RTE grid operator said massive short-to-medium term investments were needed in the power sector as the country aims to reduce its carbon emissions further and continue the switch from fossil fuels by 2050.

Research published this year by European Union (EU) lawmakers involved with Green political parties also stated the EU will need €1.5 trillion per year of investments to meet its 2050 net zero emissions target.

Last month, the European Commission said France and six other countries should be disciplined for running budget deficits in excess of EU limits, with deadlines for reducing the gaps to be set in November.

France had a budget gap of 5.5% of gross domestic product (GDP) in 2023, up from 4.8% in 2022 and above the EU's deficit limit of 3%. French public debt was 110.6% of GDP in 2023. The EU Commission expects this to increase to 112.4% this year and to 113.8% in 2025 while the EU limit is 60%.

Macron’s government has pledged to meet the EU’s deficit limit of 3% by 2027, but the outlook has been complicated by the parliamentary deadlock.

Credit rating agencies Moody’s and S&P Global have warned of negative impacts on the French economy from the political deadlock, where no political party won an outright majority.

 

Pakistan agrees US$7 billion loan deal with the IMF

Pakistan has reached agreement with the International Monetary Fund (IMF) for a new US$7 billion loan, the country’s latest resort to the global lender for help in propping up its economy and dealing with its debts through major bailouts.

In April, the IMF approved the immediate release of the final US$1.1 billion tranche of a US$3 billion bailout to Pakistan. Finance Minister Muhammad Aurangzeb said the government plans to seek a long-term loan to help stabilise the economy after the end of that bailout package.

The new loan deal will last for 37 months and aims to strengthen fiscal and monetary policy and support reforms to broaden the tax base, improve the management of state-owned enterprises, strengthen competition, secure a level playing field for investment, enhance human capital, and scale up social protection through a major welfare programme, the IMF said.

ʺThe program aims to capitalise on the hard-won macroeconomic stability achieved over the past year by furthering efforts to strengthen public finances, reduce inflation, rebuild external buffers and remove economic distortions to spur private sector-led growth,ʺ said Nathan Porter, IMF’s mission chief to Pakistan. The agreement is subject to approval by the IMF's executive board.

Pakistan’s new coalition government presented its first budget in parliament last month, promising an increase of up to 25% in the salaries of government employees and setting an ambitious tax collection target.

The finance minister said Pakistan wants to collect rupees (PKR) 13 trillion (US$44 billion) in taxes, an increase of 40% from the current fiscal year. Aurangzeb also said the government will ensure that the number of taxpayers rises, with only about five million people in Pakistan currently paying tax.

Analysts said the new budget of about US$68 billion -- up from US$50 billion in the last fiscal year -- was aimed at qualifying for a long-term IMF loan of US$6 billion to US$8 billion to help stabilise the economy. In 2023 Pakistan nearly defaulted on the payment of foreign debts.

 

World Bank offers financial lifeline to Pacific islands

The World Bank is preparing a financial lifeline for Pacific Island nations, backed by the US and Australia, as an exodus of Western banks from the unprofitable market prompts concern that China could fill the vacuum in the strategic region.

Without a backstop, many of the 18 small countries and territories of the Pacific Islands Forum, spanning 30 million square km (10 million square miles) of ocean, risk being cut off from global finance as Western banks leave the less-developed region, a situation an Australian official involved in the plan called ʺArmageddon"ʺ.

The US$77 million proposal would initially enable emergency access to dollars or other major currencies that the island nations would need for trade and remittances if Western banks cut ties, the World Bank said.

The region, which Washington has long considered its maritime neighbourhood, is caught in a superpower battle for influence as China makes steady advances.

Nauru, Solomon Islands and Kiribati switched diplomatic recognition from Taiwan to Beijing in recent years, and the Solomon Islands has struck security and policing pacts with China that sparked alarm in the US and Australia.

Banking curbs after the 2008 financial crisis have made Western lenders cautious about ties to the Pacific, where banks and regulators often lack the resources to find and prosecute financial crimes, raising the risk that banks get embroiled in embarrassing and expensive scandals.

There is also little prospect of profit from the region's tiny, remote populations to entice banks to bear the cost of helping raise compliance standards.

ʺThe proposed World Bank project is a creative way of addressing the challenge of de-risking and small scale in Pacific Island countries,ʺ said Lalita Moorty, the World Bank's East Asia and Pacific director for prosperity.

Without access to overseas banks, Pacific countries would struggle to receive remittances - a key component of their economies - welcome holidaymakers or trade with the wider world. Already as competition wanes, the cost of remittances has increased to some of the highest globally.

ʺIt can create instability for the financial system,ʺ said Denton Rarawa, senior economics adviser at the Pacific Islands Forum.

Between 2011 and 2022, the region lost 60% of its correspondent banking relationships, where Western banks partner with local ones to enable transactions in international currencies.

ANZ Bank has sold assets in Papua New Guinea, Westpac tried to sell its Pacific business and Nauru's only lender, Australia's Bendigo Bank, announced plans to leave in 2025.

Chinese banks have in recent years expressed interest in the Solomon Islands, Tonga and Samoa, the central bankers of those countries told Reuters, although nothing has eventuated.

 

La Niña threatens further dent in emerging-market bond returns

Emerging-market bonds, which have fallen out of favour this year, are set to face another threat in coming months: the La Niña weather phenomenon that is set to drive up inflation, reports suggest.

Climbing food prices are likely to weigh on Latin American local-currency bonds that are already underperforming their global peers, according to Columbia Threadneedle Investments. Assets in countries such as Brazil, Argentina and Central America are especially at risk from unpredictable weather events, TCW Group says.

There is a 65% chance La Niña will form in the next three months and persist into 2025, according to the National Oceanic Atmospheric Administration. La Niña refers to periods of cooler-than-normal sea surface temperatures in the mid Pacific Ocean that can cause droughts in Latin America, hitting crops and driving up food costs. It can also lead to more hurricanes in the Gulf of Mexico, hurting oil production.

Weather disruptions pose an inflationary factor “that might slow easing cycles by central banks in places like Latin America,” said Adrian Hilton, head of global rates and emerging market debt at Columbia Threadneedle in London. Colombia’s central bank, for example, “can add possible climatic impacts on food prices to the list of concerns,” he said.

Emerging markets have been volatile due to a range of extreme weather in recent years that has been attributed to rising global temperatures. Southern Brazil saw catastrophic flooding in May, while parched conditions reduced the number of ships that could use the Panama Canal in June. In Africa, Zambia’s worst drought in four decades helped convince the central bank to raise interest rates, while low rainfall in India has pushed up food costs across Asia.

Those events have added further fuel to global inflation that is sapping returns from developing-nation debt. Emerging-market local-currency bonds have dropped 0.7% this year, underperforming Treasuries that have lost 0.3%, according to indexes compiled by Bloomberg.

The anticipated La Niña pattern may have an especially pronounced effect this time around as it is set to occur three months after the reverse El Niño ended, just the third occasion that’s happened since 1950, according to Swiss Re Group.

“The severe weather events brought by El Niño in 2023 and 2024 and potentially also by La Niña in the summer will likely accentuate already-high agriculture and property protection gaps across the region,” economists Fernando Casanova Aizpun and Caroline De Souza Rodrigues Cabral wrote in a research note in May. 

“A swift transition to La Niña could prolong a three-year period of high inflation as food and energy prices become subject to a supply shock.”

 

BNP Paribas and Ant International partner in Europe

BNP Paribas has formed a strategic partnership with Ant International, a subsidiary of Ant Group n part of China’s Alibaba conglomerate, to ʺrevolutionise the European financial market.ʺ The collaboration will ʺleverage Ant Group’s advanced digital technology and BNP Paribas' extensive banking network to enhance digital payment solutions and financial services across Europe. ʺ

The collaboration was formalized through a Memorandum of Understanding (MoU) signed in Zurich by Douglas Feagin, President of Ant International, and Pierre Fersztand, Global Head of Cash Management, Payments, Trade Solutions & Factoring at BNP Paribas. The partnership aims to create a seamless and innovative digital ecosystem, providing consumers and businesses with more efficient and secure financial services. This initiative is expected to significantly impact the European market by improving accessibility and user experience in financial transactions​.

Under the strategic alliance, BNP Paribas will integrate Alipay+, Ant International’s advanced mobile payment and digitalization technology platform. This integration aims to empower thousands of merchants across Europe, utilising BNP Paribas’ acquiring services, to accept payments seamlessly from over 25 international mobile partners via Alipay+.

Additionally, the partnership will bolster the role of WorldFirst, Ant International’s comprehensive digital payment and financial services platform, within the Single Euro Payments Area (SEPA) scheme. BNP Paribas will sponsor WorldFirst’s enhanced participation in SEPA, facilitating smoother online cross-border payments and fund transfers within the SEPA zone. This initiative will allow WorldFirst’s clients to access real-time payment schemes and automate treasury payments to optimize their operations.

A key aspect of the collaboration is the exploration of tokenised deposits for global treasury management through Ant International’s Whale platform. Using blockchain technology, advanced encryption, and AI, the Whale platform aims to revolutionisse the efficiency and transparency of global fund transfers, enhancing liquidity management for businesses worldwide.

 

KPMG launches climate reporting resources hub

Global professional services firm KPMG has launched Clear on Climate Reporting, a digital hub aimed at helping companies provide reporting to investors and regulators on the financial implications of climate-related risks and opportunities on their businesses.

According to KPMG, the new hub is being launched as companies are seeing greater climate change-drive broader stakeholder scrutiny of financial reporting, with many facing growing risks from the physical effects of climate change and the transition to a lower-carbon economy. The firm added that while companies need to consider whether these climate-related matters are material to their financial statements, “there is no single standard that addresses everything and there are a lot of bases to cover to get the accounting right.”

Brian O’Donovan, Global IFRS and Corporate Reporting Leader at KPMG International, said: “Essentially, companies need to tell investors what the financial implications of their climate-related plans are; and if they believe there’s no financial impact, tell investors why. Investors are looking for a connected picture of performance, showing the financial implications of sustainability plans and actions.”

According to KPMG, at launch, the new hub provides a series of resources covering key climate-related reporting issues for companies, including FAQs to help identify the potential financial statement impacts for businesses, as well as podcasts and videos to explore issues in more depth, including by sector, with more resources, including a new emissions section, to be added in the future.

Among the topics covered on the hub include recognising liabilities related to net zero commitments, accounting for emissions schemes, environmental, social and governance (ESG) measures in executive pay packages, considerations for companies when purchasing carbon credits, and accounting for different forms of government assistance, among others.

Larry Bradley, Global Head of Audit, KPMG International, said: “What’s described in the front of the annual report won’t always be mirrored in the financial statements in the way users expect. This is often true for climate. It is important that companies both comply with the IFRS Accounting Standards and connect the dots between financial and non-financial information.”

 

Datapro and Mastercard form Latin America cross-border partnership

Banking systems and digital solutions provider Datapro is collaborating with Mastercard to expand the integration of Mastercard Cross-Border Services, a solution within the Mastercard Move portfolio of money transfer solutions. The collaboration will provide Datapro’s customers throughout Latin America and the Caribbean with access to fast, transparent, and convenient cross-border payment experiences.

A release stated “Increasingly, consumers are looking for ways to send money across the globe quickly and securely. In fact, delivery speed, security, receipt confirmation and the ability to use an app are the top factors driving choice of online solutions, according to Mastercard’s latest Borderless Payments Report. To accelerate innovation and respond to consumer needs, Datapro removes the technical barriers to implementation that financial institutions may currently face when adopting new payment solutions.”

“We are incredibly excited to collaborate with Mastercard in order to bring new digital payment solutions to customers across the region,” said Ignacio Blanco, CEO of Datapro. “Datapro has a solid track record of success within Latin America and the Caribbean for more than 45 years. This collaboration is a strong testament to Datapro’s ongoing commitment to supporting financial institutions in driving innovation and providing impactful digital solutions to their customers.”
 

Tanzania fintech NALA raises US$40 million to build payments across emerging markets

Tanzania-founded fintech startup NALA has raised US$40 million to fuel its international expansion and launch its own payment rails for Africa and beyond.

NALA is an African payments company and money transfer app that enables users to make secure and reliable payments from Europe, the UK and US to Tanzania, Kenya, Rwanda, Uganda and Ghana in seconds. Last year, it launched in the European Union (EU), adding 19 new countries to its list of send countries and aiding its mission of connecting Africans globally.

In the past year, NALA has achieved a tenfold increase in revenue, reached profitability, and had positive cash flow, while in the past 20 months it has seen a 34x increase in transaction volume. It is now planning further growth, and further international expansion, after raising US$40 million in Series A funding, in a round led by Acrew Capital with participation from DST Global Partners, Amplo, Norrsken22 and HOF Capital, and angels such as Ryan King and Vlad Tenev.

The new funding will help NALA’s consumer business expand beyond Africa, building services for the global migrant diaspora. It was also help build Rafiki, its new B2B payments platform, which is designed to lay the payment rails for the next billion users.

“This US$40 million funding round marks a pivotal moment for NALA. It will enable us to go beyond remittances and extend our reach beyond Africa, building a robust payments ecosystem,” said Benjamin Fernandes, founder and CEO of NALA.

“We’re reinvesting this money to enhance our infrastructure, ensuring reliable, low-cost payments for all. With the launch of our own payment rails and the expansion of our B2B platform Rafiki, we’re not just talking about change – we’re building it. We’ve got some bold, ambitious plans, give us a couple of years.”

This is NALA’s second round of fundraising in 20 months, having raised US$10 million through Accel, Amplo, and Bessemer Partners in 2022.
 

Singapore’s Ho Bee Land issues S$160 million inaugural green bond

Singapore-based real estate company Ho Bee Land has debuted its inaugural green bond, a S$160 million (US$119 million) five-year fixed-rate unsecured issue off the company’s S$800 million multi-currency medium-term note programme.

The bond was distributed across various investors, including institutional investors, private banks, corporations, and financial institutions in Singapore.

Net proceeds from the issuance will be used to fund or refinance eligible green projects under Ho Bee Land’s Green Finance Framework, awarded a second party opinion rating of SQS2 from Moody’s, signalling the financing framework to be overall considered of very good sustainability quality.

DBS Bank acted as the sole green structuring advisor and global coordinator for this bond issuance, with DBS, OCBC and The Hongkong Shanghai Banking Corporation, acting as joint lead managers and joint bookrunners.

Nicholas Chua, CEO of Ho Bee Land, says: ʺHo Bee Land is committed to ensuring sustainability is embedded in our business and financial strategies, and this green bond issuance is a testament to our commitment. It allows us to diversify our funding sources and broaden our investor base while reinforcing our dedication to green building practices.ʺ

Clifford Lee, global head of investment banking at DBS, adds: ʺWe are pleased to have supported Ho Bee Land as its sole green structuring advisor and global coordinator for its inaugural tap of Singapore’s green capital market. On the built environment front, we see growing demand for green financing as the industry recognises the role sustainable buildings play in securing a low-carbon future.ʺ

 

Spindo issues Indonesia’s first rupiah SLB

Indonesia’s largest welded steel pipe manufacturer PT Steel Pipe Industry, aka Spindo, issued the country’s first local currency sustainability-linked bond (SLB) amounting to one trillion rupiah (US$61.75 million) on the back of a guarantee extended by Credit Guarantee and Investment Facility (CGIF), a trust fund of the Asian Development Bank (ADB).

Listed in the Indonesia Stock Exchange (IDX) the transaction represents a significant milestone for sustainable financing in Indonesia.

Rated idAAA (cg) by Pefindo, the SLB was issued on July 9 with a coupon rate of 7% per annum for the three-year tranche and 7.35% per annum for both the five-year tranche and the seven-year tranche with stronger investors’ demand for the longer tenors. The proceeds will be used for the development of Spindo’s new warehouse, working capital and refinancing of existing debt facilities.

PT Indo Premier Sekuritas, PT BCA Sekuritas, PT Korea Investment and Sekuritas Indonesia, and PT Sucor Sekuritas were the joint lead underwriters for the transaction.

Spindo was established in 1971 with a production capacity of around 600,000 tonnes per year. It operates six units in East Java and West Java. More than 60% of the company’s products are used in infrastructure, telecommunications, mining, petrochemicals, construction and utilities, while the remainder is used in the oil and gas sector, automotive industry and furniture.

Spindo is classified as a blue company in terms of environmental aspects – meaning it complies with environmental regulations in Indonesia.

The deal is the second local currency-denominated SLB guaranteed by CGIF in less than a month. In June, it guaranteed the S$100 million (US$74 million) SLB issued by Sabana Industrial Real Estate Investment Trust. This offering represented CGIF’s first-ever guarantee for an SLB.