Monthly Archives: July 2011

New currencies for South and North Sudan

According to Reuters:

Sudan will start circulating its new currency on Sunday, the central bank said, days after South Sudan started rolling out a currency of its own.

South Sudan, which declared independence on July 9 under a 2005 peace deal that ended decades of civil war, said last Monday it had started circulating its new South Sudan pound, pegging it one-to-one with Sudan’s existing pound.

In a brief statement, the northern central bank said the new currency would go into circulation on Sunday.

It previously said it would take up to three months to replace the old Sudanese pound, describing the currency move as “precautionary measure” following the southern plans.

The Sudanese pound has been falling on the black market in Khartoum for weeks as economists say foreign currency inflows needed for imports will decline alongside falling oil revenues.

The old pound has also fallen in the south on worries the old notes will be worthless if both countries do not reach an agreement to coordinate their currency launches.

The south took about 75 percent of Sudan’s 500,000 barrel-a-day oil reserves with it when it left.

North and South Sudan have yet to work out a large range of issues from sharing oil revenues to ending violence in some parts of the joint border.

Shortcomings of the "adverse" EBA stress test scenario

The results of the stress test conducted by the quite young European Banking Authority are out now. As expected, not more than 10 banks failed the test and, in a nutshell, the results are quite relaxed putting little further pressure on European financial institutions.

Overview:

* At the end of 2010, twenty banks would fall below the 5% Core Tier 1 Ratio
(CT1R) threshold over the two-year horizon of the exercise. The overall
shortfall would total EUR 26.8 bn.
* Between January and April 2011, a further net amount of some EUR 50 bn of
capital was raised.
* Taking into account these capital raising actions implemented by end April
2011:
– Eight banks fall below the capital threshold of 5% CT1R over the two-
year time horizon, with an overall CT1 shortfall of EUR2.5 bn.
– Sixteen banks display a CT1R of between 5% and 6%.

The tests were construed to examine “the resilience of a large sample of banks in the EU 1 against an adverse but plausible scenario” (EBA).

But what does this tell us? The informative value of the stress test relies on the choice of the scenario. And there a some goods reasons to doubt its quality.

For instance, The Economist points on two shortcomings of the construction of the scenario:

  1. The test ignores the severeness of the euro crisis: It only takes a moderate haircut of sovereign debt into account, 15 percent for Greece, for example. What will happen if there is a real default in the European perphery, the test cannot tell us.
  2. The test ignores the typical structure of such crises: It only regards the direct effects of, for instance, a Greek default. it does not take possible contagion effects into account.

That is, the scenario might be not “adverse” enough to forecast the potential problems that the EU banking sector will face within the next year.

Kenya's open data initiative

By Johannes Zutt on Africa can…end poverty:

Kenya is in the midst of a quiet revolution—but many people, even in Kenya, seem to be unaware of it, or the enormous governance improvements that it is likely to bring.

We saw a new Kenya emerging last Friday when President Kibaki presided over an historic event that was hard to imagine in the old Kenya: the launch of a government website, www.opendata.go.ke , that makes enormous volumes of government data available to the public in user-friendly formats.

For the first time in Kenya’s history, core government data on population, the budget, education, health care and other public services are available to policy-makers, researchers, ICT developers, and citizens in an easily-accessible format. This portal is one of the first and largest government portals with reusable data in sub-Saharan Africa, making Kenya one of the world’s leading exemplars of open data (see Time magazine’s “Silicon Savanna”).

Middle-income fragile states

Andy Sumner asks whether there’s “a new kind of fragile state”:

What do Pakistan, Yemen, Nigeria, Iraq, Ivory Coast, Sudan and perhaps Libya, Egypt and Tunisia have in common? Fragility and middle-income status.
[…]
In short, there are only 35 low-income countries remaining out of around 200 countries that the World Bank tracks. And that’s down from 63 in 2000 and this is projected to fall to perhaps 20 or so low-income countries by 2025.
[…]
In between the two ways of looking at countries – income and fragility – there is a new kind of country – countries which are fragile and middle income. This isn’t supposed to happen though is it? Countries are poor, then they stabilise and then they get rich don’t they?

Maybe not any more. Look at the kind of countries that are both fragile and now middle income, taking the OECD’s combination of fragile states lists: Pakistan, Yemen, Nigeria, Iraq, Ivory Coast, Sudan (and perhaps now add Libya, Egypt and Tunisia).
[…]
Maybe being a poor and/or fragile state isn’t going to be the main international issue for peace and security in the future. Maybe instead it’s the fragile states who are not-so-poor?

Bond market armageddon in Greece…

Yields surge for Greece's 2year bonds

Things start to get ugly in peripheral Europe. These are the 2-years bonds.

Is another US recession just around the corner?

recession and growthrates

Dave Altig points out that:

[…] there has been a pretty reliable relationship between sustained bouts of sub-2 percent growth and U.S. recessions (indicated by the gray shaded areas). In fact, over the entire post-World War II era, periods in which year-over-year real GDP growth below 2 percent have been almost always associated with downturns in the economy.

Africa's new largest countries

Africa has a new largest country: Algeria.
And Sub-Saharan Africa (World Bank definition) also has a new largest country: DR Congo.

North Sudan lost about one third of its territory. There are about 1.6 million sq km left.
So now it seems to be number four in Africa and number two in Sub-Saharan Africa in terms of size of the territory.

here (of course, not updated yet)

Facts and figures – South Sudan

(Source BBC:)

* Population: 7.5-9.7 million
* Size: 619,745 sq km (239,285 sq miles), larger than Spain and Portugal combined
* Major languages: English, Arabic (both official), Juba Arabic, Dinka
* Religion: Traditional and a Christian minority
* Main export: Oil

Happy Birthday South Sudan!

Some media reactions:

mail&guardian

reuters

daily nation kenya