IMF meddles in Brexit vote

THE IMF and World Bank have unleashed their biggest guns in support of the ‘remain’ campaign. Brexit has elevated itself into the top issue at the Spring financial meetings despite a host of other critical issues ranging from the Panama papers to refugees and the meltdown in commodities and the economies they support.

World Bank president Jim Yong King invoked the importance of regional integration in Europe as a reason for Britain staying inside the EU but at least had the sense to say Brexit was for the British people to vote on.

IMF managing director Christine Lagarde discarded any attempt at neutrality. not only is Brexit, in her view, a threat to growth, because of the uncertainty it creates before and after the vote (should ‘leave’ triumph), but in her view it might undermine the geopolitical unity of Europe.

In support of this argument she invoked the last century and two world wars as reasons that Britain should remain – a very French attitude.

In practical terms the IMF is promising a special chapter in its annual inspection of the UK economy dealing with Brexit and quantifying the effects. Lagarde gave no clues as to the contents but the tone of her remarks left little doubt that the Fund and its economists already have made up their mind that Brexit would be bad for Britain, bad for the EU because it would lead to at least two years of uncertainty and bad for the globalised world.

The timing of the Fund report, scheduled to appear in May, has the fingerprints of the Chancellor all over it. Arguably it breaches the IMF’s political neutrality by injecting it directly into a national election campaign just a month from when people go to the polls.

One suspects that most people in the ‘Pig and Whistle’ don’t have a clue who Lagarde is, despite her striking appearance. But when adopted and propagated by the ‘remain’ campaign as the verdict of the world’s most important financial institution it is certain to have impact and work well for ‘Project Fear’.

The world’s top financial bureaucrats punctiliously refuse to make any direct comment on the American elections where issues of globalisation, protectionism, the perfidy of the banks and inequality are debated nosily on a daily basis.

But they have no such reservations about directly injecting themselves into Britain’s political process.

Out of Africa

FOR Barclays chief executive Jes Staley having capital tied up in Africa, despite a long and glorious history, makes no economic sense any longer. But for global financial stability and prosperity it is a serious problem.

There could be little doubt who Jose Vinals, the IMF’s financial enforcer in chief, was referring to when he bemoaned the decision of a major bank quitting eight countries across the continent including South Africa.

Global banks offer facilities that local banks, the most likely buyers, simply cannot offer. It is the main way in which remittances, the biggest transfer of resources from north to South, are moved across continents by migrants in the more prosperous north.

new figures from the World Bank show that in 2016 some $431.6bn in remittances followed this path. This number dwarfs anything that foreign aid can do.

Global banks also offer the most reliable way for companies to invest in Africa, send income home or transfer cash between territories.

At a time when inequality has been put on the agenda by policymakers, as a response to political alienation set in motion by the financial crisis, it is a blow against financial inclusion. This is especially true in Africa where banks such as Barclays have enabled banking for ordinary citizens on mobile devices.

Most importantly perhaps are risks to financial stability. Barclays may free up capital but its likely replacement is unlikely to be a universal bank. new owners may have less recourse to the capital and equity markets that make for a safer financial system. It could also impair trade finance, an essential component for commodity-based nations exporting to more advance countries.

It maybe that another global bank will buy up Barclays in Africa lock, stock and barrel making no difference at all.

But there are no guarantees.

Weighty decisions

NOW for something lighter so to speak. A Mintel survey finds that almost a quarter more Americas no longer order Coke or Pepsi when dining out than last year as fear of sugar and obesity increases. Iced tea has become the favoured substitute. At department store chain JC Penney they are introducing new fashion lines for the ‘plus size’ person – shifting the focus away from just catering for the more normal figure.

Are there lessons for the UK high street?