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February
Yellen, G7 urge renewed aid for Ukraine as G20 finance chiefs gather
Written by Nur Yasmin
U.S. Treasury Secretary Janet Yellen stepped up calls on Thursday for increased financial support for Ukraine to help it battle the year-old Russian invasion as the United States readies an additional $10 billion in economic assistance.
Yellen, speaking at a news conference in India on the eve of the first anniversary of Russia's invasion, said it was critical for the International Monetary Fund to "move swiftly" towards a fully financed loan programme for Ukraine.
"As President Biden has said, we will stand with Ukraine in its fight – for as long as it takes," she said. "Continued, robust support for Ukraine will be a major topic of discussion during my time here in India."
Yellen is to join other finance ministers and heads of central banks from the Group of 20 nations on Friday for a meeting at a resort near the tech hub of Bengaluru. It is the first major meeting of India's year-long presidency of the bloc, which includes wealthy G7 democracies as well as Russia, China, Brazil and Saudi Arabia.
In a joint statement, the G7 finance ministers said the bloc hoped Ukraine and the IMF could agree on a loan programme by March, adding that they had increased financial aid for Ukraine for this year to $39 billion. German Finance Minister Christian Lindner said his country was already supporting Ukraine and now other nations had to do their part.
Ukraine is seeking a $15 billion multi-year IMF programme, Prime Minister Denys Shmyhal said on Monday after meeting IMF Managing Director Kristalina Georgieva in Kyiv.
Yellen said that previous U.S. military, economic and humanitarian aid totalling $46 billion had allowed Ukraine to preserve economic and financial stability.
"Our economic assistance is making Ukraine’s resistance possible by supporting the home front: funding critical public services and helping keep the government running. In the coming months, we expect to provide around $10 billion in additional economic support for Ukraine," she added.
India, which has kept a neutral stance on the war, does not want additional sanctions against Russia to be discussed at the G20 meetings, government sources have told Reuters. India was also pressing participants to avoid using "war" in communique language to describe the conflict, G20 officials said.
But Yellen said the communique was still under discussion and that she would like to see a "strong condemnation" of Russia's invasion and the damage it has caused to Ukraine and the global economy.
Nevertheless, she said the global economy "is in a better place today than many predicted just a few months ago".
CHINA WARNING
Yellen said while headline inflation was beginning to ease in the United States and across the globe, it was important for G20 finance officials to keep working to quell inflation, adding: "We are not out of the woods yet."
She said G20 countries, especially China, needed to work to restructure the debts of low- and middle-income countries facing distress, especially the "most urgent" cases of Zambia and Sri Lanka. The G7 also said the bloc would also work on debt relief for such "vulnerable countries".
Yellen said talks between the United States and China on economic issues would resume at "an appropriate time", but also warned Beijing that providing any material support to Russia's war effort would be "a very serious concern".
Some engagements between Washington and Beijing were suspended following the downing of a suspected Chinese surveillance balloon that floated over the continental United States this month, including previously planned visits to China by Yellen and Secretary of State Antony Blinken.
Yellen told reporters the United States would quickly nominate a candidate for the World Bank presidency. As the U.S. Treasury manages the dominant U.S. shareholding in the World Bank, Yellen has a big say over who leads the institution which plans to open nominations for the post later on Thursday. (Reuters)
February
Economists urge China to think 'beyond GDP' to head off climate risks
Written by Nur Yasmin
A team of influential economists has urged China to adopt a new development model based on "wellbeing" rather than GDP growth in order to fulfil its 2060 net-zero emissions goals and head off the mounting threats of climate change.
In a report published on Thursday, the team - which includes two former chief economists of the World Bank - also called on China to cap total fossil fuel consumption and establish a detailed "pathway" for reducing emissions.
The report and its recommendations have already been submitted to the Chinese government. Co-author Nicholas Stern, chair of Britain's Grantham Research Institute on Climate Change and the Environment, told reporters he hoped it would play a constructive role in China's 2026-2030 "five-year plan".
The old development model drove rapid growth in China over the last four decades, but is putting the world at "grave risk", the report said.
China is aiming to bring emissions to a peak by 2030, though it currently remains unclear at what level they will peak. Stern said it needed to set a specific numerical target in order to bring "clarity" to its decision-making.
The report also called on China to give greater prominence to public transport and set a timetable for the elimination of fossil-fuel vehicles. China should also promote low-carbon agriculture, including plant-based meat and dairy, it said.
China began experimenting with "green GDP" in 2005 as concerns mounted about the environmental damage done by rapid industrialisation. A 2006 government report concluded that environmental losses amounted to 3% of total GDP, but critics believed the actual figure was much higher.
Though the green GDP project was cancelled in 2009, China promised in 2013 to abandon a "growth at all costs" model and said GDP would no longer be the sole criteria on which officials would be assessed.
Some provinces have recently resumed efforts to create new indicators reflecting the environmental costs of development, with central China's Hubei using a pilot "gross ecosystem product" that can be applied to individual districts, rivers or development projects.
China is home to 16 of the 20 global regions most vulnerable to climate change, data showed on Monday. (Reuters)
February
Pakistan set to increase interest rates in off-cycle review, say investors
Written by Nur Yasmin
Pakistan's central bank is set to raise interest rates as early as this week in an off-cycle review, investors said, as the South Asian nation faces pressure to mend its finances amid a $1 billion loan it is seeking from the International Monetary Fund.
Market participants in a recent treasury bill auction are expecting at least a 200 basis points increase in the central bank's policy rate, which stands at 17%. The expected increase is based on the rates the Pakistan government set in the auction to raise the funds.
The government raised 258 billion rupees ($991.54 million) in the auction on Wednesday. The cut off rates for the three-month, six-month, and 12-month tenors jumped 195 bps, 206 bps, and 184 bps higher than the previous auction.
The cash-strapped country is undertaking key measures to secure the IMF funding, including raising taxes, removing blanket subsidies, and artificial curbs on the exchange rate. While the government expects a deal with IMF soon, media reports say that the agency expects the policy rate to be increased.
The next meeting of the central bank's monetary policy committee is scheduled for March 16. Off-cycle rate reviews are not uncommon in Pakistan, though.
Adnan Sheikh, Assistant Vice President of Research at Pak Kuwait Investment Company, said that a rate hike is imminent, and it could be as soon as Friday.
“The next policy meeting is too far. Given the circumstances, it’s already being priced in,” Sheikh said.
The State Bank of Pakistan (SBP) and the IMF did not immediately respond to requests for comment.
Fahad Rauf, Head of Research at Ismail Iqbal Securities, said that the IMF has given a target to at least keep rates higher than core inflation. “Pakistan has two core inflation readings i.e., Urban (15.4% for Jan-23) and Rural (19.4%) and no national core number is released. If the SBP tries to bring rates above rural core inflation, it requires a rate hike of 200-300 bps,” he said.
Mohammad Ayub Khuhro, a fund manager at a local fund, said that recent economic data on government finances suggest that it was running low on its cash balances held with the central bank.
“This is why the government went ahead with picking up their desired targets despite a signaling effect it would send to the markets,” Khuhro said.
“The government has effectively bypassed the central bank in order to fulfill IMF conditions by accepting a higher cut off,” he added. (Reuters)
February
Australia advertises job on central bank's policy-setting board
Written by Nur Yasmin
Australia's government is advertising a job on the policy-setting board of the Reserve Bank of Australia, the first time the powerful position has been thrown open to all comers amid a push for more diversity at the central bank.
An ad on the government's jobs portal on Thursday called for candidates with knowledge or experience in economics, labour markets, financial markets, industry of public policy formation, as well as strong communication and strategic thinking skills.
"The Reserve Bank of Australia is committed to creating a diverse and inclusive workplace, and the Government is committed to ensuring that Australia's institutions appropriately reflect the diversity of our community," said the ad on Australian Public Service.
The Reserve Bank Board comprises nine members, with three ex officio members – the Governor, the Deputy Governor and the Secretary to the Treasury – and six non-executive members, who are appointed by the Treasurer.
The Sydney Morning Herald first reported on the job posting.
The government is weighing its response to an independent inquiry into the Reserve Bank's governance and policy record amid its most aggressive tightening campaign in modern history.
Australian Treasurer Chalmers said he would receive the RBA review on March 31 and would make a decision towards mid-year about whether to extend Governor Philip Lowe's term by another three years.
The review, announced by Chalmers in July, is assessing issues such as how the RBA communicates with the public and which inflation targets to follow.
It comes after the RBA undershot its inflation target of 2% to 3% for much of the last decade and issued guidance during the COVID-19 pandemic that rates were not expected to rise until at least 2024.
Now, consumer price inflation is running at a 32-year high of 7.8% and is only projected to return to the top of the bank's target range of 2% to 3% by mid-2025. (Reuters)
February
New Zealand to investigate forestry practices, impact
Written by Nur Yasmin
The New Zealand government said on Thursday it would hold a ministerial inquiry into the use of land for forestry due to damage caused during extreme weather events like the cyclone that struck 10 days ago.
Cyclone Gabrielle wrought havoc across much of the North Island, notably in the heavily forested Tairawhiti region on the east coast as waste wood and sediment off land where trees had been felled washed onto neighbouring farms, dammed rivers, contributed to flooding, and left logs scattered across beaches.
"Woody debris and sediment are particular issues for these communities following storms. More than 10,000 people in Tairāwhiti have petitioned for land use to be better managed," Forestry Minister Stuart Nash said.
The New Zealand government said the two month inquiry will make past and current land-use practices and the impact of woody debris - including forestry slash and sediment - on communities, livestock, buildings and the environment. It will also look at associated economic drivers and constraints. (Reuters)
February
Australians urged to support Indigenous recognition ahead of referendum
Written by Nur Yasmin
A First Nations group leading the push for the constitutional recognition of Australia's Indigenous people called on all citizens on Thursday to vote in favour of the change to help bring the country together.
Australia is preparing for a landmark referendum to change its constitution to include an Indigenous "Voice", which is a representative body that can advise parliament on policies affecting the Aboriginal and Torres Islander people.
The more than 800,000 Indigenous people and their ancestors have inhabited the land for about 65,000 years. But there is no mention of them in Australia's constitution.
Dean Parkin, director of "From the Heart", a campaign group, said voting yes was the referendum was a chance for all Australians to connect.
"It means you get to connect your sense of what it means to be Australian to the oldest continuous culture on Earth," he told an audience in Adelaide where the campaign was launched.
"It is a very small thing, it's a modest thing, and yet very profound."
The government is expected to introduce a bill in parliament in March outlining the proposed changes to the constitution. Once approved in parliament, the referendum will be put to Australians. The only way to change the constitution is by holding a referendum.
"We are kicking off a process that is going to result in millions of conversations between now and the referendum," Parkin said.
"It's time, history is calling," another speaker said at the event.
The referendum is one of Prime Minister Anthony Albanese's key initiatives and he has staked much of his political capital on it.
There have been 44 proposals for constitutional change in 19 referendums in Australia, but only eight have been approved.
In the last referendum in 1999, Australians voted against changing the constitution to establish the Commonwealth of Australia as a republic with the British monarch and Governor-General being replaced by a president appointed by parliament. (Reuters)
February
Dollar Index Hits seven-week high on higher-for-longer U.S. rates
Written by Nur Yasmin
The dollar index rose to its highest in nearly seven weeks on Thursday, a day after minutes from the Federal Reserve's last policy meeting that supported, but did not add to markets' view the central bank will raise rates further.
The index , which tracks the greenback against six major peers touched 104.68, its highest since Jan. 6, in late morning in Europe, before trading just below that level steady on the day.
The euro , the largest component of the index, briefly touched $1.0586, also its lowest since early Jan, largely unaffected by euro zone inflation data that came in a touch higher in January than earlier estimated, confirming that price growth is now well past its peak.
Underlying price pressures still show no signs of abating however.
The dollar sat at 134.94 Japanese yen , just off its two-month top of 135.2 reached on Tuesday.
The dollar index climbed 0.36% on Wednesday as minutes from the Jan. 31-Feb. 1 Federal Open Market Committee (FOMC) meeting showed nearly all policymakers favoured a slowing in the pace of interest rate hikes, but they also indicated curbing unacceptably high inflation would be the "key factor" in how much further rates need to rise.
The impact of the minutes was slightly lessened as the meeting preceded a series of indicators released in February, most notably jobs data, that showed the U.S. economy is performing well, leaving the Fed greater scope to raise rates to bring down inflation.
Traders of futures tied to the Federal Reserve's policy rate largely stuck to the view the central bank will keep raising rates by a quarter of a point at its next three meetings.
The recent increase in these expectations has caused the dollar index to rise steadily from a low of 100.8 in early February. But it is still well off its 20-year top of 114.78 hit last October - a time of fear about the health of the global economy, and when the Federal Reserve was raising rates more aggressively than other central banks around the world.
“I think that after the ‘popping’ of the dollar bubble, we're in a new phase for the dollar which we call the ‘chop’ where the market reassesses some of the reasons why it was so negative on the dollar – there was complacency about the Fed and the market was pricing in too many cuts for this year – which is now getting washed out,” said Paul Mackel global head of FX research at HSBC.
“But once that becomes more complete, and we get further signs that the global economy is doing better, we’ll go into the next stage for the broader dollar: the ‘flop’”
Elsewhere, sterling was a whisker lower at $1.2029, the Swiss franc was also a touch softer at 0.9318 per dollar, and the Australian dollar was a rare gainer in the G10 pack, up 0.4% to $0.6833, having slid to a near seven-week low of $0.6795 on Wednesday.
Simon Harvey, head of FX analysis at Monex Europe, said the rare lull in volatility reflects markets' comfort with current expectations for central bank policy.
"So the rates dynamic is starting to take a back seat temporarily before the next batch of data and central bank commentary comes through."
"Until then, there will be more idiosyncratic stories, for example tomorrow we have Ueda speaking in front of parliament in Japan, and other smaller bits of data, like person consumption data from the US tomorrow, will have an outsized impact."
Incoming Bank of Japan Governor Kazuo Ueda will speak in parliament on Friday and next Monday, with investors looking for clues on how soon the BOJ could end its bond yield control policy. (Reuters)
February
North Korean Media Blames U.S., Allies for Ukraine War Ahead of Invasion Anniversary
Written by Nur Yasmin
North Korean state media marked the first anniversary of Russia's invasion of Ukraine by blaming the crisis on NATO and calling America's involvement a "trail to self-destruction."
In a commentary carried by state news agency KCNA on Thursday on the eve of the Feb. 24 anniversary, international affairs critic Kim Yoo-chul said the conflict in Ukraine is the "inevitable product of coercion and hegemony" by the United States and its allies.
The Ukraine war, the biggest land conflict in Europe since World War Two, has displaced millions, left Ukrainian cities, towns and villages in ruins and disrupted the global economy.
North Korea has forged closed ties to Russia since the war began, publicly supporting Moscow in statements as well as at the United Nations.
"If Ukraine had not blindly taken part in the U.S. policy of anti-Russian confrontation, if it had abandoned the dirty demons of the United States and promoted reconciliation and unity with its neighbours, the situation would not have reached the point where it is as bad as it is now," Kim wrote.
"The current situation in Ukraine once again proves that there can be no peace in the world at any time unless the United States' policy of force, tyranny, and greedy aggression... is ended."
The Kremlin says it regards NATO, which could soon expand to include Sweden and Finland, as an existential threat to Russia.
The United States has accused North Korea of providing weapons to Russia, which both Moscow and Pyongyang have denied. (Reuters)
February
North Korea paper calls outside aid 'poisoned candy', urges self-reliance
Written by Nur Yasmin
North Korea's official newspaper said on Wednesday that relying on external aid to cope with food shortages would be equal to taking "poisoned candy", urging economic self-reliance despite deepening hardships amid sanctions and coronavirus lockdowns.
The isolated country has suffered food shortages in recent years, reeling from floods and typhoons, international sanctions aimed at curbing its nuclear and missile programmes, and a sharp cut in trade with China due to border closures and COVID-19 lockdowns.
Most U.N. agencies and Western relief groups have since left North Korea, with China remaining one of the few sources of external food assistance.
In a commentary, the ruling Workers' Party paper Rodong Sinmun warned against receiving economic help from "imperialists" who use aid as a "trap to plunder and subjugate" recipient countries and interfere with their internal politics.
"It is a mistake to try to boost the economy by accepting and eating this poisoned candy," the commentary said.
The article came as South Korea's Yonhap news agency reported on Wednesday that some 700 inmates at three countryside prisons, including in the central city of Kaechon, have died from famine and diseases over the past two years, citing an unnamed source.
Seoul's Unification Ministry, which handles inter-Korea affairs, declined to comment on the report, but said on Tuesday that there appeared to have been a recent increase in deaths from starvation in some North Korean provinces.
"Food production dropped from last year, and there is a possibility of distribution issues due to a change in their food supply and distribution policy," a ministry official told reporters.
South Korea's rural development agency in December estimated the North's crop production at around 4.5 million tonnes last year, 3.8% down from 2021, citing heavy summer rains and other weather conditions.
Unification Minister Kwon Young-se has said Pyongyang had asked the U.N. food agency, the World Food Programme, to provide support but there was no progress because of differences over monitoring issues. The agency has not responded to a request for comment. (Reuters)
February
Australia top target of Chinese trade restrictions - study
Written by Nur Yasmin
China issued threats and trade restrictions against 19 countries between 2020 and 2022, with Australia the top target of such "coercive diplomacy", a report by an Australian security think tank said on Wednesday.
The Australian Strategic Policy Institute report said China's tactic had "mixed success" in changing the policies of target governments and was not successful against Australia, instead highlighting the nation's resilience.
"Most governments have stood firm, but some have acquiesced. Undeniably, the tactics are harming certain businesses, challenging sovereign decision-making and weakening economic security," the report said.
The institute's report examined what it said were 73 "coercive PRC actions" recorded between 2020 and 2022, of which 21 were taken against Australia, 11 actions against Lithuania, and eight against Taiwan. Forty per cent of these actions were trade restrictions.
Europe was the most targeted by region, it said, with 35 actions taken or 47% of cases.
"The dominance of these tactics reflects the PRC's abuse of its global trading power and its exploitation of state-controlled media and 'wolf-warrior diplomacy'," it said.
China's embassy in Australia did not respond to a Reuters request for comment on the ASPI report.
The Albanese government, elected in May, has sought to stabilise relations with Beijing and said it wants to resume exports to China that were hit by "trade blockages" imposed by Beijing during a years-long diplomatic dispute.
Australia has, however, not changed its policy on China.
On Tuesday the former Prime Minister Malcolm Turnbull said the nation's foreign interference laws introduced in 2018 were designed to expose China's activities, but were not working.
Australia's spy chief said in a speech the nation was experiencing unprecedented levels of foreign interference.
The Australian Security Intelligence Organisation's (ASIO) director general of security, Mike Burgess, criticised business people, academics and bureaucrats in Australia who he said had urged the intelligence agency to "ease up" to "avoid upsetting foreign regimes".
Albanese said on Wednesday that ASIO had his government's support "in all of their actions". (Reuters)