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Yellen warns of US default risk by early June, urges debt limit hike

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Yellen warns of US default risk by early June, urges debt limit hike

U.S. Treasury Secretary Janet Yellen said on Friday the United States will likely hit the $31.4 trillion statutory debt limit on Jan. 19, forcing the Treasury to launch extraordinary cash management measures that can likely prevent default until early June.

“Once the limit is reached, Treasury will need to start taking certain extraordinary measures to prevent the United States from defaulting on its obligations,” Yellen said in a letter to new Republican House of Representatives Speaker Kevin McCarthy and other congressional leaders.

She urged the lawmakers to act quickly to raise the debt ceiling to “protect the full faith and credit” of the United States.

“While Treasury is not currently able to provide an estimate of how long extraordinary measures will enable us to continue to pay the government s obligations, it is unlikely that cash and extraordinary measures will be exhausted before early June,” the letter said.

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Republicans now in control of the House have threatened to use the debt ceiling as leverage to demand spending cuts from Democrats and the Biden administration. This has raised concerns in Washington and on Wall Street about a bruising fight over the debt ceiling this year that could be at least as disruptive as the protracted battle of 2011, which prompted a brief downgrade of the U.S. credit rating and years of forced domestic and military spending cuts.

The White House said on Friday after Yellen s letter that it will not negotiate over raising the debt ceiling.

“This should be done without conditions,” White House spokesperson Karine Jean-Pierre told reporters. “There’s going to be no negotiation over it.”

House Republicans are planning to move a “debt prioritization” measure by the end of March that would call on the U.S. Treasury to continue making certain payments once it reaches the debt ceiling, but details have not been finalized, a person familiar with the plan told Reuters. The proposal was first reported by the Washington Post.

The Republican plan will call on the Treasury Department to keep making interest payments on the debt, the Post reported, citing sources. It may also stipulate the Treasury should continue making payments on Social Security, Medicare and veterans benefits, and fund the military, the newspaper said.

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The plan was part of a private deal reached this month to resolve the standoff between right-wing hardliners in the House and McCarthy over his election as House speaker, the Post said.

Yellen s estimate expressing confidence that the government could pay its bills only through early June without increasing the limit marks a deadline considerably sooner than forecasts by some outside budget analysts that the government would exhaust its cash and borrowing capacity – the so called “X Date” – sometime in the third quarter of calendar 2023.

Analysts have noted that some Treasury bills maturing in the second half of the year are sporting a premium in their yields that may be tied to elevated risk of a default in that window.

“You could read this partly as trying to get Congress to act sooner rather than later,” said Bipartisan Policy Center economics director Shai Akabas, adding that Treasury was being conservative in its approach.

Yellen said that there was “considerable uncertainty” around the length of time that extraordinary measures could stave off default, due to a variety of factors, including the challenges of forecasting the government s payments and revenues months into the future.

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PENSION INVESTMENTS SUSPENDED

As of Wednesday, Treasury data showed that US federal debt stood $78 billion below the limit, with a Treasury operating cash balance of $346.4 billion. The department on Thursday reported an $85 billion December deficit as revenues eased and outlays grew, particularly for debt interest costs.

Yellen said in her letter that the Treasury this month anticipates suspending new investments in two government retiree funds for pensions and healthcare, as well as suspending reinvestments in the Government Securities Investment Fund, or G Fund, part of a savings plan for federal employees. The retirement investments are restored once the debt ceiling is raised.

“The use of extraordinary measures enables the government to meet its obligations for only a limited amount of time,” Yellen wrote to McCarthy and other congressional leaders.

“It is therefore critical that Congress act in a timely manner to increase or suspend the debt limit. Failure to meet the government’s obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen wrote. 

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UK job vacancies fall 15pc year-on-year in January

UK job vacancies fall 15pc year-on-year in January

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UK job vacancies fall 15pc year-on-year in January

British employers advertised the fewest jobs in nearly three years last month, with numbers down 15 per cent from a year ago, figures from recruitment data company Adzuna showed on Monday, adding to signs that the labour market is cooling.

Last week Bank of England Governor Andrew Bailey welcomed what he described as “full employment” – with the official UK jobless rate at 3.8 per cent – despite the economy entering a shallow recession in the second half of last year.

However, the central bank wants to see wage growth slow from rates of more than 6pc in order to put downward pressure on inflation, which remains double its target.

Falling job vacancies offer a potential sign that employers are finding it easier to recruit than in the immediate aftermath of the COVID-19 pandemic, when the number of vacancies peaked at more than 1.3 million.

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Adzuna said 867,436 jobs were advertised in Britain in January, based on its analysis of more than 1,000 online sources. This was the lowest number since April 2021 and down from more than 1 million a year earlier.

“January 2024 has proven to be one of the most difficult starts to the year for job hunters in recent years with companies continuing to put hiring plans on ice,” Adzuna co-founder Andrew Hunter said.

The number of job seekers per advertised vacancy rose to 1.81 from 1.48 a year earlier.

However, Hunter said, preliminary data for February suggested the number of vacancies was stabilising.

Previous vacancy data from the Office for National Statistics showed an 18pc annual fall in job vacancies for the three months to the end of January.

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Adzuna said the average starting salary – which employers only published for just under half of positions advertised – was 38,168 pounds ($48,450), 3.0pc more than a year earlier. 

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WTO ministers gather in UAE for talks amid geopolitical tensions

WTO ministers gather in UAE for talks amid geopolitical tensions

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WTO ministers gather in UAE for talks amid geopolitical tensions

 The world’s trade ministers gathered in the UAE on Monday for a high-level WTO meeting with no clear prospects for breakthroughs, amid geopolitical tensions and disagreements.

The World Trade Organisation’s 13th ministerial conference (MC13), scheduled to run until Thursday in Abu Dhabi, the capital of the United Arab Emirates, is the first in two years.

The WTO is hoping for progress, particularly on fishing, agriculture and electronic commerce.

But big deals are unlikely as the body’s rules require full consensus among all 164 member states — a tall order in the current climate.

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“I don’t have hopes that a very substantive agreement will be announced,” said Marcelo Olarreaga, Professor of Economics at the University of Geneva.

“My impression is that the negotiators are dealing with tactical positions – how to make it look like it is the other (side) who is blocking negotiations,” he told AFP.

Even WTO Director-General Ngozi Okonjo-Iweala has said she expects the meeting to be challenging due to the “economic and political headwinds” – from the war in Ukraine, attacks in the Red Sea, inflation, rising food prices and economic difficulties in Europe and China.

Her team is working around the clock to draft agreements for the talks, she told journalists this month, noting that “negotiating positions are still quite tough”, notably on agriculture.

‘Miracle’

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During the WTO’s last ministerial meeting, held at its Geneva headquarters in June 2022, trade ministers nailed down a historic deal banning fisheries subsidies harmful to marine life and agreed to a temporary patent waiver for Covid-19 vaccines.

They also committed themselves to re-establishing a dispute settlement system which Washington had brought to a grinding halt in 2019 after years of blocking the appointment of new judges to the WTO’s appeals court.

“Replicating the success, the miracle, of MC12 in 2022 will be extremely challenging,” European Trade Commissioner Valdis Dombrovskis said this month.

“Negotiations on the big-ticket items” – such as fisheries, agriculture and the e-commerce moratorium – will “remain open until the final phase of the conference”, he added.

“Negotiations on dispute settlement reform and potentially some parts of the outcome document will also be challenging.”

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However, the WTO faces pressure to eke out progress on reform in Abu Dhabi ahead of the possible re-election of Donald Trump as US president.

During his four years in office from 2017 to 2021, Trump threatened to pull the United States out of the trade body and disrupted its ability to settle disputes.

“There will be the US elections in November…so this is the last chance,” a diplomatic source in Geneva told AFP on condition of anonymity.

“Postponing anything until after MC13 is not a good strategy.”

Earlier this month, US Trade Representative Katherine Tai underlined Washington’s “commitment to reforming the WTO and creating a more durable multilateral trading system”.

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But Olarreaga of the University of Geneva said the other members of the WTO “cannot expect huge concessions” from the administration of US President Joe Biden in an election year.

‘Fragmentation’

While there is doubt over progress at the WTO on major issues such as agriculture, there is hope for small advances on other fronts, particularly aid for developing countries.

On Monday, two new countries, the Comoros and East Timor, are expected to be accepted as WTO members.

More than 120 countries and regions, including China and the European Union, but not the United States, issued a ministerial declaration early Monday, marking the finalisation of an agreement aimed at facilitating international investments in development.

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They also issued a submission requesting the official integration of the deal into the WTO, but some diplomats fear opposition from India, which rejects any agreement that does not include all member states.

But amid the difficulty of obtaining full consensus, more and more plurilateral agreements — deals with a narrower number of signatories — are being reached, applying only to the participating countries.

Adding to the challenges for those gathering in the UAE, is the ongoing war in Gaza and related attacks by Yemeni rebels on ships in the Red Sea, a campaign that has disrupted global maritime trade.

“The current situation is characterised by geopolitical tensions,” said a European diplomat who spoke to AFP on the condition of anonymity.

“High expectations from developing nations following the financial crisis and the Covid-19 pandemic, as well as economic tensions due to inflation… (add to the) risk of fragmentation of the global economy,” the diplomat said. 

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Gas in oil-rich Saudi Arabia: Another 15tr cubic feet of reserves proven at Jafurah field

Gas in oil-rich Saudi Arabia: Another 15tr cubic feet of reserves proven at Jafurah field

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Gas in oil-rich Saudi Arabia: Another 15tr cubic feet of reserves proven at Jafurah field

An additional 15 trillion standard cubic feet of gas have been proven at Saudi state oil company Aramco’s Jafurah gas field, Energy Minister Prince Abdulaziz bin Salman said on Sunday.

Reserves at Jafurah have reached 229 trillion cubic feet of gas and 75 billion barrels of condensates, Prince Abdulaziz said in a statement on state news agency SPA.

Saudi Arabia is working on developing its unconventional gas reserves, which require advanced extraction methods such as those used in the shale gas industry.

Jafurah is the kingdom’s largest unconventional non-oil associated gas field and it is potentially the biggest shale gas development outside of the United States.

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In 2020, the Jafurah field was estimated to require investments of $110 billion.

Saudi Aramco expects output to reach 420 million cubic feet per day of ethane by 2030, it said on its website. The Jafurah field would produce some 630,000 barrels per day of gas liquids and condensates by 2030, it said.

The news comes as Qatar announced further raising gas production despite a steep drop in global gas prices, pushing ahead with plans to extract more of the resource amidst fierce competition with rivals such as the United States.

Read more: Qatar gas production increase is coming amid collapsing LNG prices

QatarEnergy chief Saad al-Kaabi shared the details of a new expansion of its liquefied natural gas production that will add a further 16 million tonnes per annum (mtpa) to existing expansion plans, bringing total capacity to 142 mtpa.

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The Qatari announcement comes as US gas prices trade near an all-time low if adjusted to inflation after a decade of meteoric rises in output which made the US one of the top oil and gas exporters.

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