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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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Bilateral trade with Turkiye surpasses $ 1b in 11 months: FPCCI

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Bilateral trade with Turkiye surpasses $ 1b in 11 months: FPCCI

President Federation of Pakistan Chamber of Commerce and Industry (FPCCI), Irfan Iqbal Sheikh Thursday said that Pak-Turkiye bilateral economic and trade relations were improving; whereas the bilateral trade with Turkiye had surpassed $1 billion.

It was a milestone and we could only envisage Pakistani exports to Turkiye growing steadily from here onwards, he added.

It is pertinent to note that a high-profile and large Turkish trade delegation is visiting Pakistan; and, FPCCI has organized a multi-sector B2B networking session for the delegation.

The B2B event attracted top traders from all sectors of both the countries and a total of 350 traders took part in the meetings – encompassing diverse industries; exploration of joint ventures; transfer of knowledge and technology; assessing the trade potential in non-conventional product segments and vistas that will be opened after the Turkish parliament passes that Trade in Goods Agreement (TGA) with Pakistan.

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Addressing the official dinner in honor of Turkish delegation hosted by FPCCI, Suleman Chawla, SVP FPCCI said that Pakistan and Turkiye had never been positioned for more robust, diverse and large-scale bilateral trade growth as they were now due to Pakistan’s accession into TIR Convention for land-based cargoes.

The Chairman of FPCCI’s Pakistan-Turkiye Joint Business Council (PTJBC) apprised the audiences that FPCCI was closely working with DEIK and TOBB for business-to-business and chamber-to-chamber cooperation; and, FPCCI was striving to benefit from Turkiye’s technological advancements in industrial production, quality standards as good as any other European countries, entrepreneurial zeal and exportable goods.

He added that after visit of the aforementioned delegation of Turkish Exporters Assembly (TIM) and Eastern Black Sea Exporters Association (DKiB), which were the top bodies of Turkish traders; and, this visit would result in enhanced bilateral trade and joint ventures.

Ahmet Hamdi Gurdogan, head of the Turkish delegation, Supervisory Board Member of Türkiye Exporters Assembly and Vice President of Eastern Black Sea Exporters Association, said that the delegation comprised of 45 members and they were looking for their local partners for industrial, trade and commercial cooperation. He also apprised that Turkiye wanted to cement trade relations with Pakistan on the lines of Turkiye-Iran trade relations – making full use of geoeconomic advantages; transit trade and capitalizing on land-based regional connectivities.

Cemal Sangu, Consul General of Turkiye, highlighted that Pakistan had a population of 220 million and Turkey had a population 85 million; and, those 305 million plus people and consumers substantiate a bilateral trade volume of at least $5 billion. This milestone could be achieved in short-term and should not take more than 2 – 3 years to achieve; and, the new TGA should enable us to reach $15 billion 5 – 10 years, he added.

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Export-led growth cure for country’s economic woes: Ahsan Iqbal

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Export-led growth cure for country's economic woes: Ahsan Iqbal

Federal Minister for Planning Development and Special Initiatives Prof. Ahsan Iqbal on Friday said that export-led growth is the cure for our economic woes for boosting the country’s economic growth.

The Ministry for Planning Development and Special Initiatives will recommend to Prime Minister, Muhammad Shahbaz Sharif that an export emergency should be declared to take the country out of economic quagmire; said the Minister for planning, while meeting the top Pakistani exporters, said a press release issued here.

The meeting was attended by the Exporters Representatives from Steel, Pharmaceutical and Textile sectors, who also apprised the minister about the problems faced by them in the course of doing business and exporting indigenous products abroad.

The Minister while assuring them about the full-fledged support of the Government remarked that we will provide all-out support to the Industrial sector for resolving their issues.

He also asserted that the business community should present to the Government of any red-tapism or any other bottlenecks in the way of undertaking any venture, “we will cut Red Tape”, said the Minister.

He added that the incumbent Government is pursuing a business-friendly policy and promoting a conducive environment for entrepreneurs.

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The Minister said that in the past, we learnt to consume instead of earning. He also said that the survival of the country depends on the premise that whether we can enhance our exports from $32 billion to $100 billion in the shortest possible time. The Government stands with the Industrial sector to attract Foreign Direct Investment (FDI) and to push Exports.

The Minister offered the platform of the Ministry of Planning and Development to the private sector for assisting in the resolution of their problems.

The Minister lamented that CPEC provided us a golden opportunity to turn-around the economy of Pakistan but the opportunity was squandered due to the bad economic policies of the previous regime.

However, we are committed to reviving the CPEC Project. He added that China imports $2250 Billion worth of goods out of which Pakistan has a meager share of $ 3 billion, which is dismal.

The Minister laid emphasis to target the Chinese market and increase market share in the US and European markets so that a progressive export-led economy can be realized adding that the Government will support the industrial sector to meet the challenges of global competitiveness.

The Minister said that vision 2010 and Vision 2025 envisioned revamping the Economic structure and bringing prosperity and development in Pakistan but unfortunately Political instability derailed the journey of progress.

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Pakistan’s exports to Afghanistan increase by 4.60 percent

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Pakistan's exports to Afghanistan increase by 4.60 percent

Pakistan s export of goods and services to Afghanistan witnessed an increase of 4.60 percent during the first half of the current fiscal year (2022-23) as compared to the exports of corresponding period of last year, State Bank of Pakistan (SBP) reported.

The overall exports to Afghanistan were recorded at US $251.580 million during July-December (2022-23) against exports of US $240.504 million during July- December (2021-22), showing growth of 2.83 percent, SBP data revealed.

On a year-to-year basis, the exports to Afghanistan also increased 15.71 percent from US $33.097 million in December 2022, against the exports of US $38.297 million in December 2021.

Meanwhile, on a month-on-month basis, the exports to Afghanistan rose by 2.77 percent during December 2022 as compared to the exports of US $37.263 million in November 2022, the SBP data revealed.

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Overall Pakistan s exports to other countries witnessed a decrease of 6.76 percent in the first six months, from US $ 15.242 billion to US $ 14.211 billion, the SBP data revealed.

On the other hand, the imports from Afghanistan into the country during the period under review were recorded at US $13.253 million against US $90.430 million last year, showing a decline of 85.34 percent in July- December (2022-23).

On a year-on-year basis, the import for Afghanistan witnessed also decreased by 90.01 percent from US $17.311 million in December 2021, against the imports of US $1.729 million in December 2022.

On a month-on-month basis, the imports from Afghanistan into the country increased by 25.92 percent during December 2022, as compared to the imports of US $1.373 million during November 2022, according to the data.

The overall imports into the country witnessed a decrease of 18.24 percent, from US $36.094 billion to US $29.509 billion, according to the data.

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Based on the trade figures, the trade of goods and services with Afghanistan witnessed an increase of 58.80 percent in surplus during July-December (2022-23) as compared to the corresponding period of last year.

The surplus during the period under review was recorded at US $238.327 million against US $150.074 million during the same period of last year, showing growth of 58.80 percent, the data revealed.

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