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Yellen warns US default would threaten global economy, undermine US leadership

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1 year ago

May 11, 2023

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US Treasury Secretary Janet Yellen on Thursday urged Congress to raise the $31.4 trillion federal debt limit and avert an unprecedented default that would trigger a global economic downturn and risk undermining US global economic leadership.

Yellen issued the latest in a series of increasingly stark warnings in remarks prepared for a press conference ahead of a meeting in Japan with her counterparts from the Group of Seven (G7) rich nations, as well as India, Indonesia and Brazil.

“A default would threaten the gains that we’ve worked so hard to make over the past few years in our pandemic recovery. And it would spark a global downturn that would set us back much further,” she said. “It would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests.”

US President Joe Biden on Wednesday said failure by Congress to act before Treasury runs out of money to pay the government’s bills – something that could happen as early as June 1 – risked throwing the US economy into a recession.

Yellen said Republican brinkmanship on the issue amounted to a “crisis of our own making” and that just the threat of a default could lead to a downgrade of the US government’s credit rating, as occurred during a debt ceiling fight in 2011.

It could drive interest rates higher on mortgages, auto payments and credit cards, Yellen said, noting that rates were already spiking on debt due around June 1.

Biden, a Democrat, insists that Congress has a constitutional duty to raise the debt ceiling, which reflects previously spent federal money, without conditions, but Republicans who control the House of Representatives have tied any increase in the debt limit to sweeping budget cuts.

Unlike most developed countries, the US sets a ceiling on how much it can borrow. Because the government spends more than it takes in, lawmakers must periodically raise that cap.

Yellen also mapped out her priorities for the G7 meeting, including individual and joint actions to strengthen the global economy and bring down inflation, redoubling a commitment to help Ukraine defend itself against Russia’s invasion, and longer-term efforts to boost economic resilience.

Despite the downside risks, Yellen said the global economy remained in a better place than many had predicted six months ago, with most G7 countries having seen a drop in annual headline inflation and improved growth forecasts.

The United States had taken action to strengthen confidence in its banking system after the failure of three regional banks, Yellen said, as well as enacting legislation to invest in infrastructure, alternative energy and semiconductor chips.

But it was also critical to help developing countries, she said, adding that G7 members would coordinate on their efforts to push for “timely and comprehensive” debt treatments for countries in debt distress. Yellen has repeatedly accused China – the world’s largest sovereign creditor – of dragging its heels on moving forward with such arrangements.

Yellen said she would also work with her G7 counterparts to build greater economic resilience in the longer term by boosting domestic production of critical goods and helping developing countries expand their stake in global supply chains.

That meant helping those countries move away from “solely extractive industries into activities that provide greater support for the domestic economy and employment”, she said.

Yellen gave no details but said the work would build on the $600 billion in investments underway through the G7’s Partnership for Global Infrastructure and Investment, which aims to mobilise private capital toward infrastructure projects in developing countries.

The G7 – which groups the US, Japan, Germany, Britain, France, Italy and Canada – would also keep working to mitigate geostrategic risks and counter economic coercion, Yellen said, citing a speech last month in which she said Washington would push back against Chinese actions to dominate foreign competitors.

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Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

Published

2 days ago

May 17, 2024

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Chinese firm aims to expand investments in Pakistan, shows interest in mining sector

A notable Chinese company has expressed keen interest in expanding its investment in Pakistan, in yet another sign of investor confidence boost in the leadership of Prime Minister Shehbaz Sharif.

A delegation from Chinese firm MCC Tongsin Resources led by its Chairman Wang Jaichen called on PM Shehbaz here on Friday.

The premier invited the Chinese company to invest in Pakistan’s mining sector and manufacturing of export goods.

Shehbaz assured the delegation that his government would extend all-out facilitation to the company from minerals exploration and processing to the export of goods.

The PM instructed the relevant federal ministers and officers to continue consultation with the Chinese firm, taking the Balochistan chief minister, provincial departments and stakeholders on board.

The delegates reposed trust in PM Shehbaz’s leadership, and expressed keen interest in enhancing their investment in Pakistan’s mining and minerals sectors.

The delegation briefed Prime Minister Shehbaz about the construction of a mineral park in Pakistan and their future investment plans.

The premier welcomed the Chinese firm and highlighted the priority steps by his government to promote foreign investment in Pakistan.

He said that being a time-tested friend, China supported Pakistan in every difficult hour for which the Pakistani nation was grateful to the leadership and people of China.

Federal ministers Ahad Khan Cheema, Dr Musaddik Malik, Rana Tanveer Hussain, Jam Kamal Khan and relevant senior officers attended the meeting.

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Business

Govt jacks up power price by Rs1.47 per unit

Published

2 days ago

May 17, 2024

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Govt jacks up power price by Rs1.47 per unit

The government on Friday increased the electricity tariff by Rs1.47 per unit.

According to Nepra sources, the collection from consumers will take place in August, September, and October.

The electricity companies had requested the funds as part of the third quarter adjustment for 2023-2024, seeking Rs 31.34 billion under capacity charges.

Sources said that Rs5.57 billion were requested for operation and maintenance costs, and Rs12.38 billion were requested for the transmission and distribution impact under monthly fuel cost adjustment.

Previously, Nepra had completed the hearing on the electricity companies’ request under the quarterly adjustment.

Nepra approved the Power Division’s request, allowing an increase of Rs 1.45 per unit in electricity prices.

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Business

Hong Kong allows China’s digital yuan to be used in local shops

Published

2 days ago

May 17, 2024

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Hong Kong allows China's digital yuan to be used in local shops

Hong Kong will allow mainland China’s pilot digital currency to be used in shops in the city, the head of its de facto central bank said on Friday, marking a step forward for Beijing’s efforts to internationalise the yuan amid rising geopolitical tensions.

The programme, backed by Beijing, will allow mainland Chinese and Hong Kong residents to open digital yuan wallets via a mobile app developed by China’s central bank and will permit them to make payments in retail shops and some online stores in Hong Kong and in mainland China.

Transactions using e-CNY, predominantly for domestic retail payments in China, hit 1.8 trillion yuan ($249.27 billion) as of end of June 2023, with 120 million digital wallets opened, according to the latest disclosure from China’s central bank.

Using the wallet, users can make payments at over 10 million merchants in 17 provinces and cities in the mainland.

Each wallet used in the city will be subject to a balance limit of 10,000 yuan, with single transactions and daily payments capped at 2,000 yuan and 5,000 yuan, respectively, officials from the Hong Kong Monetary Authority said.

Peer-to-peer transfers will not be allowed at the moment, according to the HKMA.

“By expanding the e-CNY pilot in Hong Kong .. users may now top up their wallets anytime, anywhere without having to open a mainland bank account, thereby facilitating merchant payments in the mainland by Hong Kong residents,” HKMA Chief Eddie Yue said.

Currently, users of other digital yuan wallets such as those operated by Ant Group and Tencent can make payments in the city.

Industrial and Commercial Bank of China, Bank of China Ltd, China Construction Bank Corp and Bank of Communications Co have been selected as e-CNY wallet operators.

The yuan’s use in global finance remains low, though it has shown steady increases.

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