Aurelia Butler

KARACHI, Pakistan (Reuters) -Point-of-sale transactions routed through Pakistan’s main digital payment systems fell by around 50% the day after former Prime Minister Imran Khan’s arrest ignited countrywide protests and prompted authorities to shut down mobile internet services, data showed on Thursday.The reason for the slump was primarily the mobile broadband suspension, in addition to lower footfall at the limited number of stores opened due to the political turmoil, the two largest payments system operators, 1LINK and Habib Bank Limited (HBL), told Reuters. The violent protests that followed Khan’s arrest on Tuesday by the country’s anti-graft agency have hit commercial activity in Pakistan hard. Mobile data services have remained shut since Tuesday night on the orders of the interior ministry – the longest such continuous shutdown in a country that often suspends communications as a tool to quell unrest. Many major roads and businesses have also remained shut, mainly in the eastern city of Lahore, Pakistan’s second-largest city.Data shared with Reuters by 1LINK on POS through its platform showed international payment card transactions were down on Wednesday by 45% in volume, from a daily average of 127,000 during the week of May 1 to 7 to approximately 68,000 on May 10. The daily value of transactions using international payment cards was down 46%, from 606 million rupees ($2.14 million) to 330 million rupees ($1.16 million) on May 10. 1LINK is Pakistan’s major facilitator of POS digital payment transactions for international platforms such as Visa (NYSE:V) and Mastercard (NYSE:MA).Transactions on Pakistan’s only domestic payment scheme, PayPak, were down 52% in volume to 18,000 transactions on Wednesday, and 56% down in value to roughly 62 million rupees ($218,775).Ali Habib, spokesperson at HBL, Pakistan’s largest bank, said that it had seen a decline of 60% in the throughput of the POS machines. “HBL processes over 30% of the entire throughput of the POS machines in Pakistan. This is the largest share in the market,” he added. The State Bank of Pakistan did not immediately respond to questions sent by Reuters. Cash transactions still dominate Pakistan’s commercial dealings, with much of the market undocumented, but digital payments have been growing fast in the country of 220 million. Many retailers and industrialists across Pakistan have also said their activities had ground to a halt since the protests started on Tuesday. More than 1,600 people have been arrested while five have been killed and hundreds injured in riots, including more than 160 policemen.On Tuesday, the Pakistan Telecommunication Authority (PTA) suspended mobile broadband services across the country. Social media platforms such as Facebook (NASDAQ:META), Youtube and Twitter were also down, resulting in demand for virtual private networks to surged by 1,329% on Wednesday compared with the average, according to Simon Migliano, Head of Research at Top10VPN. Migliano calculates that the suspension of mobile broadband and social media platforms has cost nearly $100 million so far. ($1 = 283.4000 Pakistani rupees) More

NIIGATA, Japan (Reuters) -A standoff in Washington over raising the U.S. debt ceiling overshadowed a meeting of Group of Seven (G7) finance leaders starting on Thursday, heightening U.S. recession fears as central banks seek a soft landing for the global economy.The central bank governor of host Japan said the U.S. debt crisis may be discussed at the G7 gathering, adding the group must stand ready to respond to any market repercussions.”I have faith U.S. authorities will do their best to prevent it from happening,” Kazuo Ueda told reporters on Thursday, when asked about the chance of the United States defaulting on its debt.”The immediate fallout is something U.S. authorities would have to deal with. But (the G7 group) will likely scrutinise the situation … and respond as needed,” he said, adding that Japanese authorities were watching developments closely.Treasury Secretary Janet Yellen was expected to face questions from her G7 counterparts, meeting in the Japanese city of Niigata, on how Washington intends to prevent turbulence in financial markets, already jittery after the recent failure of three U.S. regional banks and strains in Europe.”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,” Yellen said in Niigata on Thursday.President Joe Biden has signalled the chance of cancelling his trip to next week’s G7 summit if the debt standoff is not solved in time, warning that failure to quickly to raise the limit on the government’s permitted borrowing from the current $31.4 trillion could throw the U.S. economy into recession.The U.S. debt crisis is a headache for Japan, which is this year’s G7 chair and the world’s biggest holder of U.S. debt.”The G7 won’t be able to come up with a solution for what is a purely domestic and political U.S. problem, though the group could reaffirm its resolve to cooperate in stabilising markets in the worse-case scenario,” said Takahide Kiuchi, an analyst at Nomura Research Institute.”Washington is solely responsible to get this fixed. But when things go wrong, all the other countries bear the brunt.”GLOBAL OUTLOOK DAMPENSThe G7 finance chiefs meet at a time when aggressive U.S. and European monetary tightening begin to weigh on global growth and stoke fears of financial instability.After the recent failure of several U.S. banks, the G7 will discuss ways to strengthen the global financial system and combat risks of digital bank runs, Japanese officials say.Simmering U.S.-China tensions also cloud the outlook for the global economy that is already under pressure from signs of weakness in the world’s second-largest economy China.Yellen told a news conference that Washington had been considering the chance of imposing restrictions on outbound investment to China to counter its “economic coercion” against other countries.The United States hoped to discuss the idea with its G7 allies at this week’s meeting, she added.Signs that China’s post-COVID recovery may be flagging are clouding policymakers’ hopes that a rebound in the country’s demand would underpin global growth. China’s consumer prices rose at the slowest pace in more than two years in April, while factory gate deflation deepened, data showed on Thursday, Other key themes to be discussed at the G7 finance gathering include steps to prevent Russia from circumventing sanctions over its invasion of Ukraine, and diversifying supply chains away from China through partnerships with low- and middle-income nations.Among other issues, Brazilian Finance Minister Fernando Haddad told reporters after a meeting with Yellen that he had expressed serious concerns that Argentina’s economic challenges could usher in an extremist government. He said Argentina needed the assistance of the International Monetary Fund. The United States is the largest shareholder in the global lender.DEBT BATTLEPast U.S. debt ceiling fights have typically ended with a hastily arranged agreement in the final hours of negotiations, avoiding an unprecedented default.In 2011, the scramble prompted the first downgrade of the top-notch U.S. credit rating. Veterans of that battle warn the current situation is riskier because political divides have widened.Back then, the G7 finance leaders said in a statement that they were “committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth.” More

People have become more pessimistic about inflation in the eurozone, betting that price pressures will remain strong for years to come despite them abating for much of the past six months. The European Central Bank said on Thursday that its latest monthly survey of consumers showed their expectations for inflation next year and in three years had both risen in March further above the central bank’s 2 per cent target, after four months of mostly falling readings.Those polled now expect eurozone inflation to be 5 per cent in a year’s time, up from 4.6 per cent in the same survey a month ago. In three years, they expect inflation to be 2.9 per cent, an increase from 2.4 per cent in the previous survey. If people expect price pressures to remain high for longer, it makes them more likely to push for higher wages and accept higher prices, fuelling more inflation.The ratcheting up of inflation expectations is likely to spook policymakers, making further interest rate rises more likely. The ECB has already raised rates seven times since the summer to combat the biggest surge in inflation for a generation, leaving the benchmark deposit rate at 3.25 per cent. While ECB officials think consumers’ inflation expectations tend to be heavily influenced by historic price growth and can be more volatile than those of investors or analysts, economists think the March poll will boost the chances of further increases in borrowing costs. “As long as inflation, wage growth and inflation expectations remain high and sticky, the ECB is going to err on the hawkish side,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. “The main justification would be that the risk of overdoing it is lower than the risk of doing too little.” Wage growth has been accelerating in the eurozone in recent months, and hourly labour costs in the bloc rose by a record 5.7 per cent in the final quarter of 2022, compared with a year earlier. Eurozone inflation has fallen from an all-time high of 10.6 per cent in October to 7 per cent in April, but much of that reflects a sharp drop in energy prices. The price of food, alcohol and tobacco has been rising at double-digit rates since August, and slowed only slightly to 14.9 per cent in the year to April. The price of services, such as restaurants, travel and holidays, is yet to decelerate after increasing 5.2 per cent in April.ECB president Christine Lagarde told Japan’s Nikkei newspaper this week there were “significant upside risks to the inflation outlook” that meant it still had “more ground to cover” in raising rates, particularly after “wage increases in various European countries”.For the first time in many years, investors have recently started betting that inflation will stay higher in the eurozone than in the US, based on the closely watched 5-year on 5-year inflation-linked swap rate.Last week, the ECB said its survey of professional forecasters showed their expectations for inflation had fallen slightly for this year and next year, but had inched up for 2025 to 2.2 per cent. More