Aurelia Butler

About four in five cities said they plan to spend their money on local roads, bridges and major projects, with 56% prioritizing road safety, according to a survey of 153 localities conducted by the National League of Cities and Polco. About 60% said they would use funds from the Infrastructure Investment and Jobs Act on water projects.A little more than a third of the municipalities said they would spend their money on broadband Internet access. About 26% said they’d put the money toward public transportation, while a little more than a quarter cited electric vehicles, buses, and ferries. Just 13% identified airports as a spending priority. Ports and waterways and passenger and freight rail came in at the bottom with less than 10% each. The focus on roads and bridges comes as the American Society of Civil Engineers says the US needs nearly $2.6 trillion over ten years to bring the country’s infrastructure into good repair. In March 2021, the society gave the U.S. a grade of C- across 17 infrastructure categories, with some of the lowest grades appearing in roads, transit and water.The Infrastructure Investment and Jobs Act, signed in November by President Joe Biden, provides $550 billion in new cost-shared federal funds to municipalities, meaning states and cities must shoulder a portion of project costs themselves. To match federal funding, around a third of survey respondents said that they will tap into special reserves, state funds and municipal bonds.Nearly half reported that they plan to utilize local recovery funds from the American Rescue Plan, a $1.9 trillion stimulus package that allocated $350 billion in aid to states and cities during the height of the pandemic. “These once-in-a-lifetime investments from the Bipartisan Infrastructure Law allow communities across the country to tackle infrastructure upgrades and badly needed infrastructure projects to improve the lives of residents,” said the league’s Executive Director Clarence E. Anthony. “From coast to coast, from the biggest cities to the smallest towns, local governments are leading the way in rebuilding and strengthening our nation’s infrastructure.”©2022 Bloomberg L.P. More

It said it had made “good progress” in talks with the authorities over a reform package the government is proposing as part of the overall deal. Tunisian officials had previously indicated they hoped to reach an agreement earlier this year as they seek $4 billion in financial assistance. Tunisia’s efforts to secure IMF support were delayed for months by political turmoil in Tunis after President Kais Saied seized most powers, ousting the government and parliament last summer. Next week, he will hold a referendum on a new constitution that will formalise the greatly expanded powers he has assumed, though most political parties have rejected the move. Tunisia has proposed cuts to the public sector wage bill, subsidies and to the costs of maintaining loss-making state-owned companies. “The authorities are making important progress with their economic agenda, coordinating well across ministries and agencies around a shared vision that is sound. It is now critical to accelerate implementation of that agenda,” the fund said.”Broad buy-in will be essential to accomplish the urgent task of reducing macroeconomic imbalances, shore up stability and support the job-creating growth that is required to activate the substantial economic potential of Tunisia,” it added. The fund has previously indicated that any reforms included in the agreement would need the support of the powerful UGTT labour union, which has proven able to paralyse the economy with strikes. However, the union has so far rejected the reforms proposed by the government and last month it held a strike of public sector workers over Saied’s decision not to involve it in economic policy making. More

Bank of England governor Andrew Bailey has raised the possibility of increasing interest rates by half a percentage point in early August as he toughened the central bank’s language on battling rising prices. Bailey said the central bank’s Monetary Policy Committee had an “absolute priority” to bring inflation back down to its 2 per cent target and faced the “largest challenge” to inflation control since the bank gained independence on setting interest rates in 1997. With June inflation figures likely to rise to another 40-year high of at least 9.3 per cent on Wednesday, Bailey set out the policy options under consideration by the MPC. A half-percentage-point interest rate rise would be the largest increase since 1995. The governor also raised the BoE’s thinking for the first time on selling some of the assets it bought under rounds of quantitative easing since 2009. “In simple terms this means that a 50 basis point increase will be among the choices on the table when we next meet,” Bailey told an audience of financial and business leaders at the annual Mansion House dinner in the City of London.Financial markets increasingly expect the European Central Bank to increase its main interest rates also by half a percentage point on Thursday. Bailey said there was no guarantee a UK increase would be that large, adding that the committee would have to take into account the easing of global supply chain bottlenecks as well as higher gas, food and fuel prices following Russia’s invasion of Ukraine.“We have been clear that we see the balance of risks to inflation as on the upside,” Bailey said. The governor acknowledged that interest rate rises would come at a time when people in the UK were becoming poorer and struggling over accessing basic necessities, saying the BoE had already taken this into account when it set monetary policy. Regarding the sale of assets, Bailey set out quite an aggressive timetable for bringing down the level of government bonds it had bought, which peaked at £895bn. “Based on analysis conducted in conjunction with colleagues at the debt management office, we are currently looking at a total reduction in the stock of gilts held . . . in the region of £50bn‐£100bn in the first year,” Bailey said.While the governor admitted challenges in battling inflation, chancellor Nadhim Zahawi threw a protective arm around the BoE, saying it had “a strong track record” on price control and had all the tools it needed to succeed.The bank has faced criticism from Tory leadership contenders, including foreign secretary Liz Truss, who said she would tighten ministerial scrutiny of its activities if she became prime minister. Meanwhile, Zahawi confirmed the government was considering taking powers to “intervene in financial regulation in the public interest”, a plan that has infuriated Bailey, who wants to preserve regulatory independence.But Zahawi said the government would look at all the arguments before coming to a decision; the move is so controversial that any change to the rules will be left until September when a prime minister will be appointed and, possibly, a new chancellor.The “call in” power, which is supported by Sunak, will not feature in the financial services bill to be published on Wednesday but could be added if he becomes prime minister.

Zahawi also flagged the importance of reforms to Solvency II rules to allow UK insurers to invest more in infrastructure alongside other reforms to London’s capital markets to make it easier for companies to raise money.On Tuesday, the Treasury published the results of a review of the fundraising market by Freshfields’ lawyer Mark Austin, which recommended regulatory changes to increase the ability of companies to raise funds quickly and cheaply, and ensure greater involvement of retail investors.In response, the Financial Conduct Authority said this aligned with its “strategic priority to ensure UK wholesale markets continued to be regarded as one of the leading global markets of choice for issuers, intermediaries and investors by identifying ways to streamline further capital raising by publicly traded companies and promote access for investors”. More

Furious trade union leaders on Tuesday signalled a wave of strikes in the coming months after the government unveiled below-inflation pay rises for millions of public sector workers.Prime minister Boris Johnson’s cabinet on Tuesday signed off wage increases covering 2.5mn public sector workers of about 5 per cent on average. Consumer price inflation is running at a 40-year high of more than 9 per cent.The government, which is under pressure to help people with the escalating cost of living crisis, said it had accepted recommendations by independent pay review bodies covering the public sector.It said this year’s pay awards were intended to “strike a careful balance” between recognising public sector workers’ contribution, fiscal discipline and controlling inflation.But unions described the awards as “pitiful”, suggesting that the government had not gone nearly far enough to prevent them consulting their members on strike action.Britain’s railways are already embroiled in the biggest strikes in a generation, partly over pay, and workers at BT and Royal Mail have voted for industrial action over what they regard as inadequate wage rises.The government’s pay offer for schools means salaries for experienced teachers will rise by 5 per cent in the next academic year. Kevin Courtney, joint general secretary of the National Education Union, said teachers would not stand for “another huge cut” to the real value of their pay during spiralling inflation. “Given this very poor pay proposal, we will look towards consulting our members in the autumn,” he added. “This will be the largest ballot of teachers for a generation.”In the NHS, the government said there would be a flat £1,400 pay rise for hospital nurses, paramedics, midwives and porters, equivalent to 4 per cent on average. There would be an average 4.5 per cent increase for doctors and dentists, and a 3.5 per cent rise for senior NHS managers.Christina McAnea, general secretary of the union Unison, said the government had made a “big mistake” with a pay deal for NHS workers that “fails on every front”. She added: “Fed-up staff might well now decide to take the matter into their own hands. If there is to be a dispute in the NHS, ministers will have no one to blame but themselves.”Sharon Graham, general secretary of Unite, said the government had delivered a “kick in the teeth” to public sector workers and the “so-called wage offer amounts to a massive national pay cut”. Pat Cullen, general secretary of the Royal College of Nursing, said the deal was a “grave mis-step” that would push nurses out of the profession, adding that the union’s members would vote and say what they want to do next.Armed forces personnel have been offered a pay rise of 3.75 per cent by the government.Police officers will have a flat £1,900 pay increase, amounting to 5 per cent on average.

The flat offers for some public sector workers mean many lower-paid staff will secure a higher pay rise in percentage terms. For example, hospital porters will receive 9 per cent.There are also higher rises for some new recruits such as starter teachers, whose pay will rise by 8.9 per cent.Official data released on Tuesday showed UK private sector pay grew almost five times as fast as the public equivalent. More

For a world desperate for economic growth, faced with the pandemic and the war in Ukraine, the latest numbers out of China have registered as more bad news. The world’s top locomotive — which has driven more than one-fifth of global gross domestic product growth — sputtered badly in the second quarter of the year.Beijing announced a rare GDP contraction of minus 2.6 per cent compared with the first quarter of the year. On a year-on-year basis, it registered an anaemic 0.4 per cent GDP growth — the worst quarterly performance since the outbreak of the pandemic in early 2020 plunged China into a steep recession.The headline numbers, however, do not represent the most disquieting aspects of China’s economic performance. An alarming rate of youth unemployment, stubbornly bleak conditions in the all-important housing market and the debt burdens of local governments suggest structural frailties that underpin the current malaise.Youth unemployment numbers — which showed that in June almost one in five people in the 16-24 age cohort were jobless — is staggering in the Chinese context. For one thing, such a ratio is far higher than in the US, Europe or Japan. For another, many of those searching in vain for jobs are university graduates — the hope of a generation that Chinese leader Xi Jinping has exhorted to lead a high-tech transformation.The real estate market is also displaying some worrying signs. With about 70 per cent of household wealth stored in property, a fall in house prices is casting a deepening pall. Homebuyers furious over the declining value of their assets are boycotting their mortgage payments, raising concerns over the broader financial system, which is saddled with $6.8tn in mortgage loans.So far, homeowners in at least 100 developments in more than 50 cities have refused to honour their mortgage repayments, according to research firm China Real Estate Information Corp. This and other trends are combining to exacerbate concerns over the viability of many developers, driving prices of their offshore bonds to levels at which further defaults appear likely. The other big casualty of the anaemic property market is the huge phalanx of local government financing vehicles — thousands of poorly regulated funds run by local authorities that Goldman Sachs last year estimated to have some Rmb53tn ($7.8tn) in debt. These LGFVs, which often rely on selling land to property developers for much of their revenue, are suffering cash flow haemorrhages as land sales fall off a cliff. The impact of this may well be long-lasting: a big part of Beijing’s plans to revive the economy with stimulus relies on big investments by local governments.All of these aspects of China’s malaise have been exacerbated by Beijing’s “dynamic zero-Covid” policies, which have subjected cities to rolling lockdowns to try to contain the virus. However, the economic frailties that now characterise the Chinese economy are taking on a distinctly structural hue.Covid should still be taken seriously. But not through ultra-strict lockdowns. Beijing should accelerate its vaccine programme, allow foreign mRNA vaccines to be administered on a nationwide scale and coax the many unvaccinated people over 60 to get a jab. The time has come for Xi and his government to jettison its vaccine nationalism and acknowledge the efficacy of foreign products.Such measures would not bring about an economic resurgence by themselves, but they could create conditions under which an economic stimulus package may work. A resumption of Chinese growth would do much to benefit global economic health. More

Ukraine is planning to take the first step in restructuring its foreign-owned sovereign debt as the government seeks to preserve cash for a drawn-out war with Russia.The finance ministry will on Wednesday ask foreign private creditors to agree to a delay in debt repayments, according to people with knowledge of the process. Ukrainian news outlet Economic Truth reported on Tuesday that the cabinet had signed off a request for a two-year repayment moratorium on $3bn of outstanding Eurobonds. A rescheduling would amount to a Ukrainian default.The move marks a U-turn for Kyiv. Since Russia’s full-scale invasion began on February 24 it has insisted on meeting its obligations in full in order to maintain the confidence of international investors and market access, despite pressure from some official creditors to delay payments.Since February, Ukraine has paid some $1bn in redemptions and interest to external creditors while appealing to its allies for financial assistance to plug a budget deficit of $5bn a month.Although western financial support has increased since May, Kyiv is still counting on the central bank to buy its debt by selling foreign reserves or printing money, at the risk of setting off an inflationary spiral. Speaking to the Financial Times in Kyiv a day before the restructuring announcement, Ukrainian finance minister Sergii Marchenko said it was “very risky” for the country to rely on the central bank monetising its debts for much longer.He also urged the IMF to agree to a new multibillion-dollar bailout for Kyiv.“We are ready for such a discussion,” Marchenko said. “I believe the IMF is also open to such a discussion. I believe we can move faster. We need to understand what we need to do in 2023.” Marchenko refused to comment on a possible default. A restructuring appeared likely after energy company Naftogaz last week became the first state entity to seek to restructure its debt. Naftogaz did not need to do so, but was instructed to by the government, according to people familiar with the decision-making process.Kyiv’s about-turn was also signalled by Oleg Ustenko, an economic adviser to President Volodymyr Zelenskyy who told new outlet RBC Ukraine, on July 9 that a delay to debt-servicing was merited.“When the war has been going on for the fifth month in a row, when it is not known exactly when it will end, then it is illogical to worry about the fact that you will not be able to enter foreign capital borrowing markets for the next year or even two years,” Ustenko said.Marchenko said Ukraine’s budget crisis was “quite stable”. The country still needed $5bn a month to plug its deficit. Western donors and international financial institutions provided $4.4bn and but they would send “less than $4bn” in July partly because of delays in the EU over disbursing a promised €9bn aid package.Marchenko said that while it was normal for the National Bank of Ukraine to temporarily monetise government debt at a time of war, it would not be sustainable for much longer.“It is risky if it is long-term or high amplitude. In 2023 we need to avoid monetary printing by the NBU,” he said.Marchenko said the government needed to cut spending in order to rein in the deficit, but it was difficult to find savings when the bulk of expenditures went on welfare payments, the military and debt interest.Economists have warned that Ukraine is heading for a financial crisis unless it curbs the deficit and devalues its currency, the hryvnia.In an article published earlier this month, Oleg Churiy, a former deputy governor of the central bank, and Yuriy Gorodnichenko, a professor of economics at Berkeley, said macroeconomic policy was unsustainable with fiscal retrenchment, a devaluation and higher tariffs on imports. Ukraine’s foreign reserves could run “dangerously low” if the NBU continued foreign exchange interventions to sustain the level of the hryvnia and external debt repayments.Marchenko said he would not comment on exchange rate policy but said the government was “looking at some possible additional import tariffs” to help preserve foreign currency. More