Aurelia Butler

WASHINGTON (Reuters) -The United States will “absolutely” enforce export controls if Chinese companies send semiconductors to Russia that were made with U.S technology, a move that could “essentially shut them down,” Commerce Secretary Gina Raimondo said on Wednesday.Raimondo doubled down on U.S. threats to punish any company in any country that violated tough export controls that the United States has imposed on Russia over its invasion of Ukraine.Raimondo said all Chinese semiconductor companies relied on U.S. software to make their chips, which made them subject to controls. “If we find that they are selling chips to Russia, then we can essentially shut them down by denying them use of that software, and we’re absolutely prepared to do that,” she told Reuters in an interview.President Joe Biden plans to announce a fresh package of sanctions on Russian political figures and oligarchs during emergency talks this week in Brussels with European and NATO leaders, national security adviser Jake Sullivan said on Wednesday.The United States and its allies are seeking to ratchet up pressure on Russian President Vladimir Putin to halt the war, which Russia calls a “special military operation.”They are particularly concerned about China’s relationship with Russia, its failure to condemn the invasion, and U.S. reports that Beijing is willing to provide military assistance to Moscow – all issues on the agenda during Biden’s meetings.Beijing has described the sanctions imposed on Russia as increasingly outrageous, although it has expressed concern about the war.Raimondo said the United States was monitoring for possible violations of its sweeping export controls on Russia “hour by hour, minute by minute,” and would crack down on any violations by any country as they occurred.Asked whether Chinese firms were violating the controls so far, Raimondo said no, but noted that Commerce does not disclose investigations or enforcement actions before they are finalized.The former venture capitalist and Rhode Island governor said Washington expected China to comply because the consequences would be severe and could hit any company, including Chinese semiconductor maker Semiconductor Manufacturing International Corp (SMIC).Raimondo said she mentioned SMIC in an interview with the New York Times earlier this month as an example of the companies that could be affected, and should have said “XYZ company” instead. But she denied that she was softening the threat.”I’m not walking that back. I’m very consistent and clear,” Raimondo said.She said the unprecedented breadth of the concerted Western action against Russia could not be lost on Beijing, and noted recent U.S. agreements on steel and aluminum with the European Union, Britain and Japan that are squarely aimed at cracking down on Chinese overcapacity.”What you’re seeing now is really unprecedented levels of cooperation between the U.S. and our like-minded allies,” Raimondo said. “I’m sure that China takes notice that America is strong and that our relationship with our partners is stronger than it’s been in a long time.” More

Continued exchange rate flexibility would be essential to absorb external shocks, it said in a statement.The IMF is working closely with Egyptian authorities to prepare for discussions with a view to supporting sustainable, job-rich and inclusive growth, it added.The new programme could entail additional IMF funding, an Egyptian Cabinet spokesman said in a separate statement. Egypt is under new economic pressure following Russia’s invasion of Ukraine, which prompted foreign investors to flee emerging markets.On Monday the government let the Egyptian pound depreciate by 14% after it had remained little changed since November 2020. On Wednesday, the currency appreciated slightly to 18.32 pounds to the dollar. Russia and Ukraine were the main exporters of wheat to Egypt – typically the world’s top importer – and major sources of tourism. “The rapidly changing global environment and spillovers related to the war in Ukraine are posing important challenges for countries around the world, including Egypt,” the IMF said. “Continued exchange rate flexibility will be essential to absorb external shocks and safeguard financial buffers during this uncertain time. Prudent fiscal and monetary policies will also be needed to preserve macroeconomic stability.” The government on Monday announced a 130 billion Egyptian pound ($7.05 billion) economic relief package, a move that analysts said seemed designed to win IMF support. In the statement, the IMF praised “authorities’ recent actions to expand targeted social protection.”Egypt has turned to the IMF three times in the last few years. It borrowed $12 billion under an Extended Fund Facility in November 2016, $2.8 billion under a Rapid Financing Instrument in May 2020 and $5.2 billion under a Stand-by Arrangement in June 2020.Egypt is eligible for a new version of any one of the three programmes, according to a person familiar with its discussions with the IMF. But because Egypt has exceeded its normal borrowing quota it would have to adhere to exceptional access criteria, making it subject to a greater level of scrutiny, the person said. More

(Reuters) – St. Louis Federal Reserve Bank President James Bullard on Wednesday said U.S. policymakers need to think “bigger” and act “faster” on raising interest rates, given that inflation is “way over” where it ought to be. Accelerating inflation over the last several months “has necessitated, I think, all of us to think more about how fast they’re going to have to go in order to keep inflation under control,” Bullard told the Mid-Size Bank Coalition of America, referring to his fellow Fed policymakers. He said he expects inflation to rise further this spring, but could be brought under control by next year. More

Rishi Sunak’s Spring Statement on Wednesday offered minimal short-term help for UK households reeling from the cost of living crisis. Instead, the chancellor concentrated his fiscal firepower on building a war chest for pre-election giveaways. The move confirmed Sunak’s priorities. Surging inflation has generated a huge windfall of extra tax revenues for the chancellor by stealth, and he chose to return only a little to Britons, in the most eye-catching way possible. First, he unveiled a one-year 5p cut in fuel duty, effective from 6pm, plus a £6bn national insurance cut for 30mn workers that will apply from July. Second, he pre-announced a 1 percentage point reduction in the 20p basic income tax rate that will take effect in 2024 — the most likely year of the next general election. “For the first time in 16 years the basic rate of income tax will be cut,” said Sunak.Despite these moves by the chancellor, the UK fiscal watchdog said the tax burden as a percentage of national income was due to rise to 36.3 per cent in 2025-26: its highest level since just after the second world war, and surpassing the official forecast of last October.

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This partly reflects previous moves by Sunak to increase national insurance contributions, freeze income tax thresholds and raise corporation tax.But the maths behind the smoke and mirrors in the chancellor’s House of Commons speech is relatively simple and relates to the effects of higher inflation on the economy, the public finances and household living standards. The Office for Budget Responsibility expects inflation to peak at about 9 per cent towards the end of 2022 — the highest rate for more than 40 years. This will squeeze household disposable incomes by 2.2 per cent in 2022-23, which the fiscal watchdog estimated to be “the largest fall in a single financial year since [official] records began in 1956-57”.With real disposable incomes not forecast to return to pre-pandemic levels until 2024-25, Aveek Bhattacharya, economist at the Social Market Foundation, a think-tank, said: “The hit to living standards is set to be on a similar scale to the worst recessions.”Dave Innes, head of economics at the Joseph Rowntree Foundation, a charity, expressed fury that the most vulnerable families and pensioners received little or no immediate support with the rising cost of living.“The choices the chancellor has made today won’t deliver any security for those at the sharpest end of this crisis, instead he has abandoned many to the threat of destitution,” he said. Amid Russia’s invasion of Ukraine, it is no surprise the economic growth forecasts have been pared back. Compared with growth of 6 per cent in 2022 and 2.1 per cent in 2023 in its October forecast, the OBR now thinks the economy will sustain expansion of only 3.8 per cent and 1.8 per cent, respectively. Thereafter, it envisages some catch-up to the previous economic path. Public services will also suffer from higher inflation, for which they received no compensation from Sunak. Jonathan Portes, professor of economics at King’s College London, said that with higher energy bills and other costs, the lack of compensation meant “pay cuts for . . . nurses, teachers and the police, with cuts to the quantity and quality of service provision”. In contrast to the pain that will be suffered by households and the public sector, higher inflation brings additional money into the Treasury’s coffers without the chancellor raising tax rates. This is because it increases the nominal value of all goods and services produced upon which taxes are levied. The OBR calculated that the additional tax receipts resulting from surging inflation provide a windfall of roughly £35bn a year to Sunak, with only some of that having to be spent on higher costs of servicing government debt and welfare benefits. Apart from a one-off bad year in 2022-23, the OBR reckoned Sunak will gain at least £15bn more annually from higher tax revenues than he is forced to spend on debt servicing and uprating benefits. Sunak then had a choice to make: should he compensate Britons and public services for their losses with his windfall, or should he bank the money? In the current financial year he gained a £50bn windfall, which has been banked. For future years, he has decided to give back to the public paying the taxes a net amount of a few billion of his projected £15bn annual windfall. This giveaway is at its highest in 2024-25, the likely year of the next election, but even then it is still only £3.6bn net. Sunak made it sound as if the giveaways were much larger than that but, once again, smoke and mirrors were at work. He said cutting 5p off fuel duty on a litre of petrol and diesel would cost more than £5bn this year, but the Treasury documents show an expense of only £2.4bn. The difference arises because the chancellor calculated the cost from a notional world in which the rate of duty on fuel was higher than it actually is. The Institute for Fiscal Studies, another think-tank, said the cost of Sunak’s tax and national insurance changes in the Spring Statement were more than paid for by the extra revenues secured from freezing income tax thresholds for four years at a time of much higher than expected inflation. Paul Johnson, director of the IFS, said: “Almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and national insurance contributions, despite the tax-cutting measures announced today.”In addition, these tax cuts are offset by large increases in the amount of loan repayments that recent graduates will face over their working lives. This Spring Statement sought to distract from stealthy tax increases and real public spending cuts. Or, as Torsten Bell, chief executive of the Resolution Foundation think-tank, said on Twitter: “This package only makes sense if your only test for policy choices was can you prove you’re a tax cutter [and] you’ve already announced a rise in national insurance.” More

Egypt has asked for support from the IMF, the fund said, as the country struggles to weather the economic impact of Russia’s invasion on Ukraine. Cairo is facing mounting pressures on its public finances as Moscow’s assault in Kyiv has sent grain prices soaring and increased the price of oil. Egypt is the world’s biggest wheat importer, is heavily reliant on supplies from Russia and Ukraine and has a subsidised bread programme which feeds 70mn people. Its predicament underscores how the war is rippling into Arab and African states that rely on food and energy imports. “The rapidly changing global environment and spillovers related to the war in Ukraine are posing important challenges for countries around the world, including Egypt,” said Celine Allard, IMF mission chief for Egypt in a statement released on Wednesday evening. “In that context, the Egyptian authorities have requested the International Monetary Fund’s (IMF) support to implement their comprehensive economic programme.”Egypt, the Arab world’s most populous nation, has benefited from previous IMF loans and programmes. In 2016 it secured a $12bn loan over three years after a crippling foreign currency crisis as it emerged from the political upheavals that followed its 2011 revolution. It also received $8bn in 2020 to deal with the impact of the pandemic, making it one of the biggest borrowers from the fund after Argentina. At the time of the 2016 agreement it devalued the currency, which lost half its value against the dollar.Analysts have been expecting this latest announcement after the country devalued its currency on Monday in a move seen as a prelude to discussions with the fund on a potential loan. Egypt also announced a package of tax breaks and increases in social spending worth $7bn.The Egyptian pound has fallen 14 per cent against the dollar since Monday when the central bank allowed its value to slip, citing the role of exchange rate flexibility as a shock absorber. The dollar traded at E£18.4 on Monday up from E£15.66 on Sunday.Goldman Sachs said the devaluation “smooths the path for an IMF programme which we believe will help anchor confidence in Egypt’s fiscal and reform trajectory”.Allard’s statement welcomed the devaluation and the expansion of the social protection network and added that “continued exchange rate flexibility will be essential to absorb external shocks and safeguard financial buffers during this uncertain time. Prudent fiscal and monetary policies will also be needed to preserve macroeconomic stability.”The war has also hit the country’s tourism, a main source of foreign currency, because it stopped the flow of visitors from Russian and Ukraine — both important markets for the sector.Foreign debt investors have also pulled billions of dollars from Egypt in recent months, adding to pressure on its currency. “There were around $5bn of net outflows in September-December and further outflows accompanied news of the Ukraine conflict,” said Fitch Ratings agency in a note last week.“In our view, these outflows reflect tighter global financial conditions, as well as investor concerns about Egypt’s external funding needs in the absence of an IMF programme, the impact of rising inflation on Egypt’s real interest rates, and the sustainability of Egypt’s exchange-rate level, after significant real appreciation in recent years.” More