Aurelia Butler

“It’s an important role and he will nominate someone to fill the position,” White House Press Secretary Jen Psaki said at a Wednesday press briefing. Psaki did not provide a timeline for announcing a new nominee.©2022 Bloomberg L.P. More

It said the need for change was “more important than ever” as the COVID-19 pandemic exacerbated long-standing structural challenges to productivity growth. The financial institution, which seeks to fight poverty worldwide, said that Mexico lacks the capital to propel economic growth. Central bank member Jonathan Heath similarly said in February the country lacked a “growth engine” and the private investment needed to up the country’s gross domestic product (GDP).The World Bank called for an end to market concentration in Mexico and said that while large firms control much of the country’s economic power, they do not grow quickly enough or create enough jobs. If the Latin American nation had followed the United States’ recovery from the 2008 financial crisis, Mexico’s productivity would be 9% higher, the report said. In an accompanying event in Mexico on Wednesday, the country’s Deputy Finance Minister Gabriel Yorio said that the hit to global value chains initially caused by the COVID-19 pandemic would likely be prolonged due to Russia’s recent invasion of Ukraine. More

The west has all but declared economic warfare on Russia in response to Vladimir Putin’s invasion of Ukraine. Whether or not Russia manages to make interest payments on its dollar debt — coupon payments on two bonds due on Wednesday did not arrive, though there is a 30-day “grace period” — the country is already experiencing all the consequences of a default: the rouble has collapsed, the government and most of its businesses are excluded from borrowing elsewhere, and a deep recession is looming. The failure to pay bond coupons on time is ultimately just another symptom of the damage Putin has wrought. While a default might seem an inevitable result of sanctions, foreign governments would, if anything, be happy to see Russia making interest payments on its external debts — since this would drain more of the country’s scarce foreign exchange reserves. Regulators fear, on the other hand, that if Moscow misses payments, this may have unforeseen effects on western financial systems. Russia’s 1998 default on local currency debt and restructuring of some Soviet-era dollar debt — its last comprehensive default on foreign currency debt was in 1918 after the October Revolution — contributed to the failure of a number of highly-leveraged hedge funds. Fewer investors have such speculative bets on Russia today, especially since the 2014 annexation of Crimea. But there is the potential to reveal some “hidden leverage” in the system; Russia’s copious forex reserves and oil and gas revenues had persuaded creditors the country was a relatively safe bet until now. Neither is the debt stock particularly large — a consequence of years of running a tight fiscal ship and the attempt to build a financial fortress, resistant to western sanctions.Moscow has indicated it may pay with roubles rather than dollars. While there are provisions in some bonds that would allow it to do so, this would constitute a legal default on others. Russia’s government, however, is likely to argue that while it is willing and able to pay, it is prevented due to sanctions. On Wednesday, finance minister Anton Siluanov said Russia had sent instructions to its usual US bank to pay the $117mn of coupon payments coming due but that sanctions might prevent the money from getting through. Any default is likely to be followed by intense legal wrangling. The country has declined to waive its “sovereign immunity” as part of bond issues, the principle that governments cannot be taken to court. Nevertheless, judges may rule that investors have a right to seize Russian assets that travel outside the country. Foreigners may be banned from negotiating a restructuring. The implications of these judgments will test the market for credit default swaps, a form of insurance where billions of dollars are at stake over the precise definition of “default”.A bigger concern may be the debts of Russian business. Private sector borrowing — external corporate debt is about $150bn, including both loans and bonds — hugely outweighs foreign currency sovereign debt of about $20bn. Oil and gas companies may still be able to borrow, thanks to an exclusion from sanctions, but “self-sanctioning” by lenders and the collapse in Russian trade will still hit their revenues and imperil their financial stability. Other Russian blue-chips will have to look elsewhere or scale down operations. Russia bears the ignominy of being the country with history’s longest default. The country finally paid off repudiated tsarist debt in 1996. It is not in Russia’s interest — or the world’s — for a repeat of such long-term damage. A non-negotiable first step to avoid such a fate must be to make peace. More

Chancellor Rishi Sunak will next week pave the way for a major overhaul of Britain’s corporate tax system, as he seeks to boost business investment and improve the UK’s weak economic growth prospects.Sunak’s spring statement on Wednesday will be overshadowed by the growing cost-of-living crisis, with pressure on the chancellor to offer immediate help to families, including through a cut in fuel duty.But Sunak’s allies said he will use the statement to warn the only sustainable way to protect and improve living standards is to boost growth, notably through increased business investment.After a post-Covid spurt, the British economy is set to record weak annual increases in gross domestic product of a little over 1.5 per cent, according to official forecasts.Employer groups such as the CBI have flagged that business confidence is waning, and raised concerns about the government’s plans to increase national insurance contributions and corporation tax.Sunak is due to use his spring statement to commit to reform of business taxation, setting the stage for detailed decisions in his autumn Budget, according to his allies.This is expected to lead to reform of the corporate tax system to encourage more capital spending by companies.Sunak is also likely to push ahead with reform of tax credits for research and development, which he believes are not delivering value for money, particularly in relation to small and medium-sized companies.

The chancellor is preparing to use the spring statement to set out plans to improve the operation of the apprenticeship levy, to ensure it is incentivising employers to deliver the right kind of training to boost productivity.The statement will set the policy direction ahead of the autumn Budget, where ministers are considering options to provide incentives to investment by companies after the end of the super-deductor tax break in 2023.Last month in his Mais economic lecture, Sunak warned that unless productivity and growth increased “people will begin to lose faith in the moral and material case for free markets”, undermining democracy itself.He said the problem was “no longer the government — businesses simply aren’t investing enough” and that his priority was “to cut taxes on business investment” in the years ahead.Sunak’s analysis is that business under-investment is chronic across all regions, with capital spending by UK companies averaging just 10 per cent of GDP, less than the 14 per cent OECD average for advanced economies.The chancellor believes George Osborne, one of his predecessors as chancellor, focused on the wrong thing by aggressively cutting headline corporation tax rates.Sunak wants to focus on the UK tax treatment of capital investment, which he said was “much less generous than the OECD average”.He said last month: “It is unclear that cutting the headline corporation tax rate did lead to a step change in business investment. We need our future tax policy to be targeted and strategic.”With corporation tax due to rise from 19 per cent to 25 per cent from 2023, Sunak is facing calls from business groups to come up with a much more generous regime to promote capital investment.“It’s a top priority for Rishi,” said one government insider. “It will be a central theme of the spring statement.” The CBI has called for a similar scheme to the super-deductor to be put on a permanent basis — suggesting a 100 per cent tax deduction for capital spending — which it has calculated would trigger an annual £40bn boost.It said there was a risk that business investment could tail off just as growth stalls. “The Treasury must act to stabilise business confidence now,” said Tony Danker, director-general of the CBI. The Treasury declined to comment. More

Good evening,China’s rare intervention in financial markets today aims to reassure investors nervous of slowing economic growth, the effects of the war in Ukraine and coronavirus lockdowns, as the country battles a surge in infections.Liu He, China’s top economic official, said Beijing would take measures to “boost the economy in the first quarter” as well as introduce “policies that are favourable to the market”, even if, at the moment, it is unclear what those precise measures will be.However, the move was enough to lift Chinese stocks, which have been hit by a sharp sell-off recently, accelerated by the crisis in Ukraine.The jump in infections has led to lockdowns in several cities, putting a brake on economic growth and disrupting already stretched global supply chains. Hong Kong is suffering a brain drain, while all but essential factories in the tech hub of Shenzhen have been ordered to stop production for a week. Tens of millions of people are trapped in their homes in Shanghai, China’s wealthiest and most populous city.The severe restrictions have been heavily criticised by business. “China is digging itself into a deep hole with its zero Covid policy,” said one expert at US consultancy Bain. “As the restrictions are hurting suppliers and logistics operations, companies are moving beyond containing the current crisis and towards diversifying production locations, undermining China as the supply chain hub of the world.”Apple supplier Foxconn said today that revenues could shrink by up to 3 per cent this year and that it might struggle to hit operating profit margins as costs rise and the pandemic continues. Restrictions in Shenzhen mean “factories cannot ship” and “freight forwarders warehouses are mostly shut down”, according to a report seen by the Financial Times. Transport between Hong Kong and the mainland meanwhile was in “semi-meltdown status”.War-related market turmoil has also affected China as the globe’s biggest importer of oil and a big buyer of food from around the world. As our Big Read explains, China is also experiencing a backlash from its friendship with Russia. President Xi Jinping and Russian leader Vladimir Putin only last month signed a “no limits” partnership in Beijing, described by one US official as the “coming out party” for their growing allegiance. Unlike Russia, with which it shares a deep hostility to the US’s global role, China can afford to play a “long game”, says chief foreign affairs commentator Gideon Rachman, by relying on its economic might to change the global balance of power. But, he argues, Putin’s actions have brought forward that potential confrontation with the west.And while trying to isolate China would be much more difficult than imposing sanctions on Russia, given how deeply integrated the country is in western supply chains, a crisis such as the current one causes people to re-examine basic assumptions, he says.“The idea of an economic severance of China from the west, once unthinkable, is beginning to look more plausible,” Rachman concludes. “It might even appeal to the growing constituency of economic nationalists in the west who now regard globalisation as a disastrous error.”Latest newsUS to send more military aid to Ukraine following plea from ZelenskyEnergy traders call for ‘emergency’ central bank intervention Oaktree prepares offer for Chelsea as race to buy football club heats upFor up-to-the-minute news updates, visit our live blogNeed to know: the economyThe US Federal Reserve lifted its benchmark interest rate for the first time since 2018 today, with a quarter-point rise expected at all of the six remaining policy meetings. Data released yesterday ahead of the Fed’s decision showed US producer prices rose 10 per cent in February, the fastest year-on-year rate since the data were first collected in 2010. The FT Editorial Board discusses the tough choices for central banks as inflation rages.Russia will default on its debt for the first time since 1998 if it tries to make interest payments on its dollar bonds in roubles today, the Fitch rating agency said. Here’s our explainer on what to expect.The International Energy Agency warned of the biggest supply shock in a generation as the search for alternatives to Russian sources continues. UK prime minister Boris Johnson heads to talks with the UAE and Saudi Arabia over increasing oil production, but in the meantime British motorists are set for pain at the pumps. Power supplier Octopus energy said the UK could eliminate its dependence on Russian gas within two years by increasing the number of onshore wind farms.Latest for the UK and EuropeBrussels warned the war in Ukraine would cause a “severe” hit to EU growth, which is now predicted to be below the 4 per cent it forecast just a month ago. Investor sentiment in Germany, the bloc’s biggest economy, is now at its lowest level since the pandemic began, according to yesterday’s closely watched Zew survey.All remaining UK travel restrictions will be scrapped from Friday. Arrivals in the country will no longer need to fill out a passenger locator form and unvaccinated people will not need to take a coronavirus test before departing for the UK or after their arrival. Scotland will not be removing laws requiring face coverings as planned because of the current spike in infections.Official labour market data showed the number of unfilled vacancies in the UK rising to a record 1.3mn and wages failing to keep up with inflation. Average earnings were 3.8 per cent higher than a year earlier over the November to January period — a real terms fall of 1 per cent — increasing pressure on chancellor Rishi Sunak to address the cost of living crisis in his spring statement next Wednesday.Listen to our Money Clinic podcast for tips on how to make your household budget stretch further as “awful April” approaches, with its double whammy of UK tax rises and increases in energy bills.Global latestChief economics commentator Martin Wolf says Russia’s war will remake the world. “Threats of nuclear Armageddon, a mobilised west, an alliance of autocracies, unprecedented economic sanctions and a huge energy and food shock. No one knows what will happen. But we do know this looks to be a disaster,” he laments. Trade Secrets writer Alan Beattie, on the other hand, is sceptical that the anti-Putin coalition will permanently change the way the global economy, trade and energy are governed.New Zealand’s prime minister Jacinda Ardern has sped up the reopening of the country’s borders after polls suggested that her popularity with voters was on the decline. Ardern said the country had the lowest rate of deaths during the pandemic in the OECD.The US is running out of money to pay for Covid-19 vaccines, tests and treatments, the White House warned, after Congress rejected a $15bn spending package. Health officials also fear that Europe’s recent surge in infections could soon come to the US.Need to know: businessThe EU and UK unveiled more sanctions against Russian oligarchs as well as targeting imports of goods such as vodka. Brussels also set up “a far-reaching ban on new investment across the Russian energy sector”. But although oil majors such as BP and ExxonMobil pledged to quit Russia, oil services companies Schlumberger, Baker Hughes and Halliburton — partners of Russian state-backed producers Rosneft and Gazprom — have not followed suit.Europe’s car plants have been hit by a shortage of cheap cabling components made in Ukraine. VW said it would consider expanding outside Europe if the war continued. Our Big Read examines the risks involved for VW and others in relying on authoritarian states such as China. Intel announced a €30bn investment in European chip manufacturing, as Brussels tries to make the EU a semiconductor leader that is less reliant on chips from Asia. However, UK chip designer Arm is cutting 1,000 jobs after the collapse of its sale to Nvidia.UK MPs accused the British Business Bank of a “colossal cock-up” for presiding over fraudulent pandemic bounce back loans for companies.UK restaurant, food and leisure groups warned of the impact of higher input costs because of the war in Ukraine. One analyst said additional increases in value added tax, business rates and the national living wage could “tip some operators over the edge”.Big banks are on alert for Russian cyber attacks on Swift after seven of the country’s lenders were kicked off the payments messaging system. “During warfare, it’s the most effective place to hit — it’s the nucleus of the global banking system, the node that connects everything,” one senior banker told the FT. Paschal Donohoe, president of the eurogroup and Ireland’s finance minister, wrote in the FT that banking union was essential if the EU was to survive future crises.The pandemic-fuelled shift towards digital banking and ecommerce continues as HSBC said it would close a tenth of its UK branches after footfall declined. Inditex, the world’s biggest clothing retailer, said it expected online sales to account for 30 per cent of revenues in 2024.The World of WorkUK retailer Wilko apologised for issuing staff guidance to attend work even if they were Covid-positive. The relaxed rules were an early example of a UK employer using the government’s end to legally enforced self-isolation to get staff back into the workplace.Rob Bridgman, founder of sofa maker Snug, shares how he dealt with the supply chain problems thrown up by the pandemic and how he changed his business to make people more confident about buying online.Isabel Berwick will be hosting a live version of our Working It podcast alongside columnist Pilita Clark on Wednesday April 6 in London, with all proceeds going to the Choose Love fundraiser for Ukraine. Get your tickets here.Get the latest worldwide picture with our vaccine trackerAnd finally . . . Art has always been weaponised, one way or another, writes arts editor Jan Dalley. But can boycotting Russian artists, or forcing them to publicly condemn the war, possibly have any effect — especially against a Kremlin leadership unruffled by international disgrace?

Valery Gergiev, centre, was fired as chief conductor of the Munich Philharmonic after refusing to condemn the invasion of Ukraine More

The IMF’s executive board has suspended the ceremonial role of “dean”, which was held by Russia’s representative Aleksei Mozhin, following pressure from top shareholders at the multilateral lender including the US, UK and Canada.“The executive board has decided to temporarily suspend the role of dean of the board given Russia’s role in the ongoing war in Ukraine and its potential impact on the ability of the executive director for Russia to carry out this task effectively,” an IMF spokesperson said in a statement to the Financial Times.The role of dean — which Mozhin has held since 2015 — is a largely honorary title conferred to the longest-serving member and carries no official responsibilities or authority. At times, the dean will fill in for the managing director, who chairs the board and is responsible for convening meetings and facilitating debate. But in the aftermath of Russia’s invasion of Ukraine, several IMF members found it unacceptable for Mozhin to carry out any ceremonial duties on behalf of the board. By suspending the position altogether, the board will not announce a successor. The issue of whether to end the suspension will be revisited before the end of the year, said a person familiar with the situation.Russia has grown increasingly isolated following its attacks on Ukraine, as the west has slapped the country with numerous sanctions and a number of name brands have departed the country. IMF managing director Kristalina Georgieva last week said the multilateral lender’s office in Moscow was “not operational”. She also said the IMF had “no program relations with Russia at this point” and that it was “highly improbable” the country would be able to make use of its $17bn in special drawing rights — a form of reserve asset issued by the IMF that in effect constitutes newly minted money.When asked whether Russia’s fund membership could be suspended, Georgieva said the country was still meeting its obligations, which are based on economic and financial criteria, and as such has not violated the lender’s articles of agreement. Though she added that “in terms of servicing debt obligations, I can say that we no longer think of Russian default as an improbable event.” Penalising Russia in this way would also require overwhelming support within the board. Russia’s share of voting power at the IMF is 2.59 per cent, compared with 16.5 per cent for the US. More