Economy

Zambia’s finance minister has rejected a call by China for the World Bank and other multilateral lenders to join a restructuring of the country’s debt and warned that delays to the relief are holding back economic recovery in Africa’s second-biggest copper producer.Situmbeko Musokotwane said in an interview that “time is of the essence” to finish a restructuring of about $13bn of external debt this year, three years after the southern African nation defaulted on it. He signalled that Beijing’s demand was a distraction from talks on specific terms for reducing the loans.Asked whether he supported the idea floated by Beijing in January for Zambia to consider including multilateral lenders in the debt restructuring talks, he replied: “Discussions at higher levels like those just make our situation worse, because what we are looking for is urgent solutions, not discussions that may drag out the matter.” He added: “We should all just focus on and get the debt [relief] delivered.”China is Zambia’s single biggest creditor, with about $6bn of infrastructure loans spread among several Chinese banks. About $3bn is owed to holders of all the country’s US dollar bonds.Beijing’s demand to include multilateral lenders would upturn a decades-old rule in sovereign lending that they should be exempt from debt restructuring because they act as lenders of last resort and charge little interest.China last year agreed in principle to give Zambia relief in tandem with other official creditors through a G20 process known as the common framework.But since then, detailed plans for a restructuring have stalled and left President Hakainde Hichilema’s government unable to access a $1.3bn IMF bailout or to resume paying its debts.China signalled its latest objection in January when a spokesperson for its foreign ministry said that “the key to easing Zambia’s debt burden . . . lies in the participation of multilateral financial institutions and commercial creditors in the debt relief efforts”.As well as conflicting with existing rules, the demand also indicates that Beijing objects to basic tenets of Zambia’s debt restructuring rather than haggling over specific terms.On a trip to Zambia last month US Treasury secretary Janet Yellen called China a “barrier” to a deal.Multilateral development lenders make up less than $3bn of about $7bn of external debt that Zambia excluded from the restructuring last year.Lusaka has asked the remaining creditors to agree to reduce the overall value of their claims by about half, or more than $6bn, either through taking direct losses on principal or reducing interest rates and extending repayment.Beijing is known to be reluctant to set any precedent for taking direct haircuts on its loans to developing nations. But analysts have said Chinese banks could cut their rates low enough to meet Zambia’s debt reduction target and still receive more than Lusaka would pay multilateral lenders.Until official creditors agree to specific terms, Zambia cannot easily secure a deal with private bondholders. “We are concerned about the delays, and we would have liked this to have happened much faster,” Musokotwane said.

But Zambia believed it was making progress with creditor engagements and could show its fiscal plans were on track, he said, adding: “For the year just ended, it has been one of the best fiscal performances in decades,” with revenues and spending on target.But this year’s budget and government plans to protect social spending assumed the debt restructuring would take place this year, he added. “There are human beings behind this . . . all this requires that the burden on our shoulders must be removed.”Some creditors have questioned the economic assumptions behind Zambia’s targets for debt relief, such as a requirement to cut debt to below 90 per cent of exports by 2027, with some suggesting the level could be higher. Others have said it would be fairer for foreign investors in Zambia’s local currency bonds, currently excluded from the restructuring, to also take haircuts.Any inclusion of domestic bonds in the restructuring would “would risk unravelling macroeconomic stability” and will not be considered, Musokotwane said. More

As the UK entered a cost of living crisis in recent months, private equity headhunter Sita Kolossa had a surreal conversation with a client about his salary. “He told me £1mn was not enough,” she said, sounding aghast, noting that this figure excluded his bonus. “I mean, what do I even do with that?”.While the private equity industry is a particular beast where even £1mn may be considered mere pennies for some executives (Blackstone chief executive Steve Schwarzman took home $1.1bn in income in 2021), the incident highlighted an issue facing many chief executives: how do you manage the pay and expectations of the highest earners? The problem is especially acute at a time when the cost of living is escalating and companies are prioritising making life easier for those with the lowest salaries. With many UK public sector workers taking strike action this winter, after years of effective pay cuts, an easy response may be to tell the highest earners to get a grip. Yet bosses say they are facing a real dilemma.Their highest earners are often the most senior people, the biggest revenue generators and longest serving employees, who have helped foster growth at companies for years. They are demanding even greater pay. Tight labour markets and a rush to secure top talent have helped their cause, as managers calculate that finding new people to replace senior staff with institutional knowledge would only cost more money and take more time.An endless pot of cash could placate everyone. Reality means making compromises. So what should a manager keep in mind when dealing with their highest earners?The first point is that some of the highest paid individuals probably do deserve pay rises. Those associated with the long-term growth of the company are important and need to be recognised as such. Martin Reeves, chair of the BCG Henderson Institute, a think-tank linked to the consultancy, researched business resilience by looking at the competitive performance of all public companies across a 50-year period.In periods of turbulence, particularly as recessionary pressures take hold, there might be a bias towards having a short-term focus and penny pinching. But competitive gains, Reeves says, come from those companies who turn attention to the next set of growth priorities. And while not every high earner is essential, companies must protect those individuals associated with its future growth through “active retention measures”, says Reeves, which can include remuneration. This could take the form of one-off bonuses, a higher salary, long-term incentive plans and other ways to financially reward staff.The second point is that retaining high earners is not always about the money. CEOs can be more imaginative and use other levers available to show a person’s value. Individual recognition can come in many forms — a bigger role, a seat at the decision-making table or a clearer career path forward. A positive company culture and attractive working conditions should be another way to entice colleagues. Uniting behind a shared company vision, more flexible working arrangements and greater ownership over one’s own time are perks that money can’t buy. But don’t then shoot yourself in the foot by doing stupid things. Outsized payouts at the top when a company has cut jobs elsewhere, made huge losses, or embroiled itself in a scandal — or if there is very little leeway to help those at the lowest end of the pay structure — will mean senior managers automatically become a target of worker ire and negative press. Finally, pay attention to the differential between the highest and lowest paid. While the pay of chief executives always seems to be in focus, in this environment the top band of earners should all watch out. This is a reflection of corporate culture and it affects the motivation of a significant part of the workforce, says Georg Wernicke, who conducts research on strategy and business policy at HEC Paris business school.“You want to pay the highest earners a sufficient amount to incentivise them to steer the company through difficult times but also enough that you can retain them as staff. But you’ll also be pressured by unions, the public, and the media to pay them something that’s fair, particularly if you’re cutting the workforce,” he said.As workers push for greater transparency on pay, the issue of the differential will only become more important. Wernicke added: “There is room for the top earners to be humble.”If an executive team is highly motivated by pay, chances are business leaders and boards will always be battling that frontier and it could be something innate to the culture of a particular company. If it is no longer working, it is something that needs to be dealt with structurally and change has to start at the top. [email protected] More

At a time of information overload, Erik Angner offers a fitting reminder of how economics can help structure our critical thinking on matters ranging from the existential, such as climate change, to the more routine, like parenting. For economists and those familiar with it, How Economics Can Save the World is a refreshing exploration of the subject’s growing application. For newcomers it will offer a clear guide into how economic reasoning can filter through noise and identify solutions for problems, big and small.Economics has sustained its share of bad publicity. Broadsides against experts by politicians, criticisms over incorrect forecasts, and some economists’ dogmatic attachment to outdated theories have all undermined faith in the subject. Indeed, a 2019 UK survey found economists were among the least trusted professionals in the country. Meanwhile, the abundance of clickbait and partial analysis promoted by social media and some news organisations, has only added to confusion around certain issues.Angner, a professor of practical philosophy at Stockholm University, concedes the need for economics to be less insular, better communicated, clearer about how values — welfare and justice, for instance — factor into its analysis, and more open to diversity. Yet by walking the reader through how branches of economics can illuminate some of humanity’s greatest challenges, such as reaching net zero carbon emissions, and how valuable it can be in our daily struggles, he is able to demystify the subject and reassert that improving everyone’s economic literacy is crucial.The author argues that the core experimental tools of economics — such as randomised control trials and empirical analysis — distinguishes it as an original way of problem-solving. It is the consistent application of these tools to public policy that makes economics distinct from psychology and sociology. Through a series of case studies, Angner outlines how these instruments help identify what is at the heart of various economic and social issues and then how they can isolate, test and justify certain courses of action.

Most effectively, through engaging examples, Angner highlights an “economic way of thinking”, approaching problems through a collection of heuristic devices. He goes through concepts such as rational choice theory, which make the subject’s logic more accessible. This is important as some are often put off by the discipline’s reputation for being overly mathematical.Angner also applies microeconomic theory to shed light on major global challenges. This includes an investigation into the efficacy of direct cash transfers in alleviating poverty, and the role of carbon taxes in fixing climate change. There is also a neat defence of the power of markets, drawing on Alvin Roth’s work on market design to support kidney exchange. Indeed, his research has helped thousands to get life-saving transplants through a system which matches donors and patients. Between the heavier topics, Angner explores more unconventional applications of economic thinking, leaning on the discipline’s growing use of behavioural science and approaches centring on the role of beliefs, preferences and values. This includes an entertaining chapter on how to change norms and bad behaviour, linking to game theory. Considerable space is also devoted to challenging our own cognitive biases, such as confirmation bias, and how not to be overconfident. Angner’s call for “epistemic humility” — a realisation that our knowledge is always incomplete, and may require revision in light of new evidence — is a reflection of his overall message that economics is at its core a way of critical thinking.The book offers hope for readers that a more rational, balanced and considered public debate is within reach, providing the insights of economics are more widely understood.How Economics Can Save the World: Simple Ideas to Solve Our Biggest Problems by Erik Angner, Penguin Business, £20, 288 pagesTej Parikh is the FT’s economics leader writer More

SINGAPORE (Reuters) -DBS Group reported a higher-than-expected 68% rise in quarterly profit as rising interest rates boosted its net interest margins and Southeast Asia’s largest bank by assets retained its full-year outlook for mid-single-digit loan growth.Singapore lenders are set to report their highest quarterly net interest margins in more than a decade on rising interest rates but as the cycle peaks and economic growth falters, profit growth will be curbed, analysts said.”Our business pipelines are healthy and asset quality robust. We expect confidence to return to markets in the coming year as interest rate increases ease and China reopens,” DBS Chief Executive Piyush Gupta said in a statement on Monday.He expects interest rate increases to moderate but doesn’t expect rate cuts this year.DBS, the first Singapore bank to report this season, said October-December net profit rose to a record S$2.34 billion ($1.76 billion) compared with an average estimate of S$2.16 billion from three analysts, according to Refinitiv data, and S$1.39 billion in the same period a year earlier.The lender, which earns most of its profit from Singapore and Hong Kong, announced a special dividend of 50 Singapore cents per share, citing its strong earnings and capital position.It reported a total net interest margin, a key gauge of profitability, of 2.05% for the latest quarter, up from 1.43% in the same period a year earlier.Singapore banks, among the most well capitalised in the world, are on track to report record full-year results as they benefited from an early rebound in the city-state’s pandemic-hit economy last year.DBS’ annual profit soared 20% to a record S$8.2 billion. However, it warned there was a downside risk of 5 to 7 basis points to the group’s peak net interest margin guidance of 2.25% due to factors including outflows to treasury bills and a strengthening Singapore dollar.Smaller peers OCBC and UOB, which report results next week, are also expected to post a sharp rise in annual profits, but quarter-on-quarter earnings are seen as being flat to slightly lower.The banks’ shares have gained 10% to 15% since late October when Singapore’s key market index fell to 20-month lows. The gauge has since recovered by 12%. ($1 = 1.3297 Singapore dollars) More

SYDNEY (Reuters) – Asian shares slipped on Monday as investors hunkered down for U.S. inflation and retail sales data that could jolt the outlook for interest rates globally, while tempering or accelerating the recent spike in bond yields.An air of geopolitical mystery was added by news the U.S air force had shot down a flying object near the Canadian border, the fourth object downed this month.Officials declined to say whether it resembled the large white Chinese balloon that was shot down earlier this month.In any case, it provided an extra excuse for caution and MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1%, after losing 2.2% last week.Japan’s Nikkei fell 0.5%, and South Korea 0.3%. S&P 500 futures were off 0.2%, while Nasdaq futures eased 0.3%.The near-term direction for assets could well be determined by U.S. data on consumer prices and retail sales this week, with much resting on whether inflation continued to slow in January.Median forecasts are for headline and core consumer prices to rise 0.4% for the month, with sales rebounding by 1.6%.Risks could be to the upside given a re-analysis of seasonal factors released last week saw upward revisions to CPI in December and November. That lifted core inflation on a three-month annualised basis to 4.3%, from 3.1%.There were also changes to the weightings for shelter costs and used car prices which might bias the CPI higher.Bruce Kasman, head of economic analysis at JPMorgan (NYSE:JPM), expects core CPI to rise 0.5% and sales to jump 2.2%, underlining the message of resilience from the bumper January payrolls report.”Developed market labor markets have tightened in recent months against our expectations of easing,” says Kasman.”The latest news reinforces conviction that we are not on a soft-landing path and that a recession will eventually be necessary to bring inflation back to central bank comfort zones.”Markets have already sharply raised the profile for future tightening by the Federal Reserve, with rates now seen peaking up around 5.15% and cuts coming later and slower.There is also a full slate of Fed officials speaking this week to provide a timely reaction to the data.Yields on 10-year Treasuries are at five-week highs of 3.75%, having jumped 21 basis points last week, while two-year yields hit 4.51%.That shift helped stabilise the dollar, especially against the euro which slipped 1.1% last week to hover at $1.0670, well away from its early February high of $1.0987.The dollar also got a leg up on the yen on Friday when reports emerged Japan’s government was likely to appoint academic Kazuo Ueda as the next Bank of Japan governor.The surprise news sparked speculation about an early end to the BOJ’s super-easy policies, though Ueda himself later said it was appropriate to the current stance.The dollar was last holding at 131.50 yen, after bouncing from a low of 129.80 on Friday.The rise in yields and the dollar has been a burden for gold prices, which was stuck at $1,862 an ounce compared to an early February peak of $1,959. [GOL/]Oil prices eased a touch after jumping on Friday when Russia said it planned to cut its daily output by 5% in March after the West imposed price caps on Russian oil and oil products. [O/R]Brent dipped 36 cents $86.03 a barrel, while U.S. crude fell 35 cents to $79.37. More

HONG KONG (Reuters) – As global investors look for ways to profit from China’s reopening from pandemic controls, the beaten-down shares of Hong Kong’s property firms and real estate funds have become popular vehicles for riding an expected economic recovery.While China’s dropping of its stringent zero-COVID policy late in 2022 has lifted travel and tourism stocks across Asia, investors say Hong Kong’s property sector has special appeal as the mainland and local economies improve, tourists return to the city and, sometime this year, U.S. interest rates peak.Investors see value in property companies regardless of whether their assets are in mainland China or Hong Kong, which reopened at about the same time.”We certainly view the current improving backdrop of Hong Kong’s reopening as a catalyst for continued re-rating,” said Jadgeep Ghuman, managing director on public real assets team at real estate investment manager Nuveen. Some property stocks have risen this year. Guangdong Investment (OTC:GGDVY) is up more than 10% since the end of 2022, while Henderson Land (OTC:HLDCY) Development has gained 7.2%. The Hang Seng Property index is up about 3.1%.Fund managers are particularly keen on Hong Kong real estate investment trusts (REITs), because their stock prices are now cheaper than the value of the properties they own or partly own. REITs also tend to be heavy borrowers, so they are set to benefit when interest rates fall.Hong Kong home prices sank 15.6% in 2022, ending a 13-year rising trend after three years of COVID-19 dried up flows of property buyers from China and tourists.Rises in Hong Kong mortgage rates that began last year have compounded troubles for developers and mortgagees. Hong Kong interest rates tailgate those of the U.S. due to the local currency’s peg to the dollar.REOPENED BORDERSFund managers said the property sector had become a bargain since borders reopened in January and as the widely expected end of Federal Reserve’s monetary tightening approached.”Hong Kong has a lot more to get us excited than China property companies where their financial data remains weak,” said Tim Gibson, co-head of Global Property Equities at Janus Henderson Investors.Gibson likes Link REIT due to its heavy exposure to shopping centres that focus on non-discretionary retail spending.Link REIT’s share price dropped 54% from a peak in July 2019 to a trough of HK$46.3 at the end of October 2022. On Friday, it was still down 37% from the peak.Rating agency Moody’s (NYSE:MCO) Investors Service said in a report last week that a rebound in tourism and retail consumption would raise the aggregate retail rental income of the property companies it rated, which include Link REIT and Sun Hung Kai Properties, by up to 10% this year.Fortune REIT and Guangdong Investment were also trading at attractive valuations and dividend yields, said Daniel Fitzgerald, portfolio manager at Martin Currie, a specialist investment manager at Franklin Templeton. Fortune REIT is trading at 54% discount to its net asset value. Guangdong Investment offers a dividend yield of more than 6.9%, higher than the industry median of 4%.”We remain positive on Hong Kong and many of its listed real asset companies, across infrastructure, utilities and property,” said Fitzgerald. “We see no reason why they could not get back to where they traded, given the re-opening of the economy.” More

The barometer, aimed at helping firms with compliance planning, also tracks the scale of the divergence between UK and EU regulations, with KPMG saying the biggest differences are in areas like customer protection and access to markets.”As the UK forges ahead with new approaches post-Brexit, and regulators consider their new competitiveness objectives, firms will likely need to adapt to an increasingly different set of requirements in the UK versus Europe,” Kate Dawson, a director at KPMG’s regulatory insight centre, said.”The volume of emerging requirements for ESG and Sustainable Finance may lead to further divergence despite global standard-setters’ best efforts,” she said.The first update of KPMG’s biannual measure of upcoming regulatory demands on finance rose slightly to 7, on a scale of 1 to 10, from 6.9 at its launch last October, as sustainability disclosure requirements and related rules on data, ratings, product labels and carbon markets are rolled out or due to be proposed in the EU and Britain.Tougher resilience requirements come second as regulators apply lessons from the COVID-19 crisis, cyber attacks, glitches at external tech suppliers and the impact of Russia’s invasion of Ukraine on energy markets.Britain rolls out its new “consumer duty” in July, a landmark toughening up of protections on financial products.The Edinburgh Reforms, which reopen 43 sets of rules inherited from the EU to help the City of London remain globally competitive post-Brexit, create significant potential for further divergence, KPMG said.Being aligned with EU rules would be a pre-condition for Britain if it wanted to regain access to the bloc’s financial market. Britain has said it wants to tailor some rules inherited from the EU to better fit into UK markets, while maintaining high international standards. More

LONDON (Reuters) – British employers expect to raise wages for their staff by the most in at least 11 years but the 5% pay deals for workers would still fall well below expected inflation, a survey published on Monday showed.With the Bank of England fearing the surge in inflation could be harder to tame if pay deals keep rising, the Chartered Institute of Personnel Development (CIPD) said 55% of recruiters planned to lift base or variable pay this year as they struggle to hire and retain staff in Britain’s tight labour market. Expected median annual pay awards in 2023 rose to 5% – the highest since CIPD records began in 2012 – from 4% in the previous three months. More than half of respondents reported having problems filling vacancies, and nearly one in three expected similar issues in the next six months.”Skills and labour remain scarce in the face of a labour market which continues to be surprisingly buoyant given the economic backdrop of rising inflation and the associated cost-of-living crisis,” Jon Boys, senior labour market economist at the CIPD, said.The survey also showed the gap between public and private employers’ wage expectations widened. Planned pay settlements in the public sector fell to 2% from 3% in the quarter before, compared to 5% in the private sector, the CIPD said. The results highlighted the squeeze on living standards as key workers including nurses, teachers and public transport staff stage a series of strikes over pay and work conditions. BoE Governor Andrew Bailey last week expressed concerns about wage-setting, despite signs that the surge in inflation has turned a corner.Annual inflation fell to 10.5% in December after hitting a 41-year high of 11.1% in October. Bailey signalled inflationary pressures were still a worry despite the BoE raising interest rates to the highest since 2008 this month.The quarterly survey showed recruiters were more willing to hire people returning to the workforce, including older workers and those with health conditions. The CIPD surveyed 2,012 employers between Jan. 3 and Jan. 25. More