Economy

(Reuters) -Zambia won International Monetary Fund approval for a $1.3 billion, 38-month loan program on Wednesday, a crucial step in the southern African country’s quest to restructure its debts and rebuild an economy ravaged by mismanagement and COVID-19.The IMF said in a statement that the new Extended Credit Facility arrangement would provide total funding of 978.2 million Special Drawing Rights – about $1.3 billion at current exchange rates – equivalent to 100% of Zambia’s Fund quota, or shareholding.Approval by the IMF’s Executive Board will unlock an immediate disbursement of about $185 million, the Fund said.Zambia’s creditors led by China and France pledged in late July to negotiate a restructuring of the country’s debts, a move that IMF Managing Director Kristalina Georgieva had welcomed as “clearing the way” for the new Fund program.”Zambia continues to face profound challenges reflected in high poverty levels and low growth,” Georgieva said on Wednesday. “The ECF-supported program aims to restore macroeconomic stability and foster higher, more resilient, and more inclusive growth.”The IMF program aims to restore Zambia’s macroeconomic stability through fiscal adjustment and debt restructuring and strengthening economic governance.Georgieva said this would require “sustained” spending reductions and that Zambian authorities were appropriately focused on eliminating “regressive” fuel subsidies, reforming agricultural subsidies, reducing inefficient public investments and increasing tax revenues. This will free up some fiscal space to increase social spending to ease transition burdens on the most vulnerable, she said.The IMF said the loan also will catalyze much-needed financial support from development partners and donor countries.DEBT RESTRUCTURING ‘MILESTONE’In 2020, Zambia became the first African country in the pandemic era to default. The restructuring of its external debt, which amounted to more than $17 billion at the end of 2021, is seen by many analysts as a test case for the region.It is one of three African countries, along with Chad and Ethiopia, that have sought restructuring under a G20 common debt restructuring framework. The IMF had reached a staff-level agreement with Zambia last December for up to $1.4 billion loan, but it was contingent upon Zambia’s ability to reduce debt to levels the Fund deems sustainable.Georgieva said in a Twitter (NYSE:TWTR) message https://twitter.com/KGeorgieva/status/1565117265649061891 the Zambia loan approval was a “major milestone” for the long-stalled G20 effort, showing that it can deliver results for other debt-burdened countries.The Fund said the next step in the debt restructuring process was for Zambia’s official creditor committee to agree on specific steps on how to deliver debt relief, in the form of a memorandum of understanding to be reached by the end of 2022. More

Asian markets kick off the new month on Thursday, glad to see the back of a turbulent August but wary of what September holds.The driving forces last month – heavy selling in fixed income, rising global interest rate expectations, the looming energy crunch in Europe, and China’s deepening economic, energy, and financial problems – will not suddenly evaporate with the date change. Equity investors may look to start the month on the front foot and pick up some relative bargains, however, after the S&P 500 and world stocks both fell more than 4% in August. Bond investors may think the same – two-year German yields, for example, have been crushed lately, and the increase in yield last month was the steepest in 40 years.But Wednesday’s newsflow was not encouraging, particularly from Europe. Headline inflation in the euro zone rose to a record high of 9.1%, and economists at Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) now predict that the ECB will raise rates by a punchy 75 basis points in September.According to Goldman Sachs financial conditions indexes, financial conditions in China are their tightest since May, and the tightest in the United States in over a month and close to a new post-pandemic peak. Recession fears continue to push stocks and oil prices lower. Brent crude slumped around 12% in August, down for a third straight month. The corporate calendar in Asia is light on Wednesday, with PMIs from Australia, South Korea and Indonesia the most relevant economic indicators for markets.Key developments that should provide more direction to markets on Thursday: Australia housing loans (July)Australia capex (Q2)Australia PMI (Aug)Indonesia PMI (Aug)S Korea PMI (Aug)S Korea GDP (Q2 revised) More

Amid widespread staff shortages and a clamour from businesses to raise the country’s immigration intake, Albanese on Thursday said Australia would create 180,000 more fee-free seats for students looking to gain technical skills in a A$1.1 billion ($752 million) package.The recently-elected centre-left Labor government is hoping to find solutions for soaring inflation and the fall in real wages during the two-day meet, with Albanese saying “compromises will need to be negotiated, sacrifices will need to be made.”Even as Australian business groups and unions assembled at the national capital for the summit, Sydney, the country’s biggest city, is facing a protracted strike by train employees and protests by nurses seeking higher wages.Treasurer Jim Chalmers said the summit was being held at a “critical juncture” for the economy.”This summit is just one step – a major step, yes, but one step. Our expectations are tempered and realistic,” Chalmers said.The government will release the outcomes of the summit on Friday that will outline the immediate actions it would pursue.Despite Australia’s unemployment sitting at a near 50-year-low of 3.4%, the central bank sees inflation heading to three-decade highs requiring further hikes in interest rates that would sharply slow growth. Wages are also rising but not as fast as inflation.A blowout in visa processing times in Australia has left about a million prospective workers stuck in limbo, worsening the acute staff shortages.Businesses have been urging the government to raise the cap on annual immigration from 160,000. Chalmers said “that will be an important part of the conversation” during the summit.”There’s an appetite to lift that in a responsible way,” he said. “But (that) should never be a substitute for training Australians for opportunities here as well.”($1 = 1.4620 Australian dollars) More

The S&P Global (NYSE:SPGI) purchasing managers’ index (PMI) fell to a seasonally-adjusted 47.6 in August from 49.8 in July, remaining below the 50-mark that separates expansion from contraction in factory activity for a second month and hitting the lowest since July 2020.Output and new orders weakened by the sharpest since June 2020, while new export orders fell by the most since July 2020.”Firms often commented on concerns that the economy would continue to perform poorly amid weak demand and challenging global economic conditions,” said Usamah Bhatti, economist at S&P Global Market Intelligence.”The outlook for output over the coming year dimmed in August as concern that the economic slowdown would deepen grew among manufacturers, while businesses also noted the lingering impact of inflation and the war in Ukraine.”The weaker demand did however help ease price pressures. Input and output prices rose by the slowest rate in 19 and 18 months, respectively.There were also signs of improvement in supply chain snags. Suppliers’ delivery times, which show the degree of disruption, deteriorated, but by the least in 21 months, while the backlog of work decreased for the first time in 22 months, as firms were able to complete work in hand amid weak inflow of new orders.Manufacturers remained optimistic over the coming year for output, but the level of optimism was the weakest since October last year. More

That was slightly faster than a 0.6% growth in the first quarter but slower than 1.3% in the last quarter of 2021, according to the Bank of Korea data.By expenditure, private consumption advanced 2.9%, while construction and facilities investment grew 0.2% and 0.5%, respectively. Exports shrank 3.1%.The country’s gross domestic product expanded by 2.9% on a year-on-year basis, also unchanged from the earlier estimate. More

“Being president of the Dallas Fed and as a policymaker, our number one priority has to be to restore price stability,” Logan said on Wednesday in a virtual event held by the regional Fed bank to introduce her. The Fed is raising interest rates at a pace not seen since the 1980s to fight inflation that is running at a 40-year high.Logan was reflecting on the several days she spent last week attending a global central bankers’ conference in Jackson Hole, Wyoming, where Fed Chair Jerome Powell signaled he would raise U.S. borrowing costs as high as needed to cool price pressures, even as he acknowledged that doing so would bring “some pain” to households and businesses as growth slowed and the labor market softened. “The theme was very clear… the clear priority was bringing inflation down, because it’s having significant implications and hardships for businesses and households,” Logan said. “And that really lines up with my own priority.”Logan has only been running the Dallas Fed since Monday, but she is no stranger to the U.S. central bank, having most recently been in charge of the New York Fed desk that manages the Fed’s $8 trillion balance sheet and implements the Fed’s interest-rate decisions. In that role she has attended a number of Fed rate-setting meetings to brief policymakers about developments in the financial sector. On Sept. 20-21 she will attend for the first time as one of 19 Fed officials to discuss the state of the economy and make a decision on how much further to lift the policy rate, now targeted in a range of 2.25%-2.5%. Policymakers are expected to weigh at that meeting whether to deliver a third straight 75-basis point rate hike, or to downshift to a smaller half-point hike in light of recent data showing what Atlanta Fed President Raphael Bostic said was “glimmers” of good news in the inflation fight.Logan did not address anything specific as to how she is leaning as far as September’s decision, or the forward path of interest rates or even her economic outlook. “Our goal here at the Dallas Fed is building a stronger economy together,” she said several times during the half-hour program. More

TOKYO (Reuters) – When Riku Omori’s pay at his regular job was slashed by a third, he found temporary work delivering fried chicken and Thai food on his bike on the streets of Kawasaki, south of Tokyo, as a way to supplement his reduced earnings.The extra 100,000 yen ($722) 26-year-old Omori gets a month helps support his wife and newborn son, which would have been difficult on the 160,000 yen he takes home monthly from his main job at a moving services company.But it adds a level of financial uncertainty that makes week-to-week living in hard Japan, an affluent nation otherwise well regarded for its egalitarianism.”The main issue about being freelance is family worries. Your wage will go to nothing if there’s no work,” said Omori, adding that he would have preferred working for a single employer that guarantees a minimum income.Omori is among a hard-to-track group of people who take up freelance work to make ends meet, often doing jobs that fall outside the scope of the labour laws that guarantee a minimum wage and social security.This work ranges from meal delivery and reception work at discount hotels to music teaching, futon sales and toilet maintenance in a country where lifetime employment was once a norm.The emergence of the freelance class poses a challenge to Prime Minister Fumio Kishida who has pledged to redistribute wealth through wage hikes, which have up until now eluded Japan despite a chronic labour shortage.Japan’s most recent jobless rate of 2.6% in July was among the lowest in 38 member nations of the Organisation of Economic Cooperation Development (OECD), slightly above rates reported by Switzerland and Denmark recently.About 38% of the 57.1 million employed workers in the world’s third-largest economy were temporary employees, government data showed, who do not enjoy the same benefits as those on permanent contracts.CURBING COSTSAs the economy slows, firms are cutting costs by filling openings with low-paid or gig workers, instead of higher paid permanent employees, analysts and freelance workers say.”There will be more and more people who can’t get by on their wage even though they’re employed,” said Toshiaki Tsuchiya, 46, a founding member of a freelance labour union.More people will do side gigs that provide little of the security and stability that regular employment brings, added Tsuchiya, who earns about a fifth of his income delivering food in his extra hours.”They’ll have no choice but to work like workers.”Increasing low-paid jobs would depress overall domestic demand, said Shigeru Wakita, a professor emeritus of labour law at Ryukoku University in Kyoto.Wakita expects the number of people who struggled with serious job-related problems to rise due to the prevalence of gig work.”In reality, workers should be protected, but they aren’t treated as such,” he said, adding that Japan’s unions have failed to address the plight of non-regular workers.As part of its attempt to regulate the gig economy, the government has sought to estimate the number of people doing freelance jobs.There were 4.6 million people engaged in freelance work as their main job or on the side, according to a government survey from May 2020, which it also cited in its key annual policy framework released in June.About 63% of those were dissatisfied with their incomes, nearly double those who were “satisfied” or “extremely satisfied” with it, the survey showed.CHANGING NEEDSThe rise of gig work isn’t all gloom.Such work has become more common as demand for job flexibility increases, particularly among Japan’s elderly and housewives seeking to work part-time, analysts said.A government pledge to draw up a plan to increase the number of start-up firms 10-fold within the next five years may also lead to benefits – such a subsidies – for entrepreneurs choosing to work with freelancers, they said.”More people are working differently than before,” said Toru Suehiro, senior economist at Daiwa Securities.The government has said it would consider expanding the eligibility of social security to freelance and gig workers.It also pledged in June to set out laws clarifying contract terms between firms that work with freelance workers.A benefit of freelance work was that the income earned with it was likely to rise in line with skill, Omori said.”As a freelance worker, the more I work, the more I get paid when I do my best,” he said.($1 = 138.4300 yen) More

Britain’s energy crisis will put at risk the health of thousands of children this winter, public health experts have said, as separate research predicted the deepest squeeze on living standards in a century.Public health expert Professor Sir Michael Marmot warned of a looming “humanitarian crisis” and said many children would be affected by the respiratory impact of living in cold, damp housing, adding that more than half of households would be in fuel poverty in January.Marmot’s warning came as the Resolution Foundation think-tank on Thursday forecast that 3mn people would be pushed into absolute poverty by a 10 per cent drop in income this and next year. Energy regulator Ofgem last week announced that the average British household’s yearly energy bill would rise from £1,971 to £3,459 from October. The jump comes amid a wider and intensifying cost of living crisis driven by soaring inflation.In its report, the UCL Institute of Health Equity, which Marmot leads, said a failure by government to act would have “dangerous consequences” for children because of the way damp, cold air affects the development of organs, increasing the risk of conditions such as hypothermia. The IHE estimated that in 2020-21 10 per cent of excess winter deaths — which are higher in the UK than the northern European average — were the result of fuel poverty, and predicted that 55 per cent of households would be in fuel poverty by January, largely because of rising bills.Professor Ian Sinha, consultant respiratory paediatrician at Alder Hey Children’s Hospital in Liverpool and a co-author of the IHE report, said he had “no doubt” that children would die. He added that the hospital was spending £3,000 a time vaccinating babies for respiratory disease, “and yet we are going to send them home to the very circumstances which are going to make them ill in the first place”. The hospital had already set up a dedicated clinic to help parents whose housing was unfit because of the cold and damp, he said.In its report, the Resolution Foundation said soaring energy bills and double digit inflation would cause household disposable income to fall 5 per cent this year and by a similar amount in 2023. This drop in income of 10 per cent over two years — equivalent to £3,000 for the typical household — would equate to the deepest squeeze on living standards in a century.Lalitha Try, a researcher at the Resolution Foundation and co-author of its report, said “no responsible government could accept such an outlook” and called for “radical policy action”. “We are going to need an energy support package worth tens of billions of pounds, coupled with increasing benefits next year by October’s inflation rate,” she added. The think-tank predicted that 3mn more people would enter absolute poverty — which it defined as living on below 60 per cent of the median income after housing costs — over the next two years, taking the total to 14 million in 2023-24. It also forecast that child poverty would reach 33 per cent in 2026-27, the highest level since the 1990s. Among other measures, both reports recommended the introduction of a “social tariff” for energy bills targeted at those on low incomes. The government did not immediately respond to a request for comment. More