Economy

The interim government’s move was seen as a bid to revive a $6 billion bailout from the International Monetary Fund.ISLAMABAD, Pakistan — Pakistan’s government on Friday sharply increased fuel prices for consumers, paving the way to revive a $6 billion bailout package from the International Monetary Fund and stabilize the country’s cratering economy amid deepening political turmoil.The move raising gasoline and diesel prices by about 20 percent — or about 15 cents — a liter staved off concerns that Pakistan, which already faces double-digit inflation, would join a wave of global defaults as the financial shocks from the pandemic, the war in Ukraine and rising interest rates batter many poorer nations.But the decision may cost the new coalition government popular support, analysts say, adding to the political uncertainty that has embroiled the country since Prime Minister Imran Khan was ousted in a no-confidence vote in Parliament early last month.“The price hike signals that the government has decided to bite the bullet and make choices that are necessary, even if they cost near-term political capital,” said Uzair Younus, the director of the Pakistan Initiative at the Atlantic Council. “The hike will ease markets and reduce uncertainty. It will be critical for the government to maintain momentum and continue making decisions that get Pakistan out of the current crisis.”Since his ouster, Mr. Khan has held a series of political rallies, drawing huge crowds and heavily criticizing the current coalition government and the military, blaming them for his removal from office. Some officials now fear that the government’s move to appease the I.M.F. could hand Mr. Khan a wave of public outrage that he could manipulate on the streets.Former Prime Minister Imran Khan, at top center in dark vest, leading an antigovernment rally in Islamabad on Thursday.Aamir Qureshi/Agence France-Presse — Getty ImagesDiscussions between the I.M.F. and the new interim government, led by Shehbaz Sharif, had been deadlocked for weeks over the terms of reviving the bailout, which was announced in 2019 and later suspended after Pakistan’s previous government failed to meet some loan conditions, like cutting energy subsidies.Pakistan has hoped for a release of a roughly $900 million seventh tranche of the $6 billion I.M.F. bailout package. Earlier this week, a fresh round of talks between the I.M.F. and the new Pakistani government in Doha, Qatar, appeared to fail after fund officials declined to accept the Pakistani request to delay the ending of government subsidies.Mr. Sharif had been reluctant to end government energy subsidies and roll back unfunded subsidies to oil and power sectors — a key I.M.F. demand — fearing public backlash that could diminish his party’s chance of success in the next general elections.Those elections are scheduled to be held next year, but the new government has come under mounting public pressure from Mr. Khan’s supporters to hold them earlier.On Thursday, Mr. Khan warned the government to announce the next elections and dissolve Parliament within six days. The warning came just after he led thousands of supporters to the capital Wednesday evening. Angry supporters clashed with the police in the capital and several other Pakistani cities. At least 1,700 protesters were arrested by the police in Punjab, the country’s most populous province.That political pressure has added to the new government’s reluctance to embark on meaningful economic reforms that, while important to stabilize the economy in the years to come, would cause immediate pain to Pakistanis’ wallets, analysts say.The interim government, led by Shehbaz Sharif, center, has been deadlocked in talks with the International Monetary Fund.Saiyna Bashir for The New York TimesLate Thursday night, drivers desperate to fill their tanks before the price increase went into effect after midnight flocked to gas stations across major cities. Many drivers’ incomes have already been squeezed by soaring inflation in recent years that has pushed up the price of basic goods.“There is no rise in our income proportional to the rise in the price of fuel and other essential items,” said Saleem Khan, 44, as he waited to fill his motorcycle’s tank at a gas station in the port city of Karachi.Mr. Khan makes around 18,000 rupees, or about $90, a month working in a restaurant in the city. In previous months, he could send nearly 10,000 rupees every month to his relatives in Bajaur, a tribal district bordering Afghanistan.“This month, it seems I’ll be able to send barely 7,000 rupees to my family,” he said.Nearby, Rasheed Ahmed, a garment factory worker, sat on his motorcycle, worrying how he would pay for basics like food and rent with the fuel price increase.“We thought the ousting of Imran Khan will help the country in decreasing the fuel prices, but the current rulers are crueler than the previous government,” Mr. Ahmed, 34, said.The new coalition government has struggled to find its bearings since coming to power in early April and is in a particularly precarious position. It has no electoral mandate, but was chosen by Parliament to take over after Mr. Khan’s ouster. And it is a tenuous coalition of political parties that previously clashed frequently and only came together around the singular aim of removing Mr. Khan from office. Mr. Sharif’s party also faces internal divisions over policy decisions.A market in Islamabad last month. Many Pakistanis are worried about their ability to afford basic necessities as inflation rises.Saiyna Bashir for The New York TimesMr. Khan’s government, before its removal from office, was also facing increasing public discontent over rising inflation. Mr. Khan claims that the economy was improving under his government, but in order to soothe the public’s flaring tempers, he announced he was cutting petroleum and energy prices — a move that eased public discontent but added to the country’s fiscal deficit.Understand the Political and Economic Turmoil in PakistanCard 1 of 5A chaotic time. More

Boris Johnson started the week of his political “reset” surveying the cabinet table and noting that most of his ministers were too young to remember the economic pain of the UK in the 1970s.Johnson said he was determined to avoid a repeat of that decade’s stagflation and high unemployment — but his comments were a reminder that he is plotting a comeback in the teeth of an economic storm.He emerges from a decisive week in a less precarious position than many had expected, even if the bar for success — to paraphrase Labour leader Sir Keir Starmer this week — had been set “lower than a snake’s belly”.Johnson’s allies were relieved that “only” four more Tory MPs initially called for the prime minister to quit following Sue Gray’s damning account of a culture of drinking and pandemic lawbreaking in Downing Street, although criticism grew during the course of Friday.A snap YouGov poll found that 59 per cent of people believed that the prime minister should quit, with just 30 per cent stating he should remain in his role. But one former cabinet member said: “He will never quit.”Meanwhile, Chancellor Rishi Sunak’s £15bn rescue package for households struggling with spiralling energy bills — part-funded by an energy windfall tax Johnson once strongly opposed — bought the prime minister some breathing space.“You didn’t need a focus group to tell you it would land well,” said one Johnson ally. “It was a really good example of proper, grown-up politics.”The Resolution Foundation think-tank said the measures to deal with rising energy bills were “well targeted” and were now “highly progressive”; Sunak had belatedly addressed the real pain facing the poorest in society.The £400 grant to all households showed he had not lost sight of wealthier Tory voters, some of whom — like Sunak — own more than one home and will enjoy multiple payments. Sunak said he would give his to charity.Johnson had initially opposed the windfall tax plan, originally proposed by the opposition Labour party, arguing that he would be incurring a lot of political pain — notably from rightwing Tory MPs — to secure only £2bn in extra revenue.Kwasi Kwarteng, business secretary, Liz Truss, foreign secretary, and Jacob Rees-Mogg, Cabinet Office minister, were among those arguing the chancellor should cut taxes, not put them up.It was only when Sunak reassured the prime minister that a windfall tax on North Sea oil and gas companies could raise £5bn this year — and that he could extract a further £3bn-£4bn from “the extraordinary profits” of electricity generators — that Johnson endorsed the plan.“The gain had to be worth the pain,” said one ally of the prime minister. Sunak now has a lucrative new tax revenue stream until December 2025, at which point his “energy profits levy” will expire.The fiscal details are important because the promise of tax cuts are Johnson and Sunak’s best hope of keeping restive Tory MPs on board and offering a brighter future to voters at the next election, expected in 2024.Sunak on Friday argued that raising money from energy companies was a “pragmatic” way to fund at least part of his £15bn spending package while making only a “minimal” impact on inflation.The chancellor has baked into his figures £30bn of “headroom” in election year: the leeway would still allow him to meet his fiscal rules and show he was bringing borrowing under control.Tory MPs are now eyeing that war chest and will be putting huge pressure on Sunak to use his autumn Budget to start cutting income tax.However, the chancellor, whose damaged reputation has been partly repaired by the well-received energy package, may want to deliver but will fret about the danger of pouring fuel on the inflationary fire.

In the meantime, he indicated on Friday that he stood ready to spend more to help people further if the cost of living crunch intensifies further. “I’ve always been prepared to respond to the situation on the ground, what’s happening to the economy,” he said.Johnson’s political breathing space could be short lived, however. Next month the Conservatives will seek to defend seats in two by-elections and voters could be withering in their verdict of his recent performance.Bookmakers make Labour odds-on favourites to win the “red wall” seat of Wakefield, while the Liberal Democrats are odds-on to overturn a Tory 24,000 majority in the “blue wall” of Tiverton and Honiton.“There’s much concern about the PM,” said one west country Conservative MP, a sign that Johnson may have survived the week, but disquiet over his performance has not gone away. More

(Reuters) – Russia’s central bank on Friday authorised Russian residents to buy shares in companies from “friendly” countries, provided the transactions were denominated in roubles or the currency of the foreign country.In a statement, the central bank said it was lifting some of the restrictions on overseas investments, which were imposed after Russia began what it calls “a special military” operation in Ukraine on Feb. 24. More

The White House plan would apply to Americans who earned less than $150,000 in the previous year, or less than $300,000 for married couples filing jointly, two of the people told the Post. The current government pause in student interest and payments due to COVID-19 expires at the end of August. It was not clear if the administration planned to resume payment requirement then.The sources, who were not identified, told the newspaper that details could change. Biden had hoped to make the announcement at the University of Delaware commencement this weekend, the people told the Post, but those plans changed after Tuesday’s massacre of elementary school children in Texas.According to a study by New York Federal Reserve economists, forgiving $10,000 per student would amount to $321 billion of federal student loans and eliminate the entire balance for 11.8 million borrowers, or 31 percent. Student debt cancellation has become a priority for many liberals and one that could shore up popularity with younger and more highly educated voters, who lean Democratic, before November’s midterm congressional elections.But the Biden administration has been reluctant to unilaterally make an unprecedented cancellation of college debt owned by the U.S. government, a move that would test his legal authority.Instead, Biden has asked Congress to pass a bill forgiving debt that he could sign.The federal government has let 43 million borrowers stop paying on a total of $1.6 trillion in student loans since the onset of the COVID-19 pandemic in 2020.”I am considering dealing with some debt reduction,” Biden told reporters on April 28. He said he was not considering the $50,000 debt reduction that some progressive Democrats have embraced. More

Siluanov said Russia had earmarked 8 trillion roubles ($123 billion) of stimulus to support the economy in the current circumstances. “(These are) huge amounts of money. We need these resources to support the economy, to support our citizens,” Siluanov told a university audience.Russia sent tens of thousands of troops into Ukraine on Feb. 24, triggering a barrage of Western sanctions.($1 = 64.8100 roubles) More

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.9% last month, the Commerce Department said Friday. Data for March was revised higher to show outlays racing 1.4% instead of 1.1% as previously reported.Economists polled by Reuters had forecast consumer spending gaining 0.7%. Spending is being supported by strong wage gains, with companies scrambling to fill a record 11.5 million job openings as of the end of March.The Federal Reserve’s hawkish monetary policy stance as it fights to quell high inflation and bring it back to its 2% target has fanned worries of a recession, sparking an equities sell-off and surge in U.S. Treasury yields and the dollar. Fears of an economic downturn have also been exacerbated by Russia’s dragging war against Ukraine as well as China’s zero COVID-19 policy, which have further entangled supply chains. The U.S. central bank has raised its policy interest rate by 75 basis points since March. The Fed is expected to hike the overnight rate by half a percentage point at each of its next meetings in June and July.Growth estimates for the second quarter are mostly above a 2.0 annualized rate. The economy contracted at a 1.5% pace in the January-March quarter, weighed down a record trade deficit and slower inventory accumulation relative to the fourth-quarter’s robust rate. Although inflation continued to increase in April, it was not at same magnitude as in recent months. The personal consumption expenditures (PCE) price index gained 0.2% last month after shooting up 0.9% in March. In the 12 months through April, the PCE price index advanced 6.3% after jumping 6.6% in March.The annual PCE price index increase is slowing as last year’s large gains drop out of the calculation. Excluding the volatile food and energy components, the PCE price index gained 0.3%, rising by the same margin for three straight months. The so-called core PCE price index increased 4.9% year-on-year in April after rising 5.2% in March. It was the second straight month that the rate of increase in the annual core PCE price index decelerated. More

An important measure of consumer prices showed that inflation slowed in April, but remained close to a four-decade high.The Personal Consumption Expenditures price index rose 0.2 percent last month from March and was up 6.3 percent from a year earlier, the Commerce Department said Friday. That is down from a 6.6 percent annual increase in March, which represented the fastest pace of inflation since 1982.Economists and investors closely watch the index, an alternative to the better-known Consumer Price Index, because the Federal Reserve prefers it as a measure of inflation. The central bank has been raising interest rates and announced that it will begin paring asset purchases in a bid to cool the economy and tame inflation.The slowdown in inflation in April was largely the result of a drop in the price of gasoline and other energy sources. Gas prices soared in February and March largely because of Russia’s invasion of Ukraine, then moderated somewhat in April. They have risen again in recent weeks, however, which could push measures of inflation back up in May. Food prices have also been rising quickly in recent months, a pattern that continued in April.Stripping out the volatile food and fuel categories, consumer prices were up 4.9 percent in April from a year earlier. That core measure, which some economists view as a more reliable guide to the underlying rate of inflation, was up 0.3 percent from a month earlier, little changed from the rate of increase in March.The comparatively tame increase in core prices in the data released Friday stood in contrast to the sharp acceleration in the equivalent measure in the Consumer Price Index report released by the Labor Department this month. The divergence was mostly the result of differences in the way the two measures count airline fares, however, and economists said the Fed was unlikely to take much comfort from the Commerce Department data.“My suspicion is they will probably look through the slowdown,” said Omair Sharif, the founder of the research firm Inflation Insights. He noted that the core index also slowed last fall, only to pick up again at the end of the year, catching the Fed off guard.Many forecasters believe that the headline inflation rate peaked in March and that April marked the beginning of a gradual cool-down. But the recent rebound in gas prices is threatening to complicate that picture. And even if inflation continues to ebb, prices are still rising far more quickly than the Fed’s target of 2 percent over time.“For the past year, inflation has been high and rising and we’re at a point now where it’s high and falling,” said Tim Quinlan, a senior economist at Wells Fargo.The public, Mr. Quinlan added, is unlikely to see the slight moderation in inflation as much to celebrate.“To them, the year over year growth in prices doesn’t matter,” he said. “It’s why does a crappy lunch cost $12 now?” More

(Reuters) – Russia will keep on paying its state Eurobond obligations in roubles and will defend its role as a reliable borrower by all possible means, Finance Minister Anton Siluanov said on Friday.The finance ministry said on Wednesday that Russia would service its external debt in roubles, which can be converted into the currency of the original Eurobonds at a later date. More