Economy

Finance minister Rishi Sunak announced a package of state-backed loans to energy providers and a rebate on local taxes in February to help soften the blow from a 54% hike in energy prices that comes into force in April.For the average household, prices will rise to 1,971 pounds ($2,600) a year in April, the same month that taxes rise, but with global gas prices continuing to surge, analysts have said that the regulatory price cap could increase by another 30%.The Sunday Times said the offices of Prime Minister Boris Johnson and Sunak had signalled that the state would step in to cover up to half of any increase in energy costs. “We’ve already looked at this and concluded that council tax is the best way to do it,” the Times quoted a source in the finance ministry as saying, referring to a local tax paid by households. “You’ve got an existing mechanism. You don’t need to set up a whole new system. It would make sense to do it like that again.”The Sun on Sunday also said Sunak was seeking to do more. “I know people are deeply anxious about making ends meet,” it quoted Sunak as saying. “While we can’t completely shield everyone from the global challenges we face, we can, and will, help you deal with these rising costs.”Britain’s education minister Nadhim Zahawi said on Sunday the government would continue to keep an eye on costs but noted that it had provided financial support throughout the pandemic. ($1 = 0.7583 pounds) More

Governments are risking a repeat of mistakes in previous food crises by imposing export controls amid spiralling commodity and energy prices, the head of the World Trade Organization has said.In an interview with the Financial Times, Ngozi Okonjo-Iweala, who became WTO director-general a year ago, also urged countries to accept a contentious deal over patent waivers for Covid-19 vaccines and said the global supply chain crunch would last much longer than previously thought.Okonjo-Iweala’s tenure has been marked by successive Covid-19 waves shutting down production and transport, severe congestion in land and sea container traffic, and a rupturing of global energy and food markets caused by the Ukraine war. “I do hope we have learned something” from the previous global food crisis in 2007-2008, Okonjo-Iweala said, referring to a period in which problems were caused by droughts in key wheat and rice-producing countries, along with a surge in the cost of energy. “The signs we see now don’t show that learning very much, because we’re having the same situation of spiking food prices, spiking energy prices and an emerging spiral.”“We should try not to compound the issues by having export restrictions put in place that may encourage others to put on their own export restrictions,” she said. Governments with surplus stocks in products like vegetable oils and grains should release them on world markets, she said, although she declined to name specific countries.Okonjo-Iweala, formerly Nigerian finance minister and World Bank managing director, said only around 12 WTO member countries had so far imposed export restrictions to keep food at home, which they are permitted to do under a loophole in WTO rules. The Ukraine war has put intense stress on the WTO as a negotiating forum, as divisions between Russia and a coalition of mainly rich governments supporting Ukraine have spilled over into talks. Those governments have issued a statement in the WTO denouncing Moscow, blocked Belarus’s application to join the institution and withdrawn so-called “most-favoured nation” status for Russia, enabling them to impose higher tariffs on Russian goods than on other members of the organisation. Okonjo-Iweala said that governments withdrawing most favoured nation status were acting within their rights. “It’s something we obviously don’t encourage, but under the WTO rules it is something that can be done,” she said. Members had worked out ways to continue negotiating despite what she described as “a very delicate situation”.In one positive development, governments are on the brink of a breakthrough agreement to waive patent protection for Covid-19 vaccines under WTO rules, in order to ease production in developing countries. The draft deal — agreed by a core negotiating group of the EU, US, India and South Africa — has been criticised by pharmaceutical companies for trampling on intellectual property (IP) rights and by health campaigners for being too narrow. The proposal will be put to the entire WTO membership for approval, which requires unanimous support.“I think we must move because this is a workable solution,” Okonjo-Iweala said. “We have to remember the WTO is a negotiating forum. It’s not a diktat forum. It’s not a place where one party can come and say: ‘this is what I want, just give it to me’.”

The draft agreement came despite a stark difference between the sweeping suspension of IP initially demanded by South Africa and particularly India and the much more limited approach pushed by the EU. “The ministers really must be commended for having devoted the necessary time to this,” she said. “They negotiated and tried to get a framework which they are not forcing on anybody. They’re just saying this might be a basis on which we might proceed.”The other big issue the WTO is trying to address is the snarl-up in global supply chains. Congestion, particularly at US west coast ports, started in 2021 after a huge surge in demand for consumer durables. It was prolonged by the Omicron coronavirus variant interrupting production and transport, particularly in China. The war in Ukraine has worsened the situation by blocking trade routes and depriving shipping lines of Ukrainian and Russian seafarers.Last year Okonjo-Iweala was initially optimistic that the supply chain problems would resolve themselves quickly, but said that she had become progressively gloomier about deep-seated issues. Earlier this month she convened a summit of CEOs from shipping, logistics and trading companies. “After listening to [the CEOs], I think that there are more structural problems, which might mean that some of this may stretch out for some time,” she said.“It’s not just port congestion. It’s problems on land. They said we don’t have enough warehousing, we don’t have enough truck drivers. This is no longer an attractive job for many young people.” The drive towards net zero carbon emissions had also strained the system by requiring different ships which affected the amount of cargo that could be carried, she said. More

The government has recently come under pressure to cut fuel excise as petrol prices hit an eight-year high, while Prime Minister Scott Morrison lags in the polls in the lead up to the election, due in May.Asked by Nine Entertainment if the government would announce in Tuesday’s budget a cut to the 44.2 cents a litre fuel excise, Frydenberg said he understood a key concern for Australians was petrol prices.”What we will do on Tuesday night is provide relief for those families recognising that fuel costs are very high right now,” he told the broadcaster.Frydenberg would not be drawn on individual budget measures the government would take on petrol, but said it recognised bowser prices had lifted due to rising global oil prices.As global oil prices soar due to the boarder impact of war in Ukraine, petrol recently hit A$2.20 a litre in several Australian cities.”A barrel of oil is up by 50% since the start of the year. That’s flowing through to the bowser here at home. We recognise that pressure,” Frydenberg said.He said Tuesday’s budget would mark a very significant material improvement to the government’s bottom line, but refused to project whether a budget surplus would be recorded in the next decade.Prime Minister Scott Morrison echoed Frydenberg’s comments, telling reporters in Western Australia the budget would deal with cost of living pressures being felt by Australians.”Because of what we’re seeing in Ukraine, the impacts on fuel prices, we know that this is biting,” he said. Labor treasury spokesman Jim Chalmers said the federal opposition wanted cost of living relief in the budget that secured a better future for Australians, including on petrol.”Petrol is a big part of the story as everybody knows,” he told ABC television.The government will hope the budget bolsters its support after the latest Newspoll showed Labor leading the coalition of Liberal and National parties. More

For weeks Chinese officials and analysts have endorsed Russia’s claims that Nato’s expansion in Europe triggered its invasion of Ukraine. Now they are pointing to a new spectre to justify their support of Russia’s war: an “Indo-Pacific Nato” that could ultimately force China to decouple from the west and achieve self-sufficiency in everything from food to semiconductors. Ever since Xi Jinping and Joe Biden refused to budge from their opposing assessments of the conflict during a two-hour phone call on March 18, Chinese diplomats have gone on a rhetorical offensive, arguing that US-led alliances are as much a threat to Beijing as they are to Moscow.Most of their ire is directed at the “free and open Indo-Pacific” strategy Biden inherited from Donald Trump, which seeks to bind the US, Japan, Australia and India in a united front against China.“Nato has kept strengthening and expanding, and intervened militarily in countries like Yugoslavia, Iraq, Syria and Afghanistan,” Le Yucheng, vice-foreign minister, said a day after the presidents’ call. “The Indo-Pacific strategy is as dangerous as the Nato strategy of eastward expansion in Europe,” he added. “If allowed to go unchecked, it would bring unimaginable consequences and ultimately push the Asia-Pacific [region] over the edge of an abyss.”Indian foreign minister S. Jaishankar’s and his Chinese counterpart Wang Yi greet media before their meeting in New Delhi on March 25 © Indian Foreign Minister S. Jaishankar/Twitter/APIn an attempt to counter Biden’s “real goal” of establishing “an Indo-Pacific version of Nato”, Le’s boss, foreign minister Wang Yi, met his Indian counterpart in New Delhi on Friday. On Tuesday Wang addressed the Organisation of Islamic Cooperation in Islamabad, where he touted $400bn in Chinese-led projects across 54 Islamic countries. China, India and Pakistan, which have a combined population of 3bn, all abstained on the UN resolution condemning Russia’s invasion of Ukraine. Alicia García Herrero, Asia-Pacific chief economist at French investment bank Natixis, said that as the Ukraine crisis drove the US and EU closer together, China was seeking to complement its Russian partnership with stronger economic and diplomatic ties to large countries across the developing world and resource-rich nations in the Middle East. While the US and EU are trying to push China into a corner, she said “China has taken and enlarged that corner . . . China is building this sphere of influence which makes its self-reliance [strategy] much more credible”. Ni Lexiong, an independent military analyst in Shanghai, said China needed to adopt a long-term perspective when making assessments about the situation in Ukraine and its relationship with Russia. “If we don’t [handle the Ukraine crisis] right, 30 years from now the west will treat China the same way it is treating Russia,” Ni said.Chinese officials increasingly worry that such treatment could include wide-ranging sanctions similar to those imposed by the US and EU on Russia. In that event, they argued, China would need Russia’s support as much as Russia now needed China’s support. Hu Xijin, former editor of the Chinese nationalist Global Times newspaper, said that Xi’s “no-limits” partnership with Putin would serve China well in any “strategic showdown” with the US over Taiwan or a similar flashpoint. “With Russia as a partner, if the US carries out maximum strategic coercion against China, China won’t be afraid of [a] US energy blockade, and our food supply will be secure,” he wrote in a recent column. “So will [our supply of] other raw materials“We must constantly boost our own strength to make the US feel that having a conflict with China is more and more unbearable. Russia is China’s most crucial partner to achieve this goal.”Russia, however, will be of little help to China in securing supplies of high-tech components vital to its vast manufacturing base, such as semiconductors as well as the largely western machinery and software needed to make them. Dan Wang at Gavekal Dragonomics, a Beijing-based consultancy, noted that if China ever faced sanctions similar to those imposed on Russia, “they would be devastating for China’s ability to remain a manufacturing superpower”.

As result, argues Andrew Gilholm at Control Risks, a consultancy, Xi must pursue “decoupling on China’s terms”. That will entail securing, with Russia’s help, food and energy supplies while avoiding US sanctions on technology, finance and other areas where it is still dependent on the west. “The idea was always to build up China’s diversification and self-reliance as fast as possible,” Gilholm said. But after Russia’s invasion of Ukraine “the motivation has gone to another level: this now must be seen almost as a national security issue, and an existential one at that”.China rescinded phytosanitary restrictions on Russian wheat exports on February 24, the same day that Putin’s troops invaded Ukraine, and can now congratulate itself for having resisted US demands for reforms of its state-led agriculture sector during the two countries’ trade war in 2018 — 19.“Beijing probably feels very validated in their approach,” said Darin Friedrichs at Sitonia Consulting, an agriculture consultancy in Shanghai. “They have kept a high level of state control and stockpiles.“And now, while a lot of other countries are scrambling for supplies, they are relatively insulated,” he added. “Those policies were pretty successful and meant for a time like this.”Additional reporting by Emma Zhou in Beijing More

The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their full income, as well as unrealized gains in the value of liquid assets like stocks.WASHINGTON — The White House will ask Congress on Monday to pass a new minimum tax on billionaires as part of a budget proposal intended to revitalize President Biden’s domestic agenda and reduce the deficit.The tax would require that American households worth more than $100 million pay a rate of at least 20 percent on their full income, as well as unrealized gains in the value of their liquid assets, such as stocks, bonds and cash, which can accumulate value for years but are taxed only when they are sold.Mr. Biden’s proposal to impose a tax on billionaires is the first time he has explicitly called for a wealth tax. While many in his party have advocated taxes that target an individual’s wealth — not just income — Mr. Biden has largely steered clear of such proposals in favor of increasing the top marginal income tax rate, imposing a higher tax on capital gains and estates, and raising taxes on corporations.The “Billionaire Minimum Income Tax” would apply only to the top one-hundredth of 1 percent of American households, and over half of the revenue would come from those worth more than $1 billion. Those already paying more than 20 percent would not owe any additional taxes, although those paying below that level would have to pay the difference between their current tax rate and the new 20 percent rate.The payments of Mr. Biden’s minimum tax would also count toward the tax that billionaires would eventually need to pay on unrealized income from assets that are taxed only when they are sold for a profit.The tax proposal will be part of the Biden administration’s budget request for the next fiscal year, which the White House plans to release on Monday. In a document outlining the minimum tax, the White House called it “a prepayment of tax obligations these households will owe when they later realize their gains.”“This approach means that the very wealthiest Americans pay taxes as they go, just like everyone else,” the document said.As the administration grapples with worries over rising inflation, the White House also released a separate document on Saturday saying that Mr. Biden’s budget proposal would cut federal deficits by a total of more than $1 trillion over the next decade.The idea of imposing a wealth tax has gained traction since Mr. Biden was elected as Democrats have looked for ways to fund their sweeping climate and social policy agenda and ensure that the wealthiest Americans are paying their fair share.Senator Elizabeth Warren, Democrat of Massachusetts, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, released separate proposals last year that would tax the wealthiest, albeit in different ways. Ms. Warren had championed the idea of a wealth tax in her unsuccessful presidential campaign.The decision by the administration to call for a wealth tax also reflects political realities over how to finance Mr. Biden’s economic agenda.Moderate Democrats, including Senator Kyrsten Sinema of Arizona, have balked at raising the corporate tax rate or lifting the top marginal income tax rate to 39.6 percent from 37 percent, leaving the party with few options to raise revenue.Still, Senator Joe Manchin III, Democrat of West Virginia, slammed the idea of taxing billionaires after Mr. Wyden’s proposal to do so was released, although Mr. Manchin has since suggested he could support some type of billionaires’ tax.Legal questions about such a tax also abound, particularly whether a tax on wealth — rather than income — is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could mount a legal challenge to the effort. More

Biden’s “Billionaire Minimum Income Tax” would set a 20% minimum tax rate on households worth more than $100 million, in a plan that would mostly target the United States’ more than 700 billionaires, according to a White House fact sheet released on Saturday.The plan would require such households to pay the minimum tax of 20% on all of their income including unrealized investment income that is now untaxed, the fact sheet said.The tax will help reduce the budget deficit by about $360 billion in the next decade, the fact sheet added.Senate Democrats last autumn had proposed a billionaires tax to help pay for Biden’s social and climate-change known as “Build Back Better” although the spending package did not move forward due to insufficient support in the Senate. More

“Incoming data don’t point to a material risk of stagflation,” Lagarde said in an interview with Phileleftheros published by the ECB on its website. Lagarde said growth in the euro area could be as low as 2.3% in a severe scenario due to the war in 2022, however in all scenarios inflation is expected to decrease and settle at levels around the bank’s 2% target in 2024. More

JOHANNESBURG (Reuters) – The African Development Bank (AfDB) is aiming to raise $1 billion to rapidly ramp up agricultural production in Africa and stave off a potential food crisis brought on by Russia’s invasion of Ukraine, its president told Reuters on Friday.But the war, which has sent commodities prices soaring, is also an opportunity for the continent to position itself as a natural gas supplier for Europe and a refuge for investors fleeing Russia.During the coronavirus pandemic, Africa has not seen infection rates and deaths on the same levels as many more developed regions. Its economies, however, have been battered and its rebound has proven sluggish. Like much of the world, African nations are staring at rapidly rising consumer prices, with the war in Ukraine endangering global wheat and corn supplies and sending fuel prices soaring.”Already, coming out of COVID we have 24 million people that are falling further into extreme poverty, and that’s going to worsen the situation,” Akinwumi Adesina said in an interview.To avoid a food crisis, he said the AfDB was planning to launch an emergency food production plan that would focus on rapidly boosting wheat, maize, rice and soybean output on the continent.”The plan is to produce roughly 30 million metric tonnes of food and to get technology into the hands of 20 million farmers. So you’re looking at big scale with small-holder farmers,” he said.The International Monetary Fund (IMF) had already voiced its support to help implement the plan, which will produce food staples worth $12 billion, Adesina said.The bank plans to raise $1 billion needed to fund the initiative from various emergency support facilities, concessional financing and from the IMF’s proposed $50 billion resilient sustainability fund.”When COVID struck, we were not ready. But this time, we’re fully ready,” he said.ALTERNATIVE TO RUSSIAWhile Adesina decried the war’s impact on Ukraine and its people, he recognised that the conflict and the geopolitical shifts it has sparked could play to Africa’s favour in some areas.”The biggest challenge Europe has is securing its energy supply,” he said. “Europe needs to look, and it’s looking, for alternative supplies of gas. Africa can be that place.”Africa boasts a host of major oil and gas producers, including Algeria, Nigeria and Angola. And new offshore gas discoveries – the viability of which had been questioned due to the global shift to renewables – could now become critical to Europe’s energy security as it weans itself off Russian supplies. France’s TotalEnergies along with US firm Exxon Mobil (NYSE:XOM) and Portugal’s Galp are currently developing projects to exploit Mozambique’s estimated 100 trillion cubic feet of gas reserves and make it a major liquefied natural gas player.Africa is meanwhile ready to welcome investors currently pulling out of Russia, Adesina said. “There are a lot of investors that are going to be diversifying out of Russia, of course … That’s a real opportunity, I think, for Africa at this point in time.” More