Economy

WASHINGTON (Reuters) -Russia may default on its debts in the wake of unprecedented sanctions over its invasion of Ukraine, but that would not trigger a global financial crisis, International Monetary Fund Managing Director Kristalina Georgieva said on Sunday.Georgieva told CBS’s “Face the Nation” program that sanctions imposed by the United States and other democracies were already having a “severe” impact on the Russian economy and would trigger a deep recession there this year.The war and the sanctions would also have significant spillover effects on neighboring countries that depended on Russian energy supplies, and had already resulted in a wave of refugees compared to that seen during World War Two, she said.Russia calls its actions in Ukraine a “special operation.”The sanctions were also limiting Russia’s ability to access its resources and service its debts, which meant a default was no longer viewed as “improbable,” Georgieva said.Asked if such a default could trigger a financial crisis around the world, she said, “For now, no.”The total exposure of banks to Russia amounted to around $120 billion, an amount that while not insignificant, was “not systemically relevant,” she said.Asked if Russia could access the $1.4 billion in emergency IMF funding approved for Ukraine last week if Moscow won the war and installed a new government, Georgieva said the funds were in a special account accessible only by the Ukrainian government.An IMF official said that referred to the “internationally recognized government of Ukraine.”The IMF last year blocked access to Afghanistan’s funds by the Taliban after they seized control of the government, citing lack of clarity over recognition of the Taliban rulers within the international community.Georgieva last week said the IMF would downgrade its previous forecast for 4.4% global economic growth in 2022 as a result of the war, but said the overall trajectory remained positive.Growth remained robust in countries like the United States that had been fast to recover from COVID-19 pandemic, she told CBS.The impact would be most severe in terms of driving up commodity prices and inflation, potentially leading to hunger and food insecurity in parts of Africa, she said. More

Hello and welcome to the working week.The northern hemisphere is heading towards the spring equinox next weekend with longer days and warmer temperatures to lift the spirits. And goodness knows we need it. So how about a week for alliances?Firstly, a military one. From Thursday, Nato will be on the march. Cold Response 2022 is a series of Arctic military exercises in Norway and the surrounding seas. These will be defensive exercises, but it will illustrate some of Nato’s firepower with about 30,000 troops taking part from more than 25 countries. Neighbouring Finland and Sweden, which are not part of Nato but where public pressure to join is rising, will also be involved. Of course, these long-planned exercises have taken on a new significance with recent events. Back in November, Russia was invited but the Kremlin declined.Nato member states have also been providing much-needed weaponry to the Ukrainians — as this excellent Big Read explains, while UK foreign secretary Liz Truss argues that the alliance should raise defence spending to meet biggest shift in security threat since 9/11. Nato defence ministers will gather in Brussels on Wednesday to discuss what further steps to take in relation to the Ukraine crisis.So much for war. The coming days will also see commemorations that highlight how nations — even those with difficult histories — can work together and how cultures can be shared peacefully. The Commonwealth of Nations is not without controversy — it is after all almost entirely made up of former territories of the British empire. Questions are also raised about its effectiveness — some Brexiters still cling to the idea that trade with Commonwealth countries could replace that lost from leaving the EU, but they are a dwindling band.However, it is the Commonwealth’s achievement in building co-operation between diverse cultures that will be commemorated this week with a ceremony in London’s Westminster Abbey. Queen Elizabeth, the Commonwealth’s head who recently recovered from Covid-19 and will turn 96 next month, was due to attend but will not now over concerns that she might not travel comfortably to the service.Thursday is St Patrick’s day, a chance to celebrate for the Irish diaspora, who have perhaps done more than any other people to blend with nations across the world. In these dark days, it will feel good to celebrate such bonds.If you want to reach out across the borders and share your views on The Week Ahead, drop me a line at [email protected]. But for now, here are the upcoming economic and corporate events.Economic dataInterest-rate decisions will be the headline economic news this week. The US Federal Reserve and Bank of England are both expected to raise their base rates by 25 basis points, while the Bank of Japan holds off from tightening for now.

Fed chair Jay Powell is a supporter of Greenspan gradualism but all the monetary policy committees convening this week will be wary of killing the golden goose of economic recovery while trying to tame the inflation beast. War in Europe has made this already tricky balancing act a degree harder.The reality is that Ukrainian conflict has upended the hopes for a post-pandemic recovery. Fears of worsening living standards in developed economies, with the knock-on effects on consumer spending, have got a degree worse with the additional damage caused by trade embargoes on Russian energy — although not all believe that oil price rises could further stoke inflation. We will get some clarity on this from data released this week.CompaniesPower — the electric kind — will be a theme among the corporate results. It is not just that there are a number of energy providers — E.On, Enel and RWE — but it is also of concern to those that are betting their future on replacements to fossil fuel machinery.German carmaker Volkswagen will be updating progress on its drive to electric vehicles — and there have been bumps on the road. Chief executive Herbert Diess has made it his mission to take on Tesla in the electric race by committing €52bn to develop battery-powered models. However, a more pressing issue is the impact of the Ukraine crisis on supply chains, with Diess saying last week that the Russian war was doing more damage to his company than the pandemic.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayIndia, February consumer price index (CPI) dataUK, Office for National Statistics annual review of the “shopping basket” of items making up the suite of consumer price inflation indicesResults: Abcam FYTuesdayCanada, January manufacturing dataChina, monthly retail sales figuresEU, January industrial production data France, February inflation rateGermany, research group ZEW economic sentiment surveyIndia, trade statisticsJapan, balance of trade dataOpec monthly oil market reportUK, March payroll employment figures plus February insolvency numbersUS, February labour statisticsResults: Assicurazioni Generali FY, Close Brothers H1, Old Mutual FY, Petrofac FY, RWE FY, TAG Immobilien FY, TP ICAP FY, Volkswagen FYWednesdayCanada, February CPI dataInternational Energy Agency monthly oil market reportItaly, February CPI dataJapan, January industrial production figuresUS, Federal Open Market Committee meeting decision on interest rates plus National Association of Home Builders/Wells Fargo monthly housing market indexResults: E.On FY, Foxconn Technology FY, Inditex FY, Restaurant Group FYThursdayAustralia, Reserve Bank of Australia’s quarterly bulletinEU, February inflation dataJapan, two-day Bank of Japan monetary policy committee meeting begins plus February CPI dataSpain, January trade balance figuresUK, Bank of England’s monetary policy committee vote on interest ratesUS, February industrial production figuresResults: Enel FY, FedEx Q3, Marshalls H1, Pirelli FY, Swatch FY Veolia FYFridayQuadruple Witching Day, when stock index futures, stock index options, stock options and single-stock futures expireCanada, January retail trade figuresEU, January trade figuresItaly, January trade balance figuresUK, February retail sales figuresWorld eventsFinally, here is a rundown of other events and milestones this week. MondayFrance, Alpine World Ski Championships start in Courchevel and Méribel, Auvergne-Rhône-AlpesJapan, White Day is marked by men sending presents to women who gave them gifts a month earlier on Valentine’s DayUK, annual celebration of the Commonwealth will be marked by a multifaith service in London’s Westminster AbbeyTuesdayUK, beginning of the Cheltenham Festival, one of the country’s highest-profile national hunt horseracing eventsWednesdayJewish festival of Purim beginsBelgium, Nato defence ministers meet in Brussels to discuss the war in UkraineThe Netherlands, municipal electionsUK, the Queen’s Platinum Jubilee concert at the Royal Albert Hall plus Campaign for Real Ale celebrates its 50th anniversaryThursdaySt Patrick’s day: Irish taoiseach Michael Martin will hold the annual shamrock ceremony with US president Joe Biden in WashingtonNorway, 23 Nato members plus Finland and Sweden begin winter exercises in northern Norway in the Cold Response 2022 eventFridayHoli, the Hindu festival of coloursSikh festival of Hola Mahalla beginsGlobal Recycling DayThree-man crew launch of the Soyuz-MS-21 to the International Space StationSerbia, 18th World Athletics Indoor Championships begin in BelgradeSaturdayAustralia, state parliamentary elections in South AustraliaEast Timor, first round of the presidential electionSundayKurdish new yearSpring equinoxUN-sponsored International Day of Happiness More

Russia has threatened to pay international bondholders in roubles rather than dollars just days before a key interest payment on its external debt comes due.Anton Siluanov, Russia’s finance minister, said on Sunday that it was “absolutely fair” the country would make all of its sovereign debt payments in roubles until western sanctions that he claimed have frozen $300bn of the country’s reserves were lifted.Moscow is scheduled to make a combined $117mn in interest payments this Wednesday on two dollar-denominated bonds, according to JPMorgan. Neither bond’s contracts gives Russia the option of paying in roubles, according to the Wall Street bank. The latest warning to foreign bondholders ratchets up the chances the country will default on its debt for the first time since the Russian financial crisis in 1998, as its financial system comes under heavy strain from the measures western governments have taken following the invasion.“We need to pay for critical imports. Food, medicine, a whole array of other vital goods,” Siluanov told a state television interviewer. “But the debts we need to pay to the countries that have been unfriendly to the Russian Federation and have limited our use of foreign currency reserves — we will pay off our debt to these countries in the rouble equivalent,” he said. Siluanov said that almost half of Russia’s $643bn foreign reserves had been hit by the sanctions, but did not disclose the denominations and jurisdictions where Russia holds other currencies.Investors have been bracing for a default, with both bonds trading at around 20 cents on the dollar. Moscow will have a 30-day grace period to make the coupon payments. International investors hold around $170bn in Russian assets, according to Financial Times calculations, with foreign currency bonds accounting for $20bn. More than two dozen asset management companies have had to freeze funds with significant Russia exposure, while others have had to sharply write down their value. There has been an exodus from Russian assets since the invasion, as the US and the EU have sought to sever the country’s ties to the global financial system. Moscow’s stock market has been closed since February 28, but shares in many Russian companies listed abroad have crumbled in value. The rouble is down more than 45 per cent this year, putting it on track for the biggest annual fall since 1998, when Russia defaulted on its local currency-denominated debt.IMF managing director Kristalina Georgieva told US broadcaster CBS on Sunday that “in terms of servicing debt obligations, I can say that no longer we think of Russian default as improbable event”.In a sign of how abruptly western investors’ view of Moscow has changed, Russia was rated investment grade at Fitch, S&P Global and Moody’s Investors Service — the three main rating agencies — up until February 25. As of the start of February, Russia kept $311bn in foreign securities, $152bn in cash and deposits in foreign banks, $30bn in special deposit receipts at the IMF, and a further $132bn in gold. Russia has cut its dollar holdings from 45 per cent of the total share in 2013 — the year before the first western sanctions over the annexation of Crimea — to just 16.4 per cent in 2021.The central bank publishes data on the structure of Russia’s foreign reserves with a lag of at least six months. As of June 2021, the euro made up 32.3 per cent of Russia’s holdings, the renminbi 13.1 per cent, the pound 6.5 per cent, other currencies 10 per cent, and gold 21.7 per cent.China held 14.2 per cent of Russia’s reserves, the largest share of any country, with Japan holding 12.3 per cent and Germany 11.8 per cent.Siluanov claimed western countries were pushing China to restrict Russia’s use of its renminbi reserves, but said he was confident Beijing would not bow to the pressure. “I think our partnership with China will allow us to maintain the co-operation we’ve achieved and increase it when western markets are closing,” he said. More

Investors are racing to cut their exposure to oil-dependent industries, as the highest crude price in more than a decade raises fears for the global economy and deals a fresh blow to sectors that were only just emerging from the effects of the pandemic.Russia’s invasion of Ukraine has unleashed turmoil across commodity markets, sending Brent crude oil to levels not seen since shortly before the financial crisis of 2008 and driving European gas prices to new highs.The prospect that energy prices could leap even higher if other countries were to follow the US in imposing an oil embargo on Russia — and the Kremlin were to retaliate by turning off its own supply of crude and gas — has left financial markets on edge.Companies caught in investors’ crosshairs stretch from airlines to those that rely on oil for their manufacturing processes. American Airlines has been hit hard, with its shares down by almost a fifth this month and its debt among the worst performers in the junk bond market. Low-cost carrier Wizz Air is one of the European airlines that has been shunned most by investors, while the yield on Delta Air Lines’ $600mn bond maturing in 2029 has soared to a level not seen since the coronavirus pandemic devastated the airline industry. The shares and bonds of tyre manufacturer Goodyear Tire & Rubber have also been punished. The international oil benchmark Brent crude rose to almost $140 at the start of last week, only a few dollars shy of the record set in July 2008. It settled at $112.67 per barrel on Friday, leaving it up 60 per cent over the past 12 months.“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” said economists at Goldman Sachs, which forecasts that crude could hit $175 a barrel.Although the increase in commodity prices had eased by the end of last week, economists and analysts have warned that the threat to the health of companies and major economies will rise if energy prices remain at an elevated level.“This is an emergency,” said John Hess, the head of Hess Corp, one of the largest US oil producers, echoing warnings from groups such as Occidental Petroleum and Pioneer Natural Resources. Petrol prices in the US, the world’s biggest petroleum market, have already set record highs and analysts expect them to keep rising. European Central Bank president Christine Lagarde last week warned that the invasion of Ukraine had created “a major shock” for the eurozone economy, as the ECB predicted higher inflation and lower growth over the next three years.European companies are already being hit by the surge in the price of gas, which Russia counts as one of its major exports. Czech group Draslovka, the world’s biggest maker of sodium cyanide, revealed this weekend that it had has been forced to suspend production in Europe because of the price rise.The rise in oil prices has so far compounded the challenge facing the Federal Reserve, which was already trying to rein in inflation and is expected to raise interest rates this week despite the turmoil following the invasion. However, there are rising concerns in Wall Street that higher energy costs will ultimately hit consumers and squeeze US companies. Economists at Goldman and Wells Fargo last week cut their growth forecasts for the US economy.Oleg Melentyev, a credit analyst at Bank of America, said a sustained run above the $125 per barrel would be damaging. “Credit stress could increase, credit spreads could widen, it could even be a credit crunch if we go way above that level to $150 per barrel,” he said. “You could have conditions that credit markets essentially seize up.” More

LONDON (Reuters) – Russia said on Sunday that it was counting on China to help it withstand the blow to its economy from Western sanctions over the war in Ukraine, but the United States warned Beijing not to provide that lifeline.Russian Finance Minister Anton Siluanov said sanctions had deprived Moscow of access to $300 billion of its $640 billion in gold and foreign exchange reserves, and added that there was pressure on Beijing to shut off more.“We have part of our gold and foreign exchange reserves in the Chinese currency, in yuan. And we see what pressure is being exerted by Western countries on China in order to limit mutual trade with China. Of course, there is pressure to limit access to those reserves,” he said.”But I think that our partnership with China will still allow us to maintain the cooperation that we have achieved, and not only maintain, but also increase it in an environment where Western markets are closing.”Western countries have imposed unprecedented sanctions on Russia’s corporate and financial system since it invaded Ukraine on Feb. 24 in what it calls a special military operation.Siluanov’s comments in a TV interview marked the clearest statement yet from Moscow that it will seek help from China to cushion the impact. But U.S. National Security Adviser Jake Sullivan said Washington was warning China not to provide it.”We are communicating directly, privately to Beijing, that there will absolutely be consequences for large-scale sanctions, evasion efforts or support to Russia to backfill them,” Sullivan told CNN.”We will not allow that to go forward and allow there to be a lifeline to Russia from these economic sanctions from any country, anywhere in the world,” added Sullivan, who is due to meet China’s top diplomat Yang Jiechi in Rome on Monday.Russia and China have tightened cooperation in recent times as both have come under strong Western pressure over human rights and a raft of other issues. Beijing has not condemned Russia’s attack on Ukraine and does not call it an invasion, but it has urged a negotiated solution.Presidents Vladimir Putin and Xi Jinping met in Beijing on Feb. 4 and announced a strategic partnership they said was aimed at countering the influence of the United States, describing it as a friendship with no limits. China is Russia’s top export market after the European Union. Russian exports to China were worth $79.3 billion in 2021, with oil and gas accounting for 56% of that, according to China’s customs agency. More

COLOMBO (Reuters) – A senior International Monetary Fund (IMF) official will be visiting Sri Lanka on Monday and Tuesday to brief President Gotabaya Rajapaksa on the fund’s assessment of the crisis-hit economy, Sri Lanka mission chief Masahiro Nozaki told Reuters.”While the IMF has not received a request for financial support from Sri Lanka, the staff stands ready to discuss options if requested,” Nozaki said.The visit comes ahead of plans by Sri Lanka to hold formal talks with the IMF next month on how to help the country.Sri Lanka is facing its worst financial crisis in years. With foreign exchange reserves standing at a paltry $2.31 billion, the country is struggling to pay for critical imports including fuel, food and medicines.In a periodic review release earlier this month, the IMF called on the government to implement a “credible and coherent” strategy to repay debt and restore macroeconomic stability. More

Prompted by the chaos of war in Ukraine, Europe realises it needs more friendly sources of energy, and fast. Across the Atlantic, President Joe Biden needs to be able to push back against conservatives who claim that he is to blame for inflation. It is in the interests of both America and the EU to come together on economic security and competitiveness in a more polarised world.This calls not only for a smarter, safer energy sourcing plan, but also a clear pathway to carbon neutrality and investment in the most strategic clean technologies — which will also drive 21st-century jobs and growth.Within this crisis, there is opportunity: namely, the possibility of an US-EU grand bargain on energy security and climate change. It should not be missed. Start with the most immediate problem, which is Europe’s dependency on Russian oil and gas. The EU has finally — and wisely — understood that there’s no going back to reliance on Russian energy. It is speeding up its own transition to fossil fuel alternatives. But, for the next few years, there’s no getting around the fact that it will need some fossil fuels to bridge the gap. Can more come from the US?The White House hopes so. At the CERAWeek energy conference a few days ago, US energy secretary Jennifer Granholm told oil executives (albeit not in so many words) to “drill, baby, drill”. As she put it, the country is now “on a war footing” and the industry should be “producing more right now, where and if you can”. She also said the administration would ease up on permitting for new pipelines, something Big Oil has pushed for.This is obviously a huge U-turn for the president, who built his campaign around green energy transition. But even Democrats are coming around to the idea that the war in Ukraine and the global fallout are more important than environmental lines in the sand, or at least in the short term. Republicans are already blaming Biden’s past restrictions on new fossil fuel drilling for skyrocketing gas prices, which could hurt Democrats badly in the midterm elections in November. Now, with the White House telling the industry to produce more, it has to hope that progressives on the left won’t scupper any new legislation that would help it do so.Investors are another challenge. Wall Street has until recently been down on the energy sector, which goes through regular capital expenditure boom and bust cycles depending on the price of oil. The last production and exploration effort resulted in a fair bit of exploding debt that rattled markets a few years back.This, coupled with the inevitable move towards clean tech, has made producers more inclined to favour dividend payments and buybacks than to drill. According to Global Energy Monitor, $244bn worth of US liquefied natural gas projects are stalled because they are “struggling to find financiers and buyers”. Investors aren’t interested in part because fossil fuels are on the way out.That attitude is now under attack as unpatriotic. “I hope that investors are listening,” said Granholm. “We can’t have one element holding back the world.” But even if the administration creates a friendlier environment for fossil fuels, production takes time. While Europeans are reluctant to accept the dirtiest fuels like coal or shale, they would love to buy more US liquefied natural gas, which is poised for a jump in supply by 2024. Germany has already committed to building more terminals to receive imported gas. In an ideal world, American business and the White House could co-operate to put more workers in fossil fuel-producing states in jobs upping refinery capacity.Of course, the short-term crisis must not derail the overall goal of shifting to clean energy, which is where the jobs and innovation of the future lie. But that requires the US and Europe to be on the same page about metrics: how to measure greenhouse gases; how to set a market price on carbon. Without an understanding of where the floor is, the transition to net zero won’t happen.As contentious as these issues have been, there’s actually already a process in place for such transatlantic harmonisation to happen. As part of the deal on Section 232 trade tariffs reached by the US and EU last October, there is a “global arrangement” provision that stipulates that the two sides have to agree to a shared way forward on dealing with carbon intensity within 12-18 months from the deal signing.In such negotiations, Europe needs to stay flexible. It may not be possible to thrash out a shared carbon price immediately, but the two sides could at least agree on a single methodology for greenhouse gas measurement. The US and EU could make shared renewable research and development commitments. They could even come together on an industrial strategy for green batteries (lest this area be ceded to China). There should also be a plan for how ultimately to move American fossil fuel workers making $50 into good jobs in clean tech, and not into those paying half what they already make (European companies sometimes outsource such jobs to the US because its cheaper). It’s a lot to tackle. But thinking big is the only way to get us through this crisis while not sacrificing the future of the [email protected] More

A case was registered against Sharma by the New Delhi police for “rashness and negligent driving” said Reuters TV partner ANI.His car was involved in an accident with a senior police official’s car, both vehicles were impounded and the case was under investigation, local news agency IANS reported.Media reports said Sharma’s Jaguar Land Rover allegedly rammed into a senior police official’s car. It was not clear who was driving the car during the incident.A senior Delhi police official involved in the probe said Sharma was interrogated by the police regarding a minor offence and allowed to leave the police station.Asked about the incident, a Paytm spokesperson said a complaint had been filed in connection with an alleged minor motor vehicle incident. No person or property was harmed, the spokesperson said, adding that the media reports were “exaggerated” and that required procedures had been completed.The spokesperson did not immediately clarify who was driving the vehicle.Paytm, which counts China’s Ant Group and Japan’s SoftBank Group Corp among its backers, raised $2.5 billion in India’s biggest initial public offering in November, but made a dismal debut on the stock exchanges and has lost over 50% since then. More