Economy

LAGOS (Reuters) – More than 31.8 million Nigerians are acutely short of food due to security challenges and the removal of fuel subsidies, the government said on Tuesday, citing a study by several of the country’s international development partners. The scale of the shortages, which have led to malnutrition among women and children, was set out by the development partners at a meeting with the government on Monday and Tuesday, the ministry of budget and economic planning said in a statement.The findings indicate a sharp rise from the 18.6 million people assessed as vulnerable to acute food insecurity from October to December 2023 by the U.N. World Food Programme.”The surge in food commodity prices, which is as a result of the removal of fuel subsidy in addition to security challenges, has placed millions of Nigerians in a precarious situation,” the ministry said.Raids by bandits wielding guns and machetes have forced many farmers to leave their fields, contributing to higher food prices and soaring inflation as Nigeria faces the worst cost of living crisis in a generation.President Bola Tinubu, who took office in May 2023, removed fuel subsidies to cut down on government spending, in a move that led to a rise in the cost of transportation.The study was produced by development partners including the U.N. Food and Agriculture Organization, the Global Alliance for Improved Nutrition and the German development agency GIZ.The study used statistics from a nutrition analysis by the Cadre Harmonise, a regional food security framework.Sanjo Faniran, Nigeria’s national convener of Food Systems and director of social development in budget and economic planning ministry, said the study helped to identify gaps, successes and challenges, and offer recommendations. More

QUETTA (Reuters) – A Pakistani truck driver, who rescuers initially thought was dead, was recovering on Tuesday after hospital staff receiving bodies realised he was alive despite being shot five times in one of the most widespread attacks by ethnic militants in years.On Monday, Munir Ahmed was driving with three colleagues in a convoy of four trucks through the southern province of Balochistan.The drivers did not notice anything amiss and had not heard of any violence until they were about an hour outside of the provincial capital, Quetta. Suddenly, armed men crowded the dusty stretch of highway, waving at them to stop, ordering the drivers out of their trucks and lining them up on the roadside.Ahmed, 50, began to recite Islamic verses in fear.”We were all horrified,” he said. The gunmen opened fire and threw the men’s bodies into a stream, leaving them for dead. Meanwhile attackers along other roads were stopping buses, pulling off passengers and killing men in front of their families, the provincial chief minister later said. The Baloch Liberation Army (BLA), an armed militant group seeking secession of the resource-rich province bordering Iran and Afghanistan, took responsibility for the assaults.Authorities said at least 70 people were killed in the attacks and subsequent military operations, including 23 civilians pulled out of their vehicles.Rescuers put Ahmed and the lifeless bodies of his three colleagues into a vehicle to take to hospital, where medical staff realised he had survived. A nurse said he had been hit by five bullets in the arm and back but was in stable condition. Lying flat in a hospital bed, far from home in Punjab with his arm heavily bandaged, Ahmed said his memory of the attack was hazy and he was upset by his colleagues’ deaths, uncertain what would happen next after such a violent disruption to his livelihood. More

BRASILIA (Reuters) – Brazil’s Senate Economic Affairs Committee (CAE (NYSE:CAE)) will not hold a confirmation hearing next week for the candidate chosen by President Luiz Inacio Lula da Silva to head the central bank, the committee’s chair said.”It can wait. It won’t happen next week, I guarantee that,” Senator Vanderlan Cardoso told Reuters on Monday night. “We need the right moment, when discussions between the Senate and the government are better. Right now, we’re in a slightly delicate moment,” Cardoso said.Cardoso emphasized that the government has yet to present any names for the central bank and suggested that the mood might be more favorable for the Senate to quickly approve the nominations after the first round of municipal elections in early October.He also said that the government did not honor an agreement regarding a legislative decree that eases gun ownership rules, contributing to a sense of unease he believes could be resolved once the issue is settled.In practice, the process is likely to take longer than the government initially suggested. Finance Minister Fernando Haddad mentioned in mid-August that the issue was on Lula’s agenda for “the coming weeks.”Government members told Reuters, on anonymity, that anticipating the nomination would effectively spotlight the next central bank chief, even though Lula’s pick would only take office early next year, thereby diminishing the weight of statements from governor Roberto Campos Neto. Lula, who has criticized Campos Neto multiple times since taking office last year, needs to appoint his substitute, along with the next directors of regulation and institutional relations, who also take office in January 2025.Given the widespread expectation that current central bank monetary policy director Gabriel Galipolo will be chosen to head the central bank, the current vacancy in his role would also need to be filled in this reshuffle.Two other sources with knowledge of the matter told Reuters that the government is rethinking when Lula might unveil his appointments to the central bank’s board after senators signaled that it would be better to wait, citing the reduced presence of senators in Brasilia due to the election period.One of the sources said recent disputes between branches of government over the release of parliamentary appropriations could sour the mood for the confirmation hearings. More

KARACHI (Reuters) -Pakistan aims to raise up to $4 billion from Middle Eastern commercial banks by the next fiscal year, the country’s central bank chief told Reuters on Tuesday, as the country looks to plug its external financing gap.In a wide-ranging interview, his first with any media organisation since taking office in 2022, State Bank of Pakistan Governor Jameel Ahmad said Pakistan was also in the “advanced stages” of securing $2 billion in additional external financing required for International Monetary Fund approval of a $7 billion bailout program.Pakistan and the IMF reached an agreement on the loan program in July, subject to approval from the IMF’s executive board and it obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.Ahmad said he expected the country’s gross financing needs would be smoothly met – both over the next fiscal year and in the medium term. In the past, Pakistan has relied on long-time allies such as China, Saudi Arabia and United Arab Emirates to ‘rollover’ debt rather than force a repayment crunch. Ahmad said he expected similar assurances would be given for the next three years, giving the government more time to get its finances in order.In addition, Ahmad said the central bank reckoned Pakistan’s gross financing needs for the coming years would be lower than the 5.5% of gross domestic product projected by the IMF in its latest country report in May. “Pakistan’s external gross financing needs have been declining in the past few years,” he said. “Since (the IMF’s) assessment was based on a higher current account deficit than realized in fiscal 2024 and now projected for the next few years, we assess the ratio of gross financing needs to GDP to be lower than the 5.5% level.” RATES AND INFLATIONAsked about monetary policy, Ahmad said recent interest rate cuts in Pakistan have had the desired effect, with inflation continuing to slow and the current account remaining under control, despite the cuts.Pakistan’s annual consumer price index inflation was 11.1% in July, having fallen from highs of over 30% in 2023.”The Monetary Policy Committee will review all these developments,” Ahmad said, adding that future rate decisions could not be pre-determined.Pakistan’s central bank cut rates for two straight meetings from a historic high of 22% to 19.5%, and will meet again to review monetary policy on September 12.There have been some concerns in markets that the government might take advantage of lower interest rates to borrow more, but the central bank chief said this was not his expectation. “We understand that the government will continue on the path of fiscal consolidation, notwithstanding the reduction in interest rates,” said Ahmad.OVERCOMING CHALLENGESAhmad, who was appointed governor of Pakistan’s central bank for a five-year term in August 2022, said his first year had been ‘quite difficult’. In 2023, Pakistan faced an acute balance of payments crisis with only enough central bank reserves to cover a month of imports.After eight months of tough negotiations over fiscal discipline, the IMF threw Pakistan a lifeline in the form of a nine-month $3 billion bailout program. “Last year was much better,” said Ahmad. “Now everything is under control from an external account management perspective.”Ahmad said the central bank would now focus on growth, digitalisation and financial inclusion. “Those are also equally important for job creation and other socioeconomic issues,” said Ahmad, noting the bank’s mandate was to ensure price and financial stability before shifting its focus to growth. More

MEXICO CITY (Reuters) – Beyond the common challenges like currency fluctuations and supply shocks that keep the world’s central bankers up at night, in Mexico there is an additional foe for those conjuring monetary policy: protection rackets.Extortion has become a massive problem in Mexico, with powerful drug cartels exerting deep influence over swathes of the country. Keen to establish new revenue streams, these groups have been turning to extorting businesses by forcing them to pay protection money.One unintended consequence: inflation.Reuters interviewed about 20 small merchants and producers, selling goods such as limes and tortillas, who said they are regularly forced to pay protection money.Leaders of business associations confirmed the problem and said they estimate extortion adds around 20% to the prices of some items.The problem is increasingly being noticed by policy wonks and central bank officials even if concrete data on the phenomenon remains scarce. “We have ample anecdotal information which shows that it (extortion) is not only an important factor but a growing one, which is contributing to the inflationary process we are encountering,” deputy central bank governor Jonathan Heath told Reuters in a written response to questions last week.Like many other countries, Mexico has struggled with high inflation in the wake of the COVID-19 pandemic. Annual inflation was running at 5.16% in the first half of August and has been gradually cooling from a two-decade peak of 8.77% in 2022. But it remains stubbornly far from the 3% targeted by Mexico’s central bank, known as Banxico.Earlier this month, Banxico lowered its benchmark interest rate by 25 basis points to 10.75% in a divided vote, in which Heath voted not to cut. Despite the move, the bank signaled it expected prices to rise higher than it had previously forecast.Heath said the problem of extortion in the Mexican economy now had to be viewed as “structural,” which “makes it difficult to achieve our goals” on inflation. “The problem is that while we know it affects the Bank’s ability to achieve our objective… we have no way of quantifying it nor of adjusting our 3% target to take it into account.” COMPLICATED WORKIncidents of extortion are thought to be hugely under-reported in Mexico, but the data there is shows a steep increase over the presidency of Andres Manuel Lopez Obrador, who has pursued a less confrontational approach to the drug cartels.That approach has meant fewer firefights between security forces and the cartels and has been credited by some for reducing the homicide rate – though murders remain high at over 30,000 per year, according to official data. Registered victims of extortion jumped from 6,895 in 2018, when Lopez Obrador took office, to a record 11,039 in 2022, dipping slightly to 10,946 in 2023.”The work of Mexico’s central bank is more complicated than in other countries that don’t have this problem (of extortion),” said Jacobo Rodriguez, analyst at Roga Capital.Extortion “is generating effects which are impacting inflation and are outside the economic dynamic,” he added. Banxico did not respond to a request for comment on how extortion was impacting prices.A regional economic report by the bank in 2023 said that company executives across Mexico had stressed that crime against producers, particularly theft and extortion, had resulted in higher costs for companies and higher consumer prices for products such as avocados, limes, cereals, and other food staples. No specific figures were given.One sector leader, who asked not to be identified, citing security risks, said that extortion had pushed prices of tortillas up 20% in some places.In just the first half of August the price of limes, meanwhile, rose some 8% as farmers in Michoacan state, Mexico’s No.1 producer, stopped work to protest rising extortion, with cartels demanding four pesos (0.20 dollars) per kilo – over half the usual sales price for producers.”The phenomenon of extortion has reached worrying levels with a significant impact which doesn’t just affect the companies that are directly being extorted but has ramifications on consumers’ pockets,” said Andres Abadia, economist at Pantheon Macroeconomics. More

House prices dipped 0.1% on a month-on-month basis after being unchanged in May, the Federal Housing Finance Agency said on Tuesday. They increased 5.1% in the 12 months through June, the smallest year-on-year rise since July 2023, after advancing by an upwardly revised 5.9% in May. The rise in annual house prices was previously reported to have been 5.7% in May. Prices were up 0.9% in the second quarter compared to the January-March quarter. They increased 5.7% between the second quarter of 2023 and the April-June quarter this year.”U.S. house prices saw the third consecutive slowdown in quarterly growth,” said Anju Vajja, deputy director for FHFA’s division of research and statistics. “The slower pace of appreciation as of June end was likely due to higher inventory of homes for sale and elevated mortgage rates.”House price inflation is likely to moderate further in the months ahead as new housing supply has surged to levels last seen in early 2008. The existing homes inventory has also risen to the highest level in nearly four years. An outright decline in house prices is, however, unlikely in the absence of significant labor market deterioration. Lower mortgages, with the Federal Reserve expected to begin its interest rate cutting cycle next month, should boost demand and absorb some of the excess inventory.All nine census regions recorded annual house price gains in June, with big increases in the Middle Atlantic, East North Central, New England and East South areas. Prices in the West South Central region trailed with a 2.7% increase. More

The guidelines propose an increase in High-Quality Liquid Assets (HQLA) holdings, which will tighten the Liquidity Coverage Ratio (LCR) requirements. Analysts at BofA Securities in a note dated Tuesday believe these changes will be positive for Indian banks and Non-Banking Financial Companies (NBFCs). The changes are expected to have broad implications for liquidity management, growth prospects, and overall financial health.The draft guidelines reflect RBI’s growing concern over the stability of digital-enabled deposits and aim to address the associated liquidity risks. “The calculation for LCR will include an additional run-off factor of 5-15% based on different type of deposit,” the analysts said.The guidelines emphasize the importance of stability in the face of increasing digital transactions, flagging the need for banks to adapt to a rapidly evolving financial ecosystem.While the guidelines are still being developed, the RBI’s focus on managing liquidity risk is clear. This focus may lead banks to adjust their balance sheets, which could temporarily slow growth and slightly impact Net Interest Margins.“In case of the draft LCR guidelines being implemented in current form, the banks expect to see 10-15% impact on LCR,” the analysts said. Most Indian banks currently maintain an LCR buffer well above the regulatory minimum, with many holding a buffer of over 15 percentage points. As a result, the risk of a breach is minimal. However, the new guidelines may force banks to reassess their strategies, particularly in terms of deposit mobilization and loan growth.BofA analysts predict that banks might prioritize profitability over growth in the near term, particularly in the unsecured and low-yield corporate segments. This shift could lead to a deceleration in credit growth, especially in areas that have traditionally been high-risk but high-reward for banks.From a credit perspective, the impact on Indian commercial banks is expected to be positive. The new guidelines are likely to reduce liquidity risk in a bank-run scenario, compelling banks to strengthen their deposit bases relative to loan growth. This, in turn, could improve capitalization levels, which have been under pressure due to rapid loan growth in recent years. BofA analysts note that slower loan growth could help Indian banks rebuild their capital ratios, which have seen a slight decline as of 1QFY25.Moreover, the guidelines could have a stabilizing effect on the credit ratings of Indian banks. Moody’s, in a note dated July 25, 2024, echoed this sentiment, stating that the proposed regulations would be credit-positive for Indian banks. The higher HQLA holdings mandated by the guidelines are expected to bolster liquidity buffers, thereby enhancing the resilience of banks in the face of potential liquidity shocks.The proposed guidelines are expected to have a limited impact on Indian corporates. Credit growth has been primarily driven by the unsecured retail sector, with corporate credit growth remaining moderate. BofA analysts believe that any slowdown in credit growth will be concentrated in the unsecured and high-yield corporate segments. Large corporates, including State-Owned Enterprises, which typically have access to various funding sources, are unlikely to be significantly affected.In contrast, NBFCs are expected to benefit from the potential slowdown in bank credit growth. As banks adjust to the new liquidity requirements, NBFCs could see increased demand, particularly in the retail lending space. This shift could provide a tailwind for NBFC growth, offering these institutions an opportunity to expand their market share in segments where banks might scale back.Indian banks’ financial results in the first quarter of FY25 was impacted by rapid loan growth. While their credit quality remained strong, their capitalization weakened slightly. Key capital ratios declined modestly, with average CET1, Tier-1, and CAR ratios at 14.7%, 14.9%, and 16.3%, respectively, as of June 2024. This decline was due to rapid loan growth outpacing capital accumulation.However, asset quality remained strong, with gross and net non-performing loan ratios at 1.8% and 0.4%, respectively. Earnings grew by 10.7% year-over-year in the first quarter, despite some margin compression. Private sector banks continued to outperform public sector banks, with stronger fundamentals and better capitalization. More

With the next policy meeting just two weeks away, a growing number of ECB policymakers are lining up behind another rate cut in September and many say that the real debate is about whether to follow up that move with another cut in October. Knot, a moderate conservative on the 26-member Governing Council, took a more measured view, however, and said that deal was not yet done, even if there may be a case for gradually easier policy.”As long as our disinflation path still converges to a return to 2% inflation at or before the end of 2025, then I’m comfortable with gradually taking our foot off the brake,” Knot told a conference panel. “I will have to wait until I have the full data and information set going into that meeting to decide my position on whether September is appropriate,” Knot added. “I would have to do so again in October, December and whenever.”Knot in the past made the case for cuts in September and December, or when the ECB releases fresh economic projections if inflation continues to fall. Markets have now fully priced in a cut next month and at least one more move later this year.Inflation rose to 2.6% in July, but was seen falling to 2.2% this month and most policymakers speaking on and off record argue that price growth trends are broadly in line with the ECB’s own projections. More