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US to send $4.5 billion more to Ukraine for budget needs

US to send $4.5 billion more to Ukraine for budget needs

National flags of Ukraine and the US fly at a compound of a police training base outside kyiv, Ukraine, May 6, 2016. Picture taken May 6, 2016. REUTERS/Valentyn Ogirenko

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Aug 8 (Reuters) – The United States will provide an additional $4.5 billion to Ukraine’s government, bringing its total budgetary support since Russia’s February invasion to $8.5 billion, the US Agency for International Development said on Monday.

The funding, coordinated with the US Treasury Department through the World Bank, will go to the Ukraine government in tranches, beginning with a $3 billion disbursement in August, USAID, the Agency for International Development, said.

It follows previous transfers of $1.7 billion in July and $1.3 billion in June, USAID said. Washington has also provided billions of dollars in military and security support. The Pentagon announced a $1 billion arms aid package on Monday. read more

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Overall, the United States has contributed more than $18 billion to Ukraine this year.

The new budgetary funds are to help the Ukrainian government maintain essential functions, including social and financial assistance for the growing poor population, children with disabilities, and millions of internally displaced persons, as the war drags on.

Ukrainian officials estimate the country faces a $5 billion-a-month fiscal shortfall – or 2.5% of pre-war gross domestic product – due to the cost of the war and declining tax revenues. Economists say that Ukraine’s annual deficit will swell to 25% of GDP, compared with 3.5% before the conflict.

The World Bank estimates that 55% of Ukrainians will be living in poverty by the end of 2023 as a result of the war and the large numbers of displaced persons, compared with 2.5% before the start of the war.

USAID said US budget support has enabled the Ukrainian government to keep gas and electricity flowing to hospitals, schools and other critical infrastructure and deliver urgently needed humanitarian supplies to citizens.

The funds have also paid for healthcare workers, teachers and other civil servants.

USAID said robust safeguards had been put in place by the World Bank, along with USAID-funded, third-party watchdogs embedded within the Ukrainian government to make sure the funds are directed where they are meant to go.

“This economic assistance is critical in supporting the Ukrainian people as they defend their democracy against Russia’s unprovoked war of aggression,” US Treasury Secretary Janet Yellen said in a statement provided to Reuters.

The injection of fresh cash for Ukraine comes as the war, which Russia calls “a special military operation,” stretches into a sixth month, with millions of displaced Ukrainians and authorities warning of likely gas shortages in winter.

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Reporting by Andrea Shalal; Editing by Heather Timmons and Howard Goller

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US

Key US Senator Sinema agrees to $430 billion drug, energy bill

Key US Senator Sinema agrees to $430 billion drug, energy bill

WASHINGTON, Aug 4 (Reuters) – Democratic US Senator Kyrsten Sinema said on Thursday she agreed to “move forward” on a $430 billion drug pricing, energy and tax bill, subject to a Senate arbitrator’s approval of the bill, which Democrats intend to pass over Republican objections.

Senate Majority Leader Chuck Schumer said earlier on Thursday the chamber would convene on Saturday to vote on a motion to proceed and then begin debate on the bill.

The bill known as the Inflation Reduction Act, introduced last week by Schumer and Democratic Senator Joe Manchin, is a key priority for Democrats and President Joe Biden ahead of November’s election battle for control of the US Congress.

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The act will help people save money on prescription drugs and health premiums, Biden said in a statement on Thursday.

“It will make our tax system more fair by making corporations pay a minimum tax,” he said.

With the 100-seat Senate split 50-50, Democrats plan to pass the bill without Republican support through a parliamentary process known as reconciliation.

But they cannot afford to lose support from a single lawmaker. Sinema’s agreement was a critical breakthrough. Another worry is COVID-19 – senators can only vote in person, so Schumer will need his full caucus to be present and healthy to pass the measure if Republicans remain unified in opposition.

Sinema said she had reached an agreement with other Democrats to remove a provision that would impose new taxes on carried interest. Without the provision, private equity and hedge fund financiers can continue to pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners.

She cautioned that her agreement to “move forward” was subject to the review of the Senate parliamentarian. The parliamentarian has to approve the contents of the bill to allow it to move forward through the “reconciliation” process that Democrats plan to use to bypass the chamber’s normal rules requiring 60 Senators to agree to advance most legislation.

Schumer, in a statement, said, he believed he now had the votes to pass the bill.

“The agreement preserves the major components of the Inflation Reduction Act, including reducing prescription drug costs, fighting climate change, closing tax loopholes exploited by big corporations and the wealthy, and reducing the deficit by $300 billion,” Schumer said.

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Reporting by Scott Malone, Additional reporting by Shivani Tanna in Bengaluru; Editing by Daniel Wallis, Shri Navaratnam and Tom Hogue

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Business

Global cenbanks lift rates by nearly 1,200 bps in July

Global cenbanks lift rates by nearly 1,200 bps in July

Plastic letters arranged to read “Inflation” are placed on Chinese Yuan banknote in this illustration taken, June 12, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, Aug 3 (Reuters) – Major developed and emerging market central banks around the globe delivered nearly 1,200 basis points in interest rate hikes in July alone, ramping up their fight against multi-decade high inflation with Canada surprising markets with an outsized move.

Central banks overseeing five of the 10 most heavily traded currencies delivered 325 basis points of rate hikes between them last month. This brings the total volume of rate hikes since the start of the year across G10 central banks to 1,100 basis points.

However, July’s tally was less than the 350 basis points seven central banks delivered in June.

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“We’ve reached peak hawkishness of the central banks,” Christian Kopf, head of fixed income portfolio management at Union Investment, told Reuters.

Reuters Graphics Reuters Graphics

“Central banks have made it clear that they will not overdo it with the rate hikes,” Kopf said, adding that it was also the message conveyed by US Federal Reserve chair Jerome Powell.

July was dotted with some eye catching moves. Canada emerged as the chief hawk, stunning markets by delivering the first 100-basis-point rate increase among the world’s advanced economies in the current cycle, lifting its key policy rate to 1.5%.

New Zealand delivered its sixth straight interest rate rise and signaled it remained comfortable with its planned aggressive tightening path to restrain runaway inflation. read more

And then of course the big one: The Fed delivered its second straight 75-basis-point rate hike, reinforcing its commitment to contain red-hot inflation running at 40-year highs. read more

There was no let up for policymakers in emerging markets, where inflation had been on a tear for much longer than in developed economies.

Nine out of 18 central banks delivered 850 bps of rate hikes in July. In total, emerging market central banks have raised interest rates by 5,265 bps year-to-date – nearly double the 2,745 bps for the whole of 2021, calculations show.

“Emerging market central banks remain more worried about inflation than growth,” BofA’s David Hauner said in a recent note to clients.

ReutersGraphics

Hungary moved twice in July, jacking up its base rate by 300 basis points to 10.75% with borrowing costs into double-digit territory for the first time since late 2008 – and flagging more hikes ahead. read more

Colombia and Chile piled in with a 150 bps and 75 bps hike respectively, though emerging market uber-hawk Brazil, which has lifted rates to 13.25 bps already in June, took a breather.

However, emerging markets have also seen cuts with Russia reducing interest rates ratcheted up to 20% in the wake of its Feb. 24 invasion of Ukraine, which sparked sweeping sanctions. read more

Inflation pressures would remain a headache for policy makers, said Tobias Adrian, director at the Monetary and Capital Markets Department at the International Monetary Fund (IMF).

“The magnitude of the inflation has been a surprise to central banks and markets, and there remains substantial uncertainty about the outlook for inflation,” Adrian wrote in a blog on Monday.

“Inflation risks appear strongly tilted to the upside,” Adrian said, adding there was a substantial risk that price pressures were becoming entrenched and expectations unanchored.

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Reporting by Karin Strohecker and Vincent Flasseur in London, Additional reporting by Dhara Ranasinghe; Editing by Jacqueline Wong

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Categories
US

Chinese military begins ‘strategic’ drills around Taiwan – state media

Chinese military begins 'strategic' drills around Taiwan - state media

A map showing locations where Chinese People’s Liberation Army (PLA) will conduct military exercises and training activities including live-fire drills is seen on newspaper reports of US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan, at a newsstand in Beijing, China August 3 , 2022. REUTERS/Tingshu Wang

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BEIJING, Aug 4 (Reuters) – China’s People’s Liberation Army has begun military exercises including live firing on the waters and in the airspace surrounding the island of Taiwan, Chinese state television reported on Thursday.

The drills, spread out across six locations, are due to end at 12:00 pm (0400 GMT) on Sunday. The exercises followed US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan, a trip condemned by Beijing, which claims the self-governed island as its own.

Significantly, in the north, east and south, the exercise areas bisect Taiwan’s claimed 12 nautical miles of territorial waters – something Taiwanese officials say challenges the international order and amount to a blockade of its sea and air space. read more

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The locations encircle the island in an unprecedented formation, Meng Xiangqing, a professor at the National Defense University, told Chinese state television, describing how an actual military operation against Taiwan could play out.

“In fact, this has created very good conditions for us when, in the future, we reshape our strategic landscape conducive to our unification,” Meng said.

Chinese forces in two areas off the northern coast of Taiwan could potentially seal off Keelung, a major port, while strikes could be launched from an area east of Taiwan targeting the military bases in Hualien and Taidong, he said.

The “doors” to Kaoshiung could also be closed by Chinese military off the southwestern coast, Meng said.

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Reporting by Ryan Woo; Editing by Jacqueline Wong & Simon Cameron-Moore

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