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The U.S. government took extraordinary steps Sunday to stop a potential banking crisis after the historic failure of Silicon Valley Bank, assuring depositors at the failed financial institution that they would be able to access all of their money quickly.

The announcement came amid fears that the factors that caused the Santa Clara, California-based bank to fail could spread, and only hours before trading began in Asia. Regulators had worked all weekend to try and come up with a buyer for the bank, which was the second largest bank failure in history. Those efforts appeared to have failed as of Sunday.

In a sign of quickly the financial bleeding was occurring, regulators announced that New York-based Signature Bank had failed and was being seized on Sunday. At more than $110 billion in assets, Signature Bank is the third-largest bank failure in U.S. history.

The Treasury Department, Federal Reserve and FDIC said Sunday that all Silicon Valley Bank clients will be protected and have access to their funds and announced steps designed to protect the bank’s customers and prevent more bank runs.

“This step will ensure that the U.S. banking system continues to perform its vital roles of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the agencies said in a joint statement.

Regulators had to rush to close Silicon Valley Bank, a financial institution with more than $200 billion in assets, on Friday when it experienced a traditional run on the bank where depositors rushed to withdraw their funds all at once. It is the second-largest bank failure in U.S. history, behind only the 2008 failure of Washington Mutual.

Some prominent Silicon Valley executives feared that if Washington didn’t rescue the failed bank, customers would make runs on other financial institutions in the coming days. Stock prices plunged over the last few days at other banks that cater to technology companies, including First Republic Bank and PacWest Bank.

Among the bank’s customers are a range of companies from California’s wine industry, where many wineries rely on Silicon Valley Bank for loans, and technology startups devoted to combating climate change.

Sunrun, which sells and leases solar energy systems, had less than $80 million of cash deposits with Silicon Valley Bank as of Friday and expects to have more information on expected recovery in the coming week, the company said in a statement.

Stitchfix, the popular clothing retail website, disclosed in a recent quarterly report that it had a credit line of up to $100 million with Silicon Valley Bank and other lenders.

Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.

Yellen described rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.

Sheila Bair, who was chairwoman of the FDIC chair during the 2008 financial crisis, recalled that with almost all the bank failures during that time, “we sold a failed bank to a healthy bank. And usually, the healthy acquirer would also cover the uninsured because they wanted the franchise value of those large depositors so optimally, that’s the best outcome.”

But with Silicon Valley Bank, she told NBC’s “Meet the Press,” “this was a liquidity failure, it was a bank run, so they didn’t have time to prepare to market the bank. So they’re having to do that now and playing catch-up.”
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India’s state minister for technology said on Sunday he will meet startups this week to assess the impact on them of Silicon Valley Bank’s collapse, as concerns rise about the fallout for the Indian startup sector. 

California banking regulators shut down Silicon Valley Bank (SVB) on Friday after a run on the lender, which had $209 billion in assets at the end of 2022, with depositors pulling out as much as $42 billion on a single day, rendering it insolvent. 

“Startups are an important part of the new India economy. I will meet with Indian Startups this week to understand impact on them and how the government can help during the crisis,” Rajeev Chandrasekhar, the state minister for IT, said on Twitter. 

India has one of the world’s biggest startup markets, with many clocking multibillion-dollar valuations in recent years and getting the backing of foreign investors, who have made bold bets on digital and other tech businesses. 

SVB’s failure, the biggest in the U.S. since the 2008 financial crisis, has roiled global markets, hit banking stocks and is now unsettling Indian entrepreneurs. 

Two partners at an Indian venture capital fund and one lender to Indian startups told Reuters that they are running checks with portfolio companies on any SVB exposure and if so, whether it is a significant part of their total bank balance. 

Consumer internet startups, which have drawn the bulk of funding in India in recent years, are less affected because they either do not have an SVB account or have minimal exposure to it, the three people said. 

“Spoke to some founders and it is very bad,” Ashish Dave, CEO of Mirae Asset Venture Investments (India), wrote in a tweet. 

“Especially for Indian founders … who setup their U.S. companies and raised their initial round, SVB is default bank. Uncertainty is killing them. Growth ones are relatively safer as they diversified. Last thing founders needed.” 

Software firm Freshworks said it has minimal exposure to the SVB situation relative to the company’s overall balance sheet. 

“As we grew, we brought on larger, diversified banks such as Morgan Stanley, JP Morgan and UBS. The vast majority of our cash and marketable securities today is not held at SVB,” Freshworks said in a blog post, adding that the company does not foresee any disruption to employees or customers. 

Freshworks said it is working with customers and vendors who were using its SVB account to migrate to alternate bank accounts. 

India’s Nazara Technologies Ltd., a mobile gaming company, said in a stock exchange filing that two of its subsidiaries, Kiddopia Inc. and Mediawrkz Inc., hold cash balances totaling $7.75 million or 640 million rupees with SVB. 
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China reappointed Yi Gang as head of the central bank Sunday to reassure entrepreneurs and financial markets by showing continuity at the top while other economic officials change during a period of uncertainty in the world’s second-largest economy.

Yi, whose official title is governor of the People’s Bank of China, plays no role in making monetary policy, unlike his counterparts in other major economies. His official duties lie in “implementing monetary policy,” or carrying out decisions made by a policymaking body whose membership is a secret.

But the central bank governor acts as spokesperson for monetary policy, is the most prominent Chinese figure in global finance and oversees reassuring bankers and investors at a time when China’s economy is emerging from drastically slower growth.

At the March 5 opening of the annual session of China’s rubber-stamp parliament, the National People’s Congress, China announced plans for a consumer-led revival of the struggling economy, setting this year’s growth target at “around 5%.”

Last year’s growth fell to 3%, the second-weakest level since at least the 1970s, putting president and head of the ruling Communist Party Xi Jinping under exceptional pressure to revitalize the economy.

A longtime veteran of monetary policy departments, Yi was first appointed governor of the People’s Bank of China in March 2018, taking over from the highly regarded Zhou Xiaochuan.

Before becoming governor, Yi spent 20 years at the central bank after getting his Ph.D. from the University of Illinois and working as a professor of economics at Indiana University from 1986 to 1994.

He is also a co-founder and professor at Peking University’s China Center for Economic Research.

The party made a similar decision to opt for continuity in 2013, when then-PBOC governor Zhou, who already had been in the job for a decade, stayed on as governor while all other economic regulators changed.

Yi’s reappointment came on the congress’s penultimate day, which also saw Xi loyalists appointed as finance minister and head of the Cabinet planning agency to carry out a program to tighten control over entrepreneurs, reduce debt risks and promote the state-led technology development. Incumbent Wang Wentao was reappointed minister of commerce.

The congress also named four vice premiers, individuals who may be in line for higher office. They include sixth-ranking member of the party’s all-powerful Politburo Standing Committee, Ding Xuexiang, as vice premier overseeing administrative matters. Veteran bureaucrats He Lifeng, Zhang Guoqing and Liu Guozhong were also named to the post. Liu and Zhang were incumbents.

Foreign Minister Qin Gang was also appointed to the position of state councilor, a position also held by Wang Yi, his predecessor and current superior as director of the party’s Office of the Central Foreign Affairs Commission.

Defense Minister Li Shangfu, an aerospace engineer by training, was also named one of the five state councilors, along with Minister of Public Security Wang Xiaohong and Secretary General of China’s Cabinet, known as the State Council, Wu Zhenglong. Shen Yiqin was the only woman named to the position and is China’s highest-ranking female politician.

No women sit on the 24-member Politburo or its standing Committee, and the party’s more-than-200-member Central Committee is 95% male.

A priority for finance officials will be to manage corporate and household debt that Beijing worries has risen to dangerous levels. Tighter debt controls triggered a slump in China’s vast real estate industry in 2021, adding to the COVID-19 pandemic’s downward pressure on the economy.

At the same time, the ruling party is trying to shift money into technology development and other strategic plans. That has prompted warnings that too much political control over emerging industries could waste money and hamper growth.

Xi has favored promoting officials who sometimes lack the experience of their predecessors and exposure to global industry and finance markets. That reflects Xi’s effort to purge the Chinese system of Western influence and promote homegrown strategies.
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Treasury Secretary Janet Yellen said Sunday that the federal government would not bail out Silicon Valley Bank, but is working to help depositors who are concerned about their money.

The Federal Deposit Insurance Corporation insures deposits up to $250,000, but many of the companies and wealthy people who used the bank — known for its relationships with technology startups and venture capital — had more than that amount in their account. There are fears that some workers across the country won’t receive their paychecks.

Yellen, in an interview with CBS’ “Face the Nation,” provided few details on the government’s next steps. But she emphasized that the situation was much different from the financial crisis almost 15 years ago, which led to bank bailouts to protect the industry.

“We’re not going to do that again,” she said. “But we are concerned about depositors, and we’re focused on trying to meet their needs.”

With Wall Street rattled, Yellen tried to reassure Americans that there will be no domino effect after the collapse of Silicon Valley Bank.

“The American banking system is really safe and well capitalized,” she said. “It’s resilient.”

Silicon Valley Bank is the nation’s 16th-largest bank. It was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008. The bank served mostly technology workers and venture capital-backed companies, including some of the industry’s best-known brands.

Silicon Valley Bank began its slide into insolvency when its customers, largely technology companies that needed cash as they struggled to get financing, started withdrawing their deposits. The bank had to sell bonds at a loss to cover the withdrawals, leading to the largest failure of a U.S. financial institution since the height of the financial crisis.

Yellen described rising interest rates, which have been increased by the Federal Reserve to combat inflation, as the core problem for Silicon Valley Bank. Many of its assets, such as bonds or mortgage-backed securities, lost market value as rates climbed.

“The problems with the tech sector aren’t at the heart of the problems at this bank,” she said.

Yellen said she expected regulators to consider “a wide range of available options,” including the acquisition of Silicon Valley Bank by another institution. So far, however, no buyer has stepped forward.

Tom Quaadman, executive vice president of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, said in a statement, “We urge the administration to facilitate a quick acquisition, guaranteeing all bank depositors have access to their cash.”

Regulators seized the bank’s assets on Friday. Deposits that are insured by the federal government are supposed to be available by Monday morning.

“I’ve been working all weekend with our banking regulators to design appropriate policies to address this situation,” Yellen said. “I can’t really provide further details at this time.”

House Speaker Kevin McCarthy, R-Calif., told Fox News Channel’s “Sunday Morning Futures” that he hoped the administration would announce the next steps as soon as Sunday.

“They do have the tools to handle the current situation, they do know the seriousness of this and they are working to try to come forward with some announcement before the markets open,” he said.

McCarthy also expressed hope that Silicon Valley Bank would be purchased.

“I think that would be the best outcome to move forward and cool the markets and let people understand that we can move forward in the right manner,” he said.

Sen. Mark Warner, D-Va., said in an interview with ABC News’ “This Week” that he was concerned that the bank’s collapse could prompt nervous people to transfer money from other regional banks to larger institutions.

“We don’t want further consolidation,” he said.

Warner suggested there would be a “moral hazard” in reimbursing depositors in excess of the $250,000 limit and said an acquisition would be the best next step.

“I’m more optimistic this morning than I was yesterday afternoon at this time,” he said. “But, again, we will see how this plays out during the rest of the day.”

He added: “What we’ve got to focus on right now is how do we make sure there’s not contagion.”

President Joe Biden and Gov. Gavin Newsom, D-Calif., spoke about “efforts to address the situation” on Saturday, although the White House did not provide additional details on next steps.

Newsom said the goal was to “stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”
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Oil giant Saudi Aramco reported Sunday its profits surged to $161 billion last year off higher crude prices, a record result for an energy firm crucial to the kingdom’s economy.

The firm, known formally as the Saudi Arabian Oil Co., said in its annual report that the profit represented “its highest annual profits as a listed company.” That came off the back of energy prices rising after Russia launched its war on Ukraine in February 2022, with sanctions limiting the sale of Moscow’s oil and natural gas in Western markets.

Aramco also hopes to increase its production to take advantage of market demand, raising the billions needed to pay for Crown Prince Mohammed bin Salman’s plans to develop futuristic cityscapes to pivot Saudi Arabia away from oil.

However, those plans come despite growing international concerns over the burning of fossil fuels accelerating climate change.

“Given that we anticipate oil and gas will remain essential for the foreseeable future, the risks of underinvestment in our industry are real — including contributing to higher energy prices,” Saudi Aramco CEO and President Amin H. Nasser said in a statement.

Profits rose 46.5% when compared to the company’s 2021 results of $110 billion. It earned $49 billion in 2020 when the world faced the worst of the coronavirus pandemic lockdown, travel disruptions and oil prices briefly going negative.

Aramco put its crude production at around 11.5 million barrels a day in 2022 and said it hoped to reach 13 million barrels a day by 2027.

To boost that production, it plans to spend as much as $55 billion this year on capital projects.

Aramco also declared a dividend of $19.5 billion for the fourth quarter of 2022, to be paid in the first quarter of this year.

Aramco’s results, viewed as a bellwether for the global energy market, mirror the huge profits seen at those of U.K. energy giant BP,America’s Exxon Mobil, Shell and others in 2022.

Benchmark Brent crude oil now trades around $82 a barrel, though prices had reached over $120 a barrel back in June. Aramco, whose fortunes hinge on global energy prices, announced a record $42.4 billion profit in the third quarter of 2022 off the back of that price spike.

Those high prices have further strained ties between the kingdom and the United States, traditionally a security guarantor among the Gulf Arab states amid tensions with Iran. Before the midterm elections in November, the kingdom said the Biden administration sought to delay a decision by OPEC and allies including Russia to cut production that could have kept gasoline prices lower for voters — making public the typically behind-the-scenes negotiations common in the region.

President Joe Biden had warned the kingdom that “there’s going to be some consequences for what they’ve done” in terms of oil prices. However, those consequences have yet to be seen as Saudi Arabia and Iran went to China to strike a diplomatic deal Friday. U.S. gasoline prices now stand on average at $3.47 a gallon, down just about a dollar from last year.

For the kingdom, higher crude oil prices can help fuel the dreams of Prince Mohammed, including his planned $500 billion futuristic desert city project called Neom. However, they also run against the fears of activists over climate change, particularly as the United Nations’ COP28 climate talks will begin this November in the neighboring United Arab Emirates.

Saudi Arabia has pledged to have net-zero carbon emissions by 2060, like China and Russia, though its plans to reach that goal remain unclear. Aramco’s earnings report noted it started a $1.5 billion Sustainability Fund in October and plans a carbon-capture-and-storage facility as well.

Saudi Arabia’s vast oil resources, located close to the surface of its desert expanse, make it one of the world’s least expensive places to produce crude. For every $10 rise in the price of a barrel of oil, Saudi Arabia stands to make an additional $40 billion a year, according to the Institute of International Finance.

Shares in Aramco stood at $8.74 on Riyadh’s Tadawul stock exchange before it opened Sunday. That’s down from a high of $11.55 a share in the last year. However, that current price still gives Aramco a valuation of $1.9 trillion — making it the world’s second most valuable company behind only Apple.

The Saudi government still owns the vast majority of the firm’s shares. Saudi Aramco publicly listed a sliver of its worth back in late 2019.

Aramco will release a comprehensive earnings report Monday.
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It was called Silicon Valley Bank, but its collapse is causing shockwaves around the world.

From winemakers in California to startups across the Atlantic Ocean, companies are scrambling to figure out how to manage their finances after their bank suddenly shut down Friday. The meltdown means distress not only for businesses but also for their workers whose paychecks could get tied up in the chaos.

California Governor Gavin Newsom said Saturday that he’s talking with the White House to help “stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”

U.S. customers with less than $250,000 in the bank can count on insurance provided by the Federal Deposit Insurance Corp. Regulators are trying to find a buyer for the bank in hopes customers with more than that can be made whole.

That includes customers such as Circle, a big player in the cryptocurrency industry. It said it has about $3.3 billion of the roughly $40 billion in reserves for its USDC coin at SVB. That caused USD Coin’s value, which tries to stay firmly at $1, to briefly plunge below 87 cents Saturday. It later rose back above 97 cents, according to CoinDesk.

Across the Atlantic, startup companies woke up Saturday to find SVB’s U.K. business will stop making payments or accepting deposits. The Bank of England said late Friday that it will put Silicon Valley Bank U.K. in its insolvency procedure, which will pay out eligible depositors up to 170,000 British pounds ($204,544) for joint accounts “as quickly as possible.”

“We know that there are a large number of startups and investors in the ecosystem who have significant exposure to SVB UK and will be very concerned,” Dom Hallas, executive director of Coadec, which represents British startups, said on Twitter. He cited “concern and panic.”

The Bank of England said SVB UK’s assets would be sold to pay creditors.

It’s not just startups feeling the pain. The bank’s collapse is having an effect on another important California industry: fine wines. It’s been an influential lender to vineyards since the 1990s.

“This is a huge disappointment,” said winemaker Jasmine Hirsch, the general manager of Hirsch Vineyards in California’s Sonoma County.

Hirsch said she expects her business will be fine. But she’s worried about the broader effects for smaller vintners looking for lines of credit to plant new vines.

“They really understand the wine business,” Hirsch said. “The disappearance of this bank, as one of the most important lenders, is absolutely going to have an effect on the wine industry, especially in an environment where interest rates have gone up.”

In Seattle, Shelf Engine CEO Stefan Kalb found himself immersed in emergency meetings devoted to figuring out how to meet payroll instead of focusing on his startup company’s business of helping grocers manage their food orders.

“It’s been a brutal day. We literally have every single penny in Silicon Valley Bank,” Kalb said Friday, pegging the deposit amount that’s now tied up at millions of dollars.

He is filing a claim for the $250,000 limit, but that won’t be enough to keep paying Shelf Engine’s 40 employees for long. That could force him into a decision about whether to begin furloughing employees until the mess is cleaned up.

“I’m just hoping the bank gets sold during the weekend,” Kalb said.

Tara Fung, co-founder and CEO of tech startup Co:Create that helps launch digital loyalty and rewards programs, said her firm uses multiple banks besides Silicon Valley Bank so was able switch over its payroll and vendor payments to another bank Friday.

Fung said her firm chose the bank as a partner because it is the “gold standard for tech firms and banking partnerships,” and she was upset that some people seemed to be gloating about its failure and unfairly tying it to doubts about cryptocurrency ventures.

San Francisco-based employee performance management company Confirm.com was among the Silicon Valley Bank depositors that rushed to pull their money out before regulators seized the bank.

Co-founder David Murray credits an email from one of Confirm’s venture capital investors, which urged the company to withdraw its funds “immediately,” citing signs of a run on the bank. Such actions accelerated the flight of cash, which led to the bank’s collapse.

“I think a lot of founders were sharing the logic that, you know, there’s no downside to pulling up the money to be safe,” Murray said. “And so, we all did that, hence the bank run.”

The U.S. government needs to act more quickly to stanch further damage, said Martín Varsavsky, an Argentinian entrepreneur who has investments across the tech industry and Silicon Valley.

One of his companies, Overture Life, which employs about 50 people, had some $1.5 million in deposits in the financially embattled bank but can rely on other holdings elsewhere to meet payroll.

But other companies have high percentages of their cash in Silicon Valley Bank, and they need access to more than the amount protected by the FDIC.

“If the government allows people to take at least half of the money they have in Silicon Valley Bank next week, I think everything will be fine,” Varsavsky said Saturday. “But if they stick to the $250,000, it will be an absolute disaster in which so many companies won’t be able to meet payroll.”
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America’s employers added a substantial 311,000 jobs in February, fewer than January’s huge gain but enough to keep pressure on the Federal Reserve to raise interest rates aggressively to fight inflation.

The unemployment rate rose to 3.6%, from a 53-year low of 3.4%, as more Americans began searching for work but not all of them found jobs.

Friday’s report from the government made clear that the nation’s job market remains fundamentally healthy, with many employers still eager to hire. Fed Chair Jerome Powell told Congress this week that the Fed would likely ratchet up its rate hikes if signs continued to point to a robust economy and persistently high inflation. A strong job market typically leads businesses to raise pay and then pass their higher labor costs on to customers through higher prices.

February’s sizable job growth shows that so far, hiring is continuing to strengthen this year after having eased in late 2022. From October through December, the average monthly job gain was 284,000. That average has surged to 351,000 for the past three months.

Economists pointed to other data in Friday’s report that suggested that the job market, while still hot, may be better balancing employers’ need for workers and the supply of unemployed people. More people have been coming off the sidelines to seek work, a trend that makes it easier for businesses to fill the millions of jobs that remain open.

The proportion of Americans who either have a job or are looking for one has risen for three straight months to 62.5%, the highest level since COVID struck three years ago. Still, it remains below its pre-pandemic level of 63.3%.

With more potential hires to choose from, employers seem under less pressure now to dangle higher pay to attract or retain workers. Average wage growth slowed in February, rising just 0.2%, to $33.09, the smallest monthly increase in a year. Measured year over year, though, hourly pay is up 4.6%, well above the pre-pandemic trend. Even so, that’s down from average annual gains above 5% last year.

What the Fed may decide to do about interest rates when it meets later this month remains uncertain. The Fed’s decision will rest, in part, on its assessment of Friday’s jobs data and next week’s report on consumer inflation in February. Last month, the government’s report on January inflation had raised alarms by showing that consumer prices had reaccelerated on a month-to-month basis.

Ahead of the February jobs data, many economists had said they thought the Fed would announce a substantial half-point increase in its key short-term interest rate, rather than a quarter point hike as it did at its meeting in February. Friday’s more moderate hiring and wage figures, though, led some analysts to suggest that the central bank may not need to move so aggressively at this month’s meeting.

“There’s clear signs of cooling when you dig deeper into the numbers,” said Mike Skordeles, head of economics at Truist, a bank. “I think it makes the case for the Fed to say … we’ll still hike rates, but we’re not going to do” a half-point hike.

The Fed’s final determination, though, will rest heavily on Tuesday’s report on consumer prices.

“Everything now hinges on February’s CPI report,” said Paul Ashworth, an economist at Capital Economics.

When the Fed tightens credit, it typically leads to higher rates on mortgages, auto loans, credit card borrowing and many business loans. Its rate hikes can cool spending and inflation, but they also raise the risk of a recession.

Even for workers who have received substantial pay raises, ongoing high inflation remains a burden. Consumer prices rose 6.4% in January compared with a year ago, driven up by the costs of food, clothing and rents, among other items.

Frustrated by wages that aren’t keeping up with inflation, Rodney Colbert, a cook at the Las Vegas convention center, joined a strike Thursday by the Culinary Workers union to demand better pay and benefits. Colbert said that his hourly pay was $4-$5 less than what cooks were paid at casinos on the Las Vegas Strip.

“I’ll average approximately 28 hours a week, and that’s not enough,” Colbert said. “Just in the past two years, my rent has gone up $400, so that’s a lot.”

Nationally, nearly all of last month’s hiring occurred in mostly lower-paid services industries, with a category that includes restaurants, bars, hotels and entertainment adding 105,000 jobs, its second straight month of strong gains. Warmer-than-usual weather likely contributed to the increase. With the weather likely allowing more building projects to continue, construction companies added 24,000 jobs.

Retailers added about 50,000 jobs last month, health care providers 63,000. Local and state governments — some of them flush with cash from stimulus programs — added 46,000 jobs.

Much of that job growth reflects continuing demand from Americans who have been increasingly venturing out to shop, eat out, travel and attend entertainment events — activities that were largely restricted during the height of COVID.

“We’ve created more jobs in two years than any administration has created in the first four years,” President Joe Biden said Friday about the employment report. “It means our economic plan is working.”

Economists note, however, that the very strength of the job market is itself contributing to the high inflation that continues to pressure millions of households.

In February, in contrast to the solid hiring in the services sector, manufacturers cut 4,000 jobs. And a sector that includes technology and communications workers shed 25,000 jobs, its third straight month of losses. It is a sign that some of the announced layoffs in the economy’s tech sector are being captured in the government’s data.

Last month, the government reported a surprising burst of hiring for January — 517,000 added jobs — though that gain was revised down slightly to 504,000 in Friday’s report. The vigorous job growth for January was the first in a series of reports to point to an accelerating economy at the start of the year. Sales at retail stores and restaurants also jumped, and inflation, according to the Fed’s preferred measure, rose from December to January at the fastest pace in seven months.

The stronger data reversed a cautiously optimistic narrative that the economy was cooling modestly — just enough, perhaps, to tame inflation without triggering a deep recession. Now, the economic outlook is hazier.
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The United States rushed to seize the assets of Silicon Valley Bank on Friday after it experienced a run on the bank.

Silicon Valley, the nation’s 16th-largest bank, failed after depositors — mostly technology workers and venture capital-backed companies — hurried to withdraw money this week as anxiety over the bank’s balance sheet spread. It is the second biggest bank failure in U.S. history, behind Washington Mutual during the height of the financial crisis more than a decade ago.

Silicon Valley was heavily exposed to the tech industry and there is little chance of contagion in the banking sector similar to the chaos in the months leading up to the Great Recession more than a decade ago. The biggest banks — those most likely to cause a systemic economic issue — have healthy balance sheets and plenty of capital.

In 2007, the biggest financial crisis since the Great Depression rippled across the globe after mortgage-backed securities tied to ill-advised housing loans rippled from the United States to Asia and Europe. The panic on Wall Street led to the collapse of the storied Lehman Brothers, founded in 1847. Because major banks had extensive exposure to one another, it led to cascading disruption throughout the global financial system, putting millions out of work.

There has been unease in the banking sector all week and the collapse of Silicon Valley pushed shares of almost all financial institutions lower Friday, shares that had already tumbled by double digits since Monday.

Silicon Valley Bank’s failure arrived with incredible speed, with some industry analysts on Friday suggesting it was a good company and still likely a wise investment. Silicon Valley Bank executives were trying to raise capital early Friday and find additional investors. However, trading in the bank’s shares was halted before the opening bell on Wall Street because of extreme volatility.

Shortly before noon eastern, the Federal Deposit Insurance Corporation moved to shutter the bank. Notably, the FDIC did not wait until the close of business to seize the bank, as is typical in an orderly wind down of a financial institution. The FDIC could not immediately find a buyer for the bank’s assets, signaling how fast depositors had cashed out. The bank’s remaining uninsured deposits will now be locked up in receivership.

The bank had $209 billion in total assets at the time of failure, the FDIC said. It was unclear how much of its deposits were above the $250,000 insurance limit at the moment, but previous regulatory reports showed that much of Silicon Valley Bank’s deposits exceeded that limit.

The FDIC said Friday that deposits below the $250,000 limit would be available Monday morning.

Silicon Valley Bank appeared stable this year, but on Thursday it announced plans to raise up to $1.75 billion to strengthen its capital position. That sent investors scurrying and shares plunged 60%. They fell further on Friday before the opening of the Nasdaq, where it is traded.

As its name implied, Silicon Valley Bank was a major financial conduit between the technology sector, its founders and startups as well as its workers. Hundreds of companies held their operating capital with the bank, and it was seen as good business sense to develop a relationship with Silicon Valley Bank if a founder wanted to find new investors or go public.

“We saw building a relationship with Silicon Valley Bank as a logical step, given their reach,” said Ashley Tyrner, CEO of FarmboxRx, a company that delivers food as medicine to Medicaid and Medicare recipients. While Tyrner has money in other banks and can make payroll, she said a good portion of her business’ profits are now locked up with the bank.

Silicon Valley’s connections to the tech sector became a liability rapidly. Technology stocks have been hit hard in the past 18 months after a growth surge during the pandemic and layoffs have spread throughout the industry.

At the same time, the bank was hit hard by the Federal Reserve’s fight against inflation and an aggressive series of interest rate hikes to cool the economy.

As the Fed raises its benchmark interest rate, the value of bonds, typically a stable asset, start to fall. That is not typically a problem as the declines lead to “unrealized losses,” or losses that are not counted against them when calculating the capital cushion than banks can use should there be a downturn in the future.

However, when depositors grow anxious and begin withdrawing their money, banks sometimes have to sell those bonds before they mature to cover that exodus.

That is exactly what happened to Silicon Valley Bank, which had to sell $21 billion in highly liquid assets to cover the exodus of deposits. It took a $1.8 billion loss on that sale.

Tyrner said she’s spoken to several friends who are backed by venture capital. She described those friends as being “beside themselves” over the bank’s failure. Tyrner’s chief operating officer tried to withdraw her company’s funds on Thursday but failed to do so in time.

“One friend said they couldn’t make payroll today and cried when they had to inform 200 employees because of this issue,” Tyrner said.
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A global shortage of semiconductor chips in the automotive industry starting in 2020 has motivated many countries to increase their domestic manufacturing. The United States has allocated more than $50 billion to promote semiconductor production and research stateside as the global need for the chips is expected to double over the next decade. Keith Kocinski has more from New York.
Camera: Keith Kocinski and Rendy Wicaksana
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Sri Lanka looks set to get a sign-off on a long-awaited $2.9 billion four-year bailout from the International Monetary Fund (IMF) on March 20 after the crisis-hit country secured new financing support from China.

The IMF and the island nation confirmed on Tuesday that Sri Lanka had received assurances from all its major bilateral creditors, a key step to deploy financing and an important moment for the country engulfed in its worst economic crisis since independence from Britain in 1948.

Sri Lankan President Ranil Wickremesinghe told parliament there were signs the economy was improving, but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.

“Sri Lanka has completed all prior actions that were required by the IMF,” Wickremesinghe said, and that he and the central bank governor had sent a letter of intent to the IMF.

“I welcome the progress made by Sri Lankan authorities in taking decisive policy actions & obtaining financing assurances from all their major creditors, incl. China, India & the Paris Club,” IMF chief Kristalina Georgieva said on Twitter, adding that she looked forward to presenting the IMF-supported program to the executive board on March 20.

Approval is expected since the board generally will not add items to its agenda unless its members are ready to act.

The country’s international debt and currency soared higher on the news, with bonds adding around 3 cents in the dollar, while the Sri Lankan rupee jumped as much as 7.8% to a 10-month high. Stocks closed more than 2% higher.

A new letter by the Export-Import Bank of China (EXIM) sent on Monday to Sri Lanka resolved the stalemate. Sources close to the talks said EXIM provided “specific and credible” financing assurances for a debt restructuring, with a specific link to the IMF program and clear language on debt sustainability.

The first tranche of funding was expected to be released shortly after the board meeting, the sources added.

In a letter in January, EXIM had offered Sri Lanka a two-year debt moratorium, but sources said this was not enough to meet IMF conditions.

“This is a positive development: it might be the first time that China provides textbook financing assurances to the IMF outside of a Common Framework process,” said Theo Maret, senior research analyst at Global Sovereign Advisory, in Paris.

By end-2020, Sri Lanka owed EXIM $2.83 billion, or 3.5% of its external debt, according to IMF data. In total, Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of public external debt, by end-2022, calculations by the China Africa Research Initiative showed.

IMF financing provides an anchor for countries to unlock other funding sources. Sri Lanka was in negotiations with India, its second biggest creditor, to extend a $1 billon credit line due to expire by March 17, two sources said.

Sri Lanka needs to repay about $6 billion on average each year until 2029 and will have to keep engaging with the IMF, Wickremesinghe said.

Countries in debt distress such as Zambia and Sri Lanka have faced unprecedented delays in securing IMF bailouts as China and Western economies have clashed over how to provide debt relief.

Sri Lanka has been waiting for about 187 days to finalize a bailout after reaching a preliminary deal. This compares to a median of 55 days it took low- and middle-income countries over the past decade to go from preliminary deal to board sign-off, according to data compiled by Reuters.

“Debt restructurings both within and outside the Common Framework have been taking longer than usual due to issues with creditor coordination and foot-dragging by China,” said Patrick Curran at Tellimer. “The restructurings in Sri Lanka and Zambia are likely to set important precedents for future restructurings.”

Chinese Foreign Minister Qin Gang said on Tuesday that Beijing would continue to participate in the settlement of international debt problems in a constructive manner.

Responding to a question on the sidelines of an annual parliament meeting, Qin also said China should be the last to be accused of causing debt traps and called on other parties to share the burden.
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Federal Reserve Chair Jerome Powell said Tuesday the U.S. economy is advancing at a faster pace than expected, which could prompt central bank policy makers to raise interest rates at a faster pace than originally planned to curb spending and borrowing in hopes of reining in the continuing increase in consumer prices.

Policy makers at the central bank had signaled their intent to increase its benchmark interest rate by a quarter of a percentage point at upcoming meetings over several months. But Powell told the Senate Banking Committee that may not be enough to curb the U.S. inflation rate, which rose 6.4% over the 12 months ending in January, about three times the 2% pace the Fed considers acceptable.

“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”

The Fed raised its benchmark interest rate, which affects borrowing costs for both businesses and consumers, by a quarter-point to a range between 4.5% and 4.75% last month, easing the pace of rate boosts following increases of a half percentage point in December and 0.75% in November.

The Fed had projected increasing the rate to between 5% and 5.5% and keeping it there until 2024, but the faster economic growth could alter those plans and push policy makers to increase the benchmark rate even higher.

“We will continue to make our decisions meeting by meeting,” Powell said. “Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy.”

Some U.S. economists have continued to predict that the economy, the world’s largest, will dip into a recession in the coming months, but that has yet to occur. Employers continue to add hundreds of thousands of new workers to their payrolls month after month — 517,000 in January alone — and the national unemployment rate is 3.4%, a 53-year low.

A report for hiring in February is due out Friday.

Fed policy makers last met February 1, but economic data revisions since then showed consumer price increases and the demand for more workers late last year didn’t slow as much as first reported.   

A robust labor market is usually favorable for workers looking for higher pay and hundreds of thousands of U.S. workers have switched jobs for bigger salaries as the country continues to recover from the 2020 coronavirus pandemic.

Powell told lawmakers that “strong wage growth is good for workers but only if it is not eroded by inflation.”

“We have more work to do,” he said. “Our policy actions are guided by our dual mandate to promote maximum employment and stable prices. Without price stability, the economy does not work for anyone.”
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On a recent winter weekday at Penn Station Shoe Repair and Shoe Shine, men hop onto shoeshine chairs and pull out newspapers and phones to read while shoeshiners get to work applying polish and elbow grease to loafers, boots and other leather shoes. When finished, these customers hand over $8 in cash at a counter where a sign reads “We’re not God, but we do save soles.”

Shoeshining has a vaunted history in the U.S. In the 1860s, Horatio Alger popularized the “rags-to-riches” American narrative with his book “Ragged Dick” about a shoeshiner (or “bootblack”) who works his way up to wealth. “Shoeshine boys” (and occasional girls) have subsequently been in countless movies and TV shows.

Today, the tradition of getting a quick polish from a rag-toting shoeshiner is greatly diminished, and many stands similar to the one in Penn Station have disappeared across the country. The decline has been exacerbated by the pandemic, remote working and the rise in popularity of more casual workwear when people did return to the office. SC Johnson, which makes the biggest shoe polish brand, Kiwi, even said in January that it had stopped selling the brand in the U.K. due to softening demand (they still sell it in the U.S.) 

The last time the Census listed shoeshining as a discrete business was 2007, when only 30 establishments were counted. The more-encompassing shoe repair market has declined an estimated 23% between 2013 and 2023 to $307 million, according to market research firm IBISWorld. Shoe polish sales in 2022 totaled 27.3 million units, down 29% compared with 2019, according to figures from Nielsen, a sign of the changes brought on by the pandemic. 

Nisan Khaimov, who owns the Penn Station stand, said his stand would shine 80 to 100 shoes each workday before the pandemic. Now it’s between 30 to 50 on Tuesday to Thursday, and even fewer on Mondays and Fridays. Hybrid work is hurting his business.

“Until people come back to work, the problems will not be solved,” said Khaimov, who benefits from commuters traveling in and out of New York City who can’t get their shoes shined where they live. “And it’s not good for landlords and for tenants also like us. So, we’re waiting. But eventually it will go back to normal, we hope. But when we don’t know.”

Rory Heenan, 38, an accountant in Philadelphia, said that as a young boy he would take the train with his father on his way to work one Friday each month and watch him get a shoeshine.

“I would just sit here as a a little guy, you know, observing,” he said. “And here I am, you know, 30 years later, doing the same thing. So, it’s certainly something that’s passed down over time.”

Across town, in the corridor between the subway and The Port Authority bus terminal, Jairo Cardenas is also feeling the pinch. Business at Alpha Shoes Repair Corp., which he’s run for 33 years, is down 75% compared with prior to the pandemic. He’s down to one shoeshiner, from the three he employed before the pandemic. His shoeshiners used to shine 60 or 70 shoes a day. Now a good day is 10 to 15 shines.

Cardenas’ landlord gave him a break on rent, but he’s still struggling, and has seen several other shoeshine stores in the area close. Still, he is noticing an uptick in people returning to work and hopes business slowly returns to normal by the spring.

Shoe repairs typically bring in more money than shines. At David Mesquita’s Leather Spa, which operates five shoe repair and shoeshine businesses, including two in Grand Central, the bulk of the business comes from shoe, handbag and garment repair. But shoeshines are still a key offering to draw people in to Leather Spa locations since they’re not available everywhere.

Pre-pandemic, Leather Spa had four shoeshine chairs in Grand Central and six shoeshiners rotating, who would do about 120 shines a day. Nowadays, there are three shoeshiners who do 40 or 50 shines on the best days.

But Mesquita is seeing people slowly coming back. His December 2022 shoeshine numbers were up 52% compared with December 2021. Mondays and Fridays are less busy than the middle of the week due to office workers’ hybrid schedules.

“Traffic is slowly coming back in, we’re seeing the commuters come in and everything, but we’re still not back 100% of what we were,” Mesquita said.

Mesquita said shoeshining is not something that will go away completely.

“I think it’s just a little luxury,” he said. “People like to treat themselves, you know, whether it’s once a week or twice a week or, you know, once every two weeks. It’s just nice.”

Besides big city transit hubs, airports are one of the few remaining spots to reliably get a shoeshine. Jill Wright owns Executive Shine, which operates shoeshine stations in the Denver and Charlotte airports. Her business was devastated when air travel shut down.

When airports started to reopen, they were empty. The only people getting their shoes shined were pilots and crew, she said, which kept her company in business. Now, Wright says her businesses is still just 35% of what it was in 2019.

“Travel has really changed,” she said. “Companies are starting to come back but not to the degree that they were.”

Business travel is rebounding, but the U.S. Travel Association predicts 2023 business trips will still be down 10% from 2019, and will return to pre-pandemic levels in 2024. Meanwhile, people are dressing differently when they travel. Instead of traveling in workwear, some travelers that still want to get their shoes shined will travel in tennis shoes, pull out their dress shoes to get a shine, and then put them back in their bag, Wright said.

Like Mesquita, Wright expects demand for shoeshines will never go away completely, because it’s more than just a transactional service. A shine is a moment of connection between two people, particularly at an airport where there is a lot of rushing around and stress, she said.

“People come for a shoeshine, but they also come for the connection and for the conversation and just for a place to relax and talk and be seen and feel some compassion,” she said. 
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China’s government announced plans to promote a consumer-led revival of the nation’s struggling economy as its legislature opened a session Sunday that will tighten President Xi Jinping’s control over business and society.

Premier Li Keqiang, the top economic official, set this year’s official growth target “around 5%” following the end of anti-virus controls that kept millions of people at home and triggered protests. Growth last year fell to 3%, the second-weakest level since at least the 1970s.

“We should give priority to the recovery and expansion of consumption,” Li said in a nationally televised speech on government plans before the ceremonial National People’s Congress in the Great Hall of the People in central Beijing.

The full meeting of the 2,977 members of the NPC is the year’s highest-profile event but its work is limited to endorsing decisions made by the ruling Communist Party and showcasing official initiatives.

This month, the NPC is set to endorse the appointment of a government of Xi loyalists including a new premier after the 69-year-old president expanded his status as China’s most powerful figure in decades by awarding himself a third five-year term as party general secretary in October, possibly preparing to become leader for life. Li, an advocate of free enterprise, was forced out as the No. 2 party leader in October.

Xi’s new leadership team will face challenges ranging from weak global demand for exports and lingering U.S. tariff hikes in a feud over technology and security to curbs on access to Western processor chips because of security fears. Beijing’s relations with Washington and its Asian neighbors have been strained by disputes over technology, security and control of the South China Sea.

In his report Sunday, the premier called for accelerating industrial and technology development, an area in which Beijing’s state-led efforts have strained relations with Washington and other trading partners. They complain China steals or pressures foreign companies to hand over technology and improperly subsidizes and shields its fledgling competitors in violation of its market-opening commitments.

Xi earlier singled out encouraging jittery consumers and entrepreneurs to spend and invest as a priority at the ruling party’s economic planning meeting in December.

Beijing needs to “fully release consumption potential,” Xi said, according to a text released last month.

Since taking power in 2012, Xi has promoted an even more dominant role for the ruling party. He has called for the party to return to its “original mission” as China’s economic, social and cultural leader and carry out the “rejuvenation of the great Chinese nation.”

Xi has crushed dissent, stepped up censorship and control over information, and tightened control over Hong Kong.

Xi’s government has tightened control over China’s biggest e-commerce and other tech companies with anti-monopoly and data security crackdowns that wiped billions of dollars off their stock market value. Beijing is pressing them to pay for social welfare and official initiatives to develop processor chips and other technology.

That has prompted warnings economic growth will suffer.

Li’s report Sunday reinforced the importance of state industry. It promised to support entrepreneurs who generate China’s new jobs and wealth but also said the government will “enhance the core competitiveness” of state-owned companies that dominate industries from banking and energy to telecoms and steel.

Li also called for “resolute steps” to oppose formal independence for Taiwan, the self-ruled island democracy claimed by Beijing as part of its territory. He called for “peaceful reunification” between China and Taiwan, which split in 1949 after a civil war, but announced no initiatives.

Taiwan never has been part of the People’s Republic of China, but Beijing says it is obligated to unite with the mainland, by force if necessary. Xi’s government has stepped up efforts to intimidate the island by flying fighter jets and bombers nearby and firing missiles into the ocean.

Chinese economic growth has struggled since mid-2021, when tighter controls on debt that Beijing worries is dangerously high triggered a slump in the vast real estate industry, which supports millions of jobs. Smaller developers were forced into bankruptcy and some defaulted on bonds, causing alarm in global financial markets.

Longer term, the workforce has been shrinking for a decade, putting pressure on plans to increase China’s wealth and global influence.

Consumer spending is gradually recovering, but the International Monetary Fund and some private sector economists forecast growth this year as low as 4.4%, well below the official target.

A measure of factory activity rose to a nine-year high in February. Other measures of activity including the number of subway passengers and express deliveries rose.

A central bank official said Friday real estate activity is recovering and lending for construction and home purchases is rising.

A recovery based on consumer spending is likely to be more gradual than one driven by stimulus spending or a boom in real estate investment. But Chinese leaders are trying to avoid reigniting a rise in debt and want to nurture self-sustaining growth based on consumption instead of exports and investment.

The official in line to become premier is Li Qiang, a former party secretary of Shanghai who is close to Xi but has no government experience at the national level. Li Qiang was named No. 2 party leader in October.

That reflects Xi’s emphasis on promoting officials with whom he has personal history and bypassing party tradition that leadership candidates need experience as Cabinet ministers or in other national-level posts.

If achieved, the official growth target would be an improvement over last year but down sharply from 2021’s 8.1%.
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On a blustery late-winter day in Shakespeare’s birthplace, the foyer of the Other Place theater is a cozy refuge. Visitors are having meetings over coffee, checking emails, writing poetry, learning to sew.

It looks and feels like an arty café in the picturesque streets of Stratford-upon-Avon, but it’s a “warm hub” set up by the Royal Shakespeare Company drama troupe to welcome people struggling to heat their homes because of sky-high energy prices.

Warm hubs have sprouted across Britain by the thousands this winter as soaring food and energy prices drive millions to turn down the thermostat or skimp on hot meals. Research by the opposition Labour Party counted almost 13,000 such hubs, funded by a mix of charities, community groups and the government and nestled in libraries, churches, community centers and even a tearoom at King Charles III’s Highgrove country estate.

Wendy Freeman, an artist, writer and seventh generation Stratfordian, heard about the RSC’s warm hub from a friend. She lives in “a tiny house with no central heating” and relies on a coal fire for warmth. Like many, she has cut back in response to the cost-of-living crisis driven by the highest inflation since the 1980s.

“You just adapt,” said Freeman, 69, who was using the center as a warm, quiet place to work on a poem. “Little things, like putting less water in the kettle. I was brought up with ‘save the pennies, and the pounds will look after themselves.’ I always cook from scratch and eat what’s in season.

“But it’s nice to go somewhere warm,” she added.

A perfect storm of Russia’s war in Ukraine, lingering pandemic disruption and economic aftershocks of Brexit is putting more people in Britain under financial strain. Households and businesses were hit especially hard after Russia’s invasion of Ukraine drove up the cost of natural gas needed for heating and helped push the U.K. to the precipice of a recession.

The U.K.’s annual inflation rate was just above 10% in January, with food prices up almost 17% over the year. Some 62% of adults are using less natural gas or electricity to save money, according to the Office for National Statistics. A quarter of households regularly run out of money for essentials, pollster Survation found.

Though oil and natural gas prices have fallen from last year’s peaks, the average British household energy bill is still double what it was a year ago. Costs for many are due to rise by another 20% on April 1 when a government-set price cap goes up.

Anne Bolger, a retired math teacher, happened across the warm hub during a walk one day and has come back every week since. She drops in to check emails, prep for math tutoring or do a jigsaw puzzle.

“Today’s the day that I’m appreciating it, because home is freezing,” she said.

The hub runs one afternoon a week in the smallest of the RSC’s three theaters. On Tuesday, the space held a mixture of theater staff, actors on the way to rehearsals and visitors looking to get warm. Organizers provide puzzles, games, toys for children, free tea, coffee and Wi-Fi — even a sewing table.

“I like the fact that it’s such a creative space,” said Bolger, 66. “People are having meetings there, they’re talking, they’re working. I just feel a bit more alive than sitting at home, a bit more connected.”

That’s just what organizers want to hear. They say warm hubs exist to ease loneliness as well as energy poverty.

“The warmth is in the welcome as much as a warm building to come to,” said Nicola Salmon, who oversees the hub as the RSC’s creative place-making manager. “There is always somebody here to chat to.”

Stratford, about 100 miles (160 kilometers) northwest of London, is a prosperous town that makes a good living from William Shakespeare, its most famous son. Even on a wintry weekday, tourists traipse though streets of half-timbered Tudor buildings to see the house where the Bard was born, visit the schoolroom where he studied and stand over his grave in the medieval Holy Trinity Church.

The RSC is one of Stratford’s main cultural attractions and major employers. Salmon says the warm hub is part of the company’s efforts to get closer to its surrounding community, a town that “is often perceived as affluent and well-off” but contains “areas of great deprivation.”

Like Britain’s food banks — now numbering an estimated 2,500 — warm hubs are a crisis measure showing signs of becoming permanent.

The Warwickshire Rural Community Council, a charity covering the county around Stratford, set up a mobile warm hub — a minibus-turned-pop-up outdoor café — in 2021 as pandemic restrictions plunged many rural residents into isolation.

A year ago, the charity ran five hubs across the county, with backing from Cadent, the private company that distributes much of Britain’s heating gas. As winter hit and energy bills soared, the number mushroomed to 90, providing everything from meals to repair workshops and slow-cooking courses meant to reduce gas use.

About 30 of the hubs will stay open this summer — with a view to becoming permanent — and the mobile hub will be on the road five days a week.

“People say we shouldn’t be in this situation, and we shouldn’t be,” said Jackie Holcroft, the charity’s warm hubs manager. “But we are. And I think one of the most amazing things is that you’ve got hundreds, thousands of volunteers around Warwickshire and they’re all coming together to make a difference.”

The RSC’s warm space will close at the end of March, but the company is already planning for its return next year.

“I’ll miss it like crazy,” said Bolger, one of the regulars. “I’m not hoping that the fuel crisis goes on forever, but I am hoping this place will stay open.”
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Pakistan’s economic crisis is hitting the health sector hard. Pakistan relies heavily on imports such as raw material needed to manufacture medicines and complex surgical equipment. The medical supply chain is coming under increased pressure due to the country’s low foreign exchange reserves and declining rupee. Sarah Zaman reports from Islamabad. Camera and edit: Wajid Asad, Waqar Ahmad
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Pakistan’s currency fell 7% against the U.S. dollar Thursday as the government struggles to persuade the International Monetary Fund to resume lending to the cash-strapped country to help avert a default on its foreign debt.

The Pakistani rupee has weakened to a record low in recent weeks after foreign exchange companies were allowed in January to remove a cap on the exchange rate. The currency’s official value closed at 285.09 rupees against the dollar Thursday versus 266.11 the previous day.

The market-determined currency exchange rate is a key IMF demand for Prime Minister Shehbaz Sharif’s government to complete before the lender’s board approves a funding tranche of more than $1 billion to Pakistan. 

Islamabad has since failed to secure the tranche, which was initially expected to be disbursed in December as part of a stalled $6.5 billion IMF bailout program, over a lack of progress on fiscal consolidation.

“A delay in IMF funding is creating uncertainty in the currency market,” said Mohammed Sohail of Topline Securities, a Karachi-based brokerage house.

The IMF program is key to unlocking other external bilateral and multilateral financing sources for Pakistan. The drawn-out negotiations between the two sides are putting pressure on government finances and the country’s more than 220 million population.  

Pakistan’s foreign exchange reserves have dwindled to precarious levels and stood at just over $3 billion, hardly enough for three weeks of imports.

Inflation has also skyrocketed to 31.5%, according to official data published Wednesday. Food and fuel prices have soared beyond the means of many Pakistanis.

Decades of financial mismanagement, corruption, and political instability are blamed for pushing Pakistan’s economy to the brink of default. A global energy crisis and last year’s devastating floods across the country have worsened the crisis. 

The Sharif administration has already taken most other actions to keep the talks with the IMF on track. They include a hike in fuel and energy tariffs, the withdrawal of subsidies in export and power sectors and generating more revenue through new taxation in a supplementary budget.

Analysts anticipated the fiscal adjustments would likely further fuel inflation in Pakistan whether or not a deal with the IMF has been reached. 

Pakistani Finance Minister Ishaq Dar rejected reports as “malicious rumors” that the country was on the verge of a default.

“This is not only completely false but also belie the facts. SBP forex reserves have been increasing and are almost U.S. $1 billion higher than four weeks ago, despite making all external due payments on time,” Dar tweeted Thursday.

“Our negotiations with IMF are about to conclude and we expect to sign staff level agreement with IMF by next week. All economic indicators are slowly moving in the right direction,” Dar asserted. He added that foreign commercial banks had started extending facilities to Pakistan.

China, a longtime ally of Pakistan, is the only country that has helped Islamabad get a $700 million loan facility from the China Development Bank last month.

IMF Managing Director Kristalina Georgieva, while speaking at last month’s Munich Security Conference, urged Pakistan to collect more taxes from the wealthy and spend the money on the poor.

“Why should rich people benefit from subsidies when the country faces such a difficult task? Why should rich people and businesses not pay their taxes when the country has such tremendous challenges?” she asked while responding to a question about the delay in reaching a deal with Pakistan.

“In my view what is at stake is fairness in society and we will stand for this fairness, of course, very much hoping that we can get to a good point in moving the policy in Pakistan in the right direction,” Georgieva said. 

Pakistan has long been under fire for not imposing taxes on the wealthy in a country where less than 2% pay income taxes. The rest evade it either in collusion with tax authorities or by exploiting loopholes in the legal system, say financial experts. 

The World Food Program, in its latest assessment, has warned the ongoing economic crisis in Pakistan is “progressively deteriorating, with a depreciated currency, increased food and fuel prices and uncertainty over resuming a $6.5 billion funding package with the IMF.”

The statement added that flood-affected people “are resorting to negative coping strategies that include the sale of income-producing assets, taking on additional debt, withdrawing children from school, and skipping meals.”

Some information for this report came from Reuters.
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Big Tech shed tens of thousands of jobs over the past several months as giants Google, Amazon, Meta and Microsoft have reduced their workforces. But while white-collar jobs are cut, some blue-collar jobs are difficult to fill despite the rising wages in that sector of the economy. Keith Kocinski has more.
Camera: Keith Kocinski, Rendy Wicaksana
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