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The World Bank chief will announce a raft of measures on Thursday to aid countries hit by natural disasters, including a pause in debt repayments to the lender, as world leaders gather in Paris to give impetus to a new global finance agenda.

Some 40 leaders, including about a dozen from Africa, China’s prime minister and Brazil’s president, will be joined in the French capital by international organizations at the “Summit for a New Global Financial Pact.”

It aims to boost crisis financing for low-income countries, reform post-war financial systems and free up funds to tackle climate change by getting top-level consensus on how to progress several initiatives currently struggling in bodies like the G20, COP, IMF-World Bank and United Nations.

Leaders are set to back a push for multilateral development banks like the World Bank to put more capital at risk to boost lending, according to a draft summit statement seen by Reuters.

In a speech to be delivered on Thursday, new World Bank president Ajay Banga will outline a “toolkit”, including offering a pause in debt repayments, giving countries flexibility to redirect funds for emergency response, providing new types of insurance to help development projects and helping governments build advance-emergency systems.

While the new World Bank measures are designed to give developing nations some financial breathing space, there was no discussion of multilateral lenders offering debt writedowns — so-called haircuts.

China — the world’s largest bilateral creditor — has been pushing for lenders like the World Bank or the International Monetary Fund to absorb some of the losses.

Those institutions and many developed nations, notably the United States, are resisting, arguing that acceding to Beijing’s demand would be tantamount to a bailout for China. Chinese Prime Minister Li Qiang is due to speak at the summit on Friday.

New vision

Citing the war in Ukraine, climate crisis, widening disparity and declining progress, leaders said the World Bank and other multilateral financial institutions needed a new vision.

The global financial architecture is outdated, dysfunctional and unjust, the United Nations Secretary-General Antonio Guterres said.

“It is clear that the international financial architecture has failed in its mission to provide a global safety net for developing countries,” he said.

French President Emmanuel Macron, hosting the summit, said it was time to act or trust would be lost.

The summit aims to create roadmaps that can be used over the next 18-24 months, ranging from debt relief to climate finance. Many of the topics on the agenda take up suggestions from a group of developing countries, led by Barbados Prime Minister Mia Mottley, dubbed the “Bridgetown Initiative.”

The coronavirus pandemic pushed many poor countries into debt distress as they were expected to continue servicing their obligations in spite of the massive shock to their finances.

Africa’s debt woes are coupled with the dual challenge faced by some of the world’s poorest countries of tackling the impacts of climate change while adapting to the green transition.

Wealthy nations have yet to come good on climate finance that they promised as part of a past pledge to mobilize $100 billion a year, a key stumbling block at global climate talks.

Though binding decisions are not expected, officials involved in the summit’s planning said some strong commitments should be made about financing poor countries.

Nearly eighty years after the Bretton Woods Agreement created the World Bank and International Monetary Fund (IMF), leaders aim to squeeze more financing from multilateral lenders for the countries that need it most.

In particular, there should be an announcement that a $100 billion target has been met that will be made available through the International Monetary Fund for vulnerable countries, officials said.

U.S. Treasury Secretary Janet Yellen, whose country is the World Bank’s biggest shareholder, said multilateral development institutions should become more effective in the way they use their funds before thinking of injecting more money into them.

Some leaders are expected to lend their weight to long-stalled proposals for a levy on shipping industry emissions ahead of a meeting next month of the International Maritime Organization officials said.
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Chinese commercial banks lowered interest rates on Tuesday as Beijing seeks ways to boost economic growth, which has been disappointingly slow as the country recovers from pandemic-era lockdowns and supply chain bottlenecks.

The move took place just days after the Chinese central bank announced it would cut the interest rate it charges on several different facilities it uses to supply commercial banks with cash.

The change in commercial banks’ prime rates, which are offered to borrowers with the best credit, were relatively modest. The rate on one-year loans fell to 3.55% from 3.65%, while the rate on five-year loans dropped to 4.2% from 4.3%.

Striking a balance

The change, which was the most significant adjustment to interest rates in nearly a year, was smaller than some analysts had expected. China faces continued softness in its real estate sector, high levels of indebtedness and persistently slow growth.

David Qu, an economist covering China for Bloomberg Economics, said on Bloomberg television that the small rate cut was an effort to maintain what he referred to as a “balance between stabilizing the housing market and avoiding stimulating another bubble in the housing market.”

In an analysis released last week after the Peoples Bank of China signaled that rate cuts were coming, Logan Wright and Allen Feng of the Rhodium Group wrote, “[T]he reductions in mortgage rates will not have much of an impact on property sales, but may help to reduce mortgage payment burdens for Chinese households. This is more likely designed to boost household consumption, so that households can free up and come from debt service for other purposes.”

Lower growth expected

Concerns about China’s economy have worsened in recent months, a fact that senior leaders in Beijing have begun to publicly acknowledge.

On Friday, Chinese state television reported that Premier Li Qiang told a meeting of senior Communist Party leaders that the government is exploring ways of driving growth.

“The external environment is becoming more complex and severe, and the slowdown in global trade and investment will directly affect the recovery process of our country’s economy,” Li said.

Over the weekend, Goldman Sachs Group Inc. reduced its forecast for growth in China this year to 5.4% from 6%.

The Chinese economy’s growth rate is still significantly higher than that of many developed economies, including the U.S., which the International Monetary Fund expects to grow at only 1.6% in 2023. However, China’s growth rate was as high as 7.8% 10 years ago, and has been mostly slowing since, with the exception of an anomalous 8.1% rate in 2021 as it returned from the depths of the pandemic.

More stimulus expected

After reports last month that industrial output and retail sales had both come in under expectations, some experts expected that the Chinese government would engage in a careful program of targeted economic stimulus in the near future. The trouble is that some of the most obvious levers of influence may be less potent than they have been in the past.

For instance, lower interest rates are usually seen as stimulative because they encourage borrowing to fund capital investment. However, debt levels among Chinese companies are already quite high, which will serve to dampen demand for more credit.

In recent months, Chinese officials have signaled openness to foreign investment in the country as another means of increasing economic growth.

However, this comes after a period in which Beijing’s aggressive crackdown on Chinese tech firms and high-profile visits of state security officials to the Chinese offices of Western businesses have left some companies wary.

In April, security officials entered the offices of consulting firm Bain & Company and questioned employees. That visit came a month after officials entered the offices of another U.S. firm, the Mintz Group, and detained five Chinese nationals working there.

Global challenges

The change in interest rates takes place amid a number of important discussions between China and other large economies around the world.

On Monday, U.S. Secretary of State Antony Blinken visited Beijing, where he met with Chinese Foreign Minister Qin Gang and then President Xi Jinping. Both sides characterized the discussions as productive, but on issues of significant economic concern to Beijing, no progress was announced.

These included the Biden administration’s continued application of broad tariffs on Chinese goods implemented by the administration of former President Donald Trump, and severe restrictions on China’s ability to buy cutting-edge semiconductors due to bans put in place by the Biden administration.

On Tuesday, Li traveled to Germany for meetings with senior officials there. Germany, which counts China as its second-largest trading partner after the European Union, saw its economy rocked after the Russian invasion of Ukraine exposed its over-reliance on Russia as a source of fossil fuels. The German government is in the midst of “de-risking” its economy by expanding the number of countries it relies on for key imports — a process that has China concerned about the future of its trade with Europe’s largest individual economy.
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The risks of artificial intelligence to national security and the economy need to be addressed, U.S. President Joe Biden said on Tuesday, adding he would seek expert advice.

“My administration is committed to safeguarding Americans’ rights and safety while protecting privacy, to addressing bias and misinformation, to making sure AI systems are safe before they are released,” Biden said at an event in San Francisco.

Biden met a group of civil society leaders and advocates who have previously criticized the influence of major tech companies, to discuss artificial intelligence.

“I wanted to hear directly from the experts,” he said.

Several governments are considering how to mitigate the dangers of the emerging technology, which has experienced a boom in investment and consumer popularity in recent months after the release of OpenAI’s ChatGPT.

Biden’s meeting on Tuesday included Tristan Harris, executive director of the Center for Humane Technology, Algorithmic Justice League founder Joy Buolamwini, and Stanford University Professor Rob Reich.

Regulators globally have been working to draw up rules governing the use of generative AI, which can create text and images, and whose impact has been compared to that of the internet.

Biden has also recently discussed the issue of AI with other world leaders, including British Prime Minister Rishi Sunak whose government will later this year hold a first global summit on artificial intelligence safety. Biden is expected to discuss the topic with Indian Prime Minister Narendra Modi during his ongoing U.S. visit.

European Union lawmakers agreed last week to changes in draft rules on artificial intelligence proposed by the European Commission in a bid to set a global standard for a technology used on everything from automated factories to self-driving cars to chatbots.
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A global aid agency warned Monday that a large-scale plague of locusts is ravaging northern Afghanistan and could destroy 1.2 million metric tons of wheat, almost one-quarter of the country’s annual harvest.

“The escalating situation threatens to plunge millions of people into worsening levels of hunger,” the nongovernmental aid group Save the Children said in a statement.

The locust outbreak comes as funding shortfalls have cut off food aid for 8 million people in Afghanistan in the past two months, the group said. It urged the international community to increase humanitarian aid and resume development assistance to help prevent the impoverished country from spiraling into “famine-like conditions.”

Save the Children said that the Moroccan locust, one of the world’s most damaging plant pests, is sweeping across eight of Afghanistan’s 34 provinces, the country’s wheat basket.

The agency said the outbreak has come at the worst possible time for Afghanistan, where more than 15 million people — one-third of the population — are projected to face crisis levels of hunger over the next five months, including 3.2 million children.

Aid organizations face a $2.2 billion shortfall in humanitarian funding to support Afghanistan’s most vulnerable children and families, especially women and girls.

Arshad Malik, the Save the Children country director, said that millions of children would suffer unless humanitarian aid is immediately increased.

“However, humanitarian aid alone is not a quick fix. The underlying drivers of hunger, including resuming development aid and support to the country’s ailing economy, will also need to be addressed.”

Since the Taliban regained control of the conflict-torn South Asian nation in August 2021, the international community has suspended development assistance and imposed financial sanctions.

The United Nations says the humanitarian crisis in Afghanistan, stemming from years of war and prolonged drought, has worsened since the Taliban took control of the country. 

U.N. officials say that the Taliban’s discriminatory policies against Afghan women have caused the humanitarian and economic situation in the country to deteriorate. The hardline group has barred Afghan women from working for the United Nations and other aid agencies. 

The Taliban have suspended girls’ education beyond the sixth grade and banned many women government employees from workplaces. 

The restrictions on Afghan women, and other human rights concerns, have deterred foreign governments from recognizing the Taliban as legitimate rulers of the country.   
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Military and civilian aircraft streaked across the sky as the Paris Air Show returned Monday after a four-year COVID-induced hiatus, with a big crowd including Ukrainian military officials and the French president.

Organizers have billed the biennial event as the “recovery airshow” after the coronavirus ravaged the sector and the event was cancelled in 2021.

This year’s airshow has a new focus on defense following Russia’s invasion of Ukraine, along with the industry’s efforts to reduce its carbon footprint, with French President Emmanuel Macron arriving in a helicopter partly using sustainable aviation fuel (SAF).

Huge traffic jams around Le Bourget airport outside Paris were testament to the interest in this year’s show, as aircraft makers field hundreds of orders and airlines brace for a near-record number of passengers this year.

The Ukraine conflict has also prompted countries to step up military spending, which could benefit aerospace defense firms.

While Russia has been excluded from the event, Ukrainian military officials toured the huge exhibition space at Paris-Le Bourget airport, some taking photos of missiles on display.

Le Bourget offers a forum to announce deals with some 2,500 firms lining up to show off their latest planes, drones, helicopters and prototypes such as flying taxis.

Airbus chief executive Guillaume Faury, who heads France’s aerospace industry association GIFAS, called it “the return of the good old times of the excitement of the show.”

Macron was welcomed as he opened the event with an aerial display including Airbus’ latest A321 XLR airliner, civilian and military helicopters and a jet fighter.

Businesspeople and uniformed military visitors from around the world watched the action or headed into the guarded private spaces of the major firms’ stands.

With 125,000 square meters of exhibition space — the equivalent of nearly 18 soccer pitches — around 320,000 visitors are expected during the week-long event.

Big deals

Along with the Farnborough airshow in England, which takes place in even numbered years, Le Bourget is a key sales event for the civil and defense industries.

Airbus and rival Boeing compete fiercely in announcing orders for aircraft running into the billions of dollars.

Both industry heavyweights are also battling to solidify supply chains as they increase production to meet growing demand.

At least 158 planes, helicopters and drones are on display, from the latest long-haul commercial jets to the F-35, a U.S. stealth fighter.

The United States has a strong presence with 425 exhibitors, bolstered by renewed interest in military equipment in the aftermath of the Ukraine war.

Firms from 46 other nations are present.

China, which lifted COVID restrictions only at the beginning of this year, is also represented.

However, Beijing is not displaying its first homegrown medium-haul passenger jet, the C919, built to compete with the Airbus A320neo and Boeing 737 MAX.

Flying taxis

The airshow also hopes to open a window into the future as projects for flying taxis and other vertical takeoff aircraft abound.

Several prototypes will be on display as part of a “Paris Air Mobility” exhibition to showcase the latest innovations that developers hope will change how people travel.

Engine maker Safran announced early Monday that it would open four production lines in France and Britain making electric motors for small planes.

For his part, Macron arrived aboard Airbus’ latest helicopter, the H160, in a flight fueled with 30% SAF before visiting the European group’s stand laying out its net-zero-by-2050 plan.

Macron had on Friday announced $2.2 billion to help develop technologies to reduce aircraft emissions.

Air travel accounts for nearly 3% percent of global CO2 emissions but serves only a small minority of the world population.

With the industry targeting net zero emissions by mid-century, firms are turbocharging efforts to achieve it.

The initial focus is on SAF, made from sources such as municipal waste, leftovers from the agricultural and forestry industry, crops and plants, and even hydrogen.

But companies are also working to develop battery- and hydrogen-powered aircraft.
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Multinational companies — including Amazon, Marriott and Hilton — pledged Monday to hire more than 13,000 refugees, including Ukrainian women who have fled the war with Russia, over the next three years in Europe.

Just ahead of World Refugee Day on Tuesday, more than 40 corporations say they will hire, connect to work, or train 250,000 refugees, with 13,680 of them getting jobs directly in those companies.

“Every number is a story of an individual family who left everything, seeking safety, seeking protection and wanting to be able to rebuild as quickly as possible,” said Kelly Clements, United Nations deputy high commissioner for refugees. “So the commitments that businesses are going to make on Monday are absolutely essential.”

She said 110 million people have been displaced worldwide, with an estimated 12 million from Ukraine, nearly half of whom are living in Europe after the continent’s largest movement of refugees since World War II.

The hiring push in Europe was organized by the Tent Partnership for Refugees, a nonprofit founded by Chobani CEO Hamdi Ulukaya that connects businesses and refugees, and is being unveiled at a gathering in Paris. The group’s first summit in the U.S. last year led to commitments to hire 22,725 refugees.

In the new round, Amazon leads the pack, vowing to hire at least 5,000 refugees over the next three years in Europe, followed by Marriott and Hilton with 1,500 each, Starbucks and ISS with 1,000 each, and smaller commitments from brands such as Adidas, Starbucks, L’Oreal, PepsiCo and Hyatt.

“This is good for us as a company because the opportunity to add diversity to our workforce will continue to make us a stronger company,” said Ofori Agboka, Amazon vice president overseeing human resources. “With diversity brings innovation, creativity, different insights.”

He said the vast majority of jobs will be hourly roles at fulfillment and storage centers and in transport and delivery.

Amazon announced 27,000 job cuts earlier this year, part of a wave of layoffs after tech companies ramped up hiring during the COVID-19 pandemic. Those layoffs primarily affected salaried office jobs, Agboka said.

Daria Sedihi-Volchenko fled Kyiv last year and now works in Warsaw, Poland, as a senior program manager for an Amazon Web Services program providing free tech training for Ukrainians. She says about 40% of those in the program have no tech background.

“I went through the same way as many of our learners … are going through,” she said. “I had to learn, and I took a commitment on my interview. I said that ‘OK, if we can agree and I can start working for you, I promise to learn Polish and I promise to learn technical skills.'”

A year ago, Sedihi-Volchenko woke up to explosions from Russia’s invasion.

“I was terrified. I was so scared for Ukraine, for the nation, for the future, for my own life,” she said. “But also that was a shocking moment when I understood that everything in my life is changing.”

She began living in basements but left as Russian forces approached Kyiv. She drove 40 hours to reach Moldova, thankful that she “didn’t drive on a single land mine and nobody shot into my car.”

She went to Poland to find work, embarking on an IT path after working as a project manager for government ministries and as an economist in Ukraine.

Companies are hoping refugees can fill staffing needs after the economy bounced back from the pandemic. In Europe, unemployment is at its lowest since the euro currency was introduced in 1999.

“We’re seeing record levels of demand for our properties across many markets here in Europe,” Marriott International CEO Anthony Capuano said. “And so we are hiring aggressively to make sure we can accommodate our guests as demand ramps up.”

Marriott’s jobs will largely be hourly positions such as housekeepers, kitchen staff and front desk attendants.

European nations have welcomed Ukrainians, and while Clements applauded opening schools, workplaces and other opportunities to them, she said the same should be offered to others fleeing conflict and crises in places like Syria, Sudan and Afghanistan.

Sedihi-Volchenko knows the challenges ahead for refugees, even as some companies offer help with language skills, counseling and training. Job listings can be difficult to decipher, and like her, they may have difficulty securing a stable internet connection or work clothes.

“It’s important to give a refugee just time to learn the language, but the person can start working because if you bring experience with IT systems or finance or project management or any other area, naturally, you understand, it’s not so much about the language. You understand the flow of work,” she said.

She said 110 million people have been displaced worldwide, with an estimated 12 million from Ukraine, nearly half of whom are living in Europe after the continent’s largest movement of refugees since World War II.

A year ago, Sedihi-Volchenko woke up to explosions from Russia’s invasion.
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Chinese consumers snapped up billions of dollars’ worth of items in China’s first major online shopping festival after emerging from the pandemic as merchants slashed prices, but analysts say that consumer confidence still remains weak.

Chinese merchants offered customers steep discounts during the 618 shopping festival, which ran on China’s major shopping platforms from the end of May until June 18, in the hopes of shoring up sales amid a weaker-than-expected recovery in consumption.

Major shopping festivals, like e-commerce retailer JD.com’s 618 and Alibaba’s Singles’ Day, are typically barometers of consumption in China, and Chinese e-commerce platforms often participate by offering discounts and incentives to consumers.

Analysts say that consumption remains soft this year as China emerges from the pandemic, even as platforms including JD.com, Tmall, Taobao and Pinduoduo offered billions in subsidies.

“Chinese consumer confidence remains weak due to a mix of geopolitics, continued weakness from COVID-19 and domestic Chinese politics,” said Shaun Rein, founder and managing director of the China Market Research Group in Shanghai.

Rein said that consumers were less likely to spend more during 618 as merchants had already been discounting heavily for years because of the pandemic, and deals were not that much better compared to previous months.

In March, JD.com launched a “10-billion-yuan subsidies” program to compete with rival Pinduoduo, which is known for its low-priced goods. The CEO of Alibaba’s e-commerce business unit, Trudy Dai, also previously pledged to make “huge, historic” investments to attract users to its platforms.

“For months, Chinese consumers have been price-conscious, looking for deals and trading down across most product categories,” Rein said.

This year, for the first time, JD.com did not reveal its total sales numbers for the 618 event, despite saying in a blog post that the 2023 shopping extravaganza had “exceeded expectations, setting a new record.”

Last year, neither Alibaba nor JD.com unveiled final numbers for Singles’ Day in November, amid muted festivities during COVID-19 and an expected slowdown in growth.

JD.com said in a blog post that during the 618 shopping festival, consumers snapped up 10 times the number of products that were eligible under its “10-billion-yuan subsidies” program, compared to March.

Despite overall soft consumption, categories like cosmetics and luxury goods saw a bigger uptick in sales compared to the previous quarter, according to Jacob Cooke, CEO of e-commerce consultancy WPIC.

For this year’s 618 event, more luxury brands took part as they sought to boost sales in China after the sector in 2022 declined for the first time in five years amid China’s strict “zero-COVID” policies and lockdowns that hammered retail spending.

Brands like Moncler and Lemaire took part in 618 on Tmall for the first time.

Many luxury brands also took the opportunity to launch new products online, with some offering rare discounts and other incentives such as interest-free payment in instalments over 12 months.

Brands like Burberry, Chloe and Miu Miu’s sales in the first 30 minutes of the 618 festival at the end of May had exceeded its total sales during the shopping festival a year ago, according to Tmall data.

“Luxury coming back online is a big trend, because that’s the category that’s been hit really hard over COVID-19,” said Cooke. “Some brands may see up to a 10-fold increase in sales over last year.”
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Binance, the world’s biggest cryptocurrency exchange, and Binance.US have entered into an agreement with the U.S. Securities and Exchange Commission to ensure that U.S. customer assets remain in the United States until a sweeping lawsuit filed this month by the regulatory agency is resolved.

The agreement, disclosed in court papers filed late Friday, still requires the approval of the federal judge overseeing the litigation. To make certain that U.S. customer assets do not go offshore, the agreement allows only Binance.US employees access to these assets.

The SEC on June 5 sued Binance, its CEO and founder Changpeng Zhao and Binance.US’s operator, alleging that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.

The suit and one filed by the SEC the following day against major U.S. exchange Coinbase represented a dramatic escalation of a crackdown on the industry by U.S. regulators.

Under the agreement, which does not resolve the SEC lawsuit, Binance.US will take steps to make sure that no Binance Holdings officials have access to private keys for its various wallets, hardware wallets or root access to Binance.US’s Amazon Web Services tools, the court filings showed.

The SEC said in a statement released on Saturday that the emergency relief order secured for Binance.US customers will protect their assets and ensure that they can continue to withdraw those assets.

“Given that Changpeng Zhao and Binance have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please … these prohibitions are essential to protecting investor assets,” Gurbir Grewal, director of the SEC’s enforcement division, said in the statement.

A Binance spokesperson said in a statement on Saturday: “Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms. User funds have been and always will be safe and secure on all Binance-affiliated platforms.”

Under other provisions in the proposed agreement, Binance.US will create new crypto wallets to which the global exchange’s employees have no access, provide additional information to the SEC and agree to an expedited discovery schedule, the filings said.

The U.S. affiliate of Binance halted dollar deposits last week and gave customers a deadline of June 13 to withdraw their dollar funds, after the SEC asked a court to freeze its assets.
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Pakistan is in a debt crisis. It must pay billions in debt servicing, but the state’s coffers are almost empty. As hopes for reviving a bailout deal with the International Monetary Fund fade, experts say the country may escape default this month, but the situation will grow increasingly grave.

Hit by devastating floods, political instability and pandemic-related supply shocks, Pakistan’s import-dependent economy has been on the brink of default for months as the country’s external debt burden mounts against shrinking foreign exchange reserves.

Pakistan’s total external debt stood at upward of $126 billion at the end of 2022. Most of the country’s income goes to pay off the principal as well as interest on this debt.

In June, Pakistan is due to pay $3.6 billion to its lenders. According to the governor of the State Bank of Pakistan, the country’s central bank, $400 million has been paid, while $2.3 billion is expected to be rolled over. Still, the country must pay $900 million. The dollar reserves of the central bank are hovering at about $4 billion.

Need for IMF

Hopes of reviving a stalled 2019 International Monetary Fund, or IMF, bailout deal faded further this week after the lender objected to a few provisions in Pakistan’s proposed federal budget for the fiscal year starting July 2023.

In a statement to VOA, IMF resident representative for Pakistan, Esther Perez Ruiz, listed several measures that did not meet the lender’s expectations, including a new tax amnesty that she said was “against program’s conditionality and governance agenda.”

However, Perez Ruiz said, “the IMF team stands ready to work with the government in refining this budget ahead of its passage.”

Pakistan’s Minister for Finance Ishaq Dar rejected the objections.

“Pakistan is a sovereign country and cannot accept everything the IMF demands,” local media quoted Dar as saying in a briefing to the Pakistani Senate Standing Committee on Finance on Thursday.

The $6.5 billion 2019 deal regarded as a key to avoiding default would give Pakistan $1.1 billion. Not a huge amount by itself, yet it would unlock funds from other lenders, helping to ease the country’s debt crisis.

To revive the deal, Islamabad slashed subsidies, increased taxes and largely stopped controlling the value of the rupee, among other steps over past few months, to woo the IMF.

Experts say the actions were too little, too late.

Differences also persisted on how much funding Pakistan should gather from friends. Islamabad failed to reach the target as allies, slow to help, signaled frustration with the country’s lack of economic reform.

Default risk

The 2019 program ends June 30 with Pakistan’s current fiscal year. Dar maintains Pakistan will not default if talks with the Washington-based lender fail.

“We have sovereign commitments, which the past government made. They are not PTI’s [Pakistan Tehreek-e-Insaaf] or [former Prime Minister] Imran Khan’s, they are Pakistan’s commitments. I think even at the cost of paying a political price we must meet those obligations, and we have,” Dar said at a news briefing last week.

Pakistan’s major ally China, to whom it owes the largest chunk of its bilateral debt, came to its rescue yet, again. In a message to journalists late Friday night, the State Bank of Pakistan announced receiving a $1 billion loan from China. Beijing refinanced the loan which Islamabad had earlier repaid.

However, the current government’s term in office ends mid-August, after which a caretaker setup will run the country until general elections.

Pakistan’s former finance minister, Hafeez Pasha, told VOA if the present government fails to unlock IMF funds, it may put Pakistan’s economy in peril in the new fiscal year.

“IMF will not talk to temporary governments. So, the earliest we can talk to the IMF is sometime after the elections, which could be October, November. This interim period is a period of great uncertainty. And this is what we are all very worried about,” Pasha said.

Plan B

It is unclear how the government plans to manage debt repayment without the IMF.

Dar told a post-budget news conference last week that the government would engage in debt restructuring with bilateral lenders or individual countries.

Days later, the central bank governor informed analysts in a briefing that he was unaware of any such plans.

Earlier, when asked if Pakistan had a Plan B, Dar’s response in a pre-budget news briefing had been an emphatic yes, but it was short on details.

He then signaled Pakistan could sell or lease assets to remain current on debt repayments.

“If you are pushed into a corner, what will you do? Lie down? Let there be a default? Pakistan is solvent. If Pakistan’s loans have soared from 70 billion to 100 billion in the last four years, Pakistan also has assets worth billions,” Dar told journalists.

Some experts say that in many ways, Pakistan already has defaulted, as companies face restrictions in sending dividends to shareholders overseas, airlines threaten to move out over nonpayment of dues, and parents struggle to find dollars for their children studying abroad.

Ali Khizar, research head at Business Recorder, a major Pakistani news outlet, points to the flight of human and financial capital from Pakistan as a sign.

“Pakistan may not have defaulted technically on its debt,” Khizar told VOA. But, he says, as people use informal means to send money outside, large businesses leave the country, and people migrate in record numbers to find work outside Pakistan, “we have defaulted on many grounds.”
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Pakistan is facing a debt crisis. It must pay billions in debt servicing, but the state’s coffers are almost empty. At the same time, hopes of reviving a stalled 2019 International Monetary Fund bailout program are fading. Is Pakistan just days away from a default? VOA’s Pakistan bureau chief Sarah Zaman reports from Islamabad. Camera/Edit: Naveed Nasim, Wajid Asad, Malik Waqar Ahmed
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Can you pay my bills?

That seems to be what Sweden is asking Beyoncé after the star came to town.

When the singer launched her global tour last month in Stockholm, tens of thousands of fans from around the world swarmed the Swedish capital. But it’s not all fun and games for the host of the kickoff of Beyoncé’s first solo tour in seven years.

A senior economist at a top Scandinavian bank says Beyoncé had something to do with Sweden’s higher-than-expected inflation rate last month.

Consumer prices rose 9.7% last month in Sweden compared with a year earlier, the country’s statistics agency, Statistics Sweden, said Wednesday. Costs for certain goods and services, including hotels, rose.

That was a drop from 10.5% in April — the first time that inflation in Sweden has fallen below 10% in more than six months — but it was still slightly higher than economists had predicted.

Michael Grahn, chief economist for Sweden at Danske Bank, thinks Beyoncé’s concert may help explain why.

“Beyonce’s start of her world tour in Sweden seems to have coloured May inflation,” he said on Twitter on Wednesday.

“How much is uncertain,” he added, but the concert “probably” contributed to 0.2 of the 0.3 percentage points that restaurant and hotel prices added to the monthly increase in inflation.

An estimated 46,000 people attended each of Beyoncé’s two Stockholm concerts. Fans from around the world took advantage of Sweden’s relatively weaker currency to buy tickets that were cheaper than in other countries, such as the United States.

“The main impact on inflation, however, came from the fact that all fans needed somewhere to stay,” Grahn told The New York Times. The popularity of the concerts meant some fans had to venture up to 40 miles [64 kilometers] away to find a room, he said.

Grahn told the Financial Times that the phenomenon was “quite astonishing.”

But he added on Twitter that he predicts the situation will return to normal in June.

“We expect this upside surprise to be reversed in June as prices on hotels and tickets reverse back to normal,” he said.
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The international credit rating agency Moody’s and the International Monetary Fund say the Sudan conflict will harm its neighbors’ economies if it continues. In the markets of N’djamena, Chad’s capital, traders and customers alike have already been feeling the pinch from high inflation as the economic fallout of the war threatens their love of hot, sweet, tea. Henry Wilkins reports. (Camera and Produced by: Henry Wilkins)
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Indian Prime Minister Narendra Modi makes his first state visit to Washington in nine years on June 21. The trip comes as the United States and India increase cooperation in critical emerging technologies. Matt Dibble has the story.
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The Federal Reserve kept its key interest rate unchanged Wednesday after having raised it 10 straight times to combat high inflation. But in a surprise move, the Fed signaled it may raise rates twice more this year, beginning as soon as next month.

The Fed’s move to leave its benchmark rate at about 5.1%, its highest level in 16 years, suggests that it believes the much higher borrowing rates have made some progress in taming inflation. But top Fed officials want to take time to more fully assess how their rate hikes have affected inflation and the economy.

“Holding the target rate steady at this meeting allows the committee to assess additional information and its implications” for the Fed’s policies, the central bank said in a statement.

The central bank’s 18 policymakers envision raising their key rate by an additional half-point this year, to about 5.6%, according to economic forecasts they issued Wednesday.

The economic projections revealed a more hawkish Fed than many analysts had expected. Twelve of the 18 policymakers forecast at least two more quarter-point rate increases. Four supported a quarter-point increase. Only two envisioned keeping rates unchanged. The policymakers also predicted that their benchmark rate will stay higher for longer than they envisioned three months ago.

“We understand the hardship that high inflation is causing, and we remain strongly committed to bring inflation back down to our 2% goal,” Fed Chair Jerome Powell said at a news conference.

One reason why the officials may be predicting additional rate hikes is that they foresee a modestly healthier economy and more persistent inflation that might require higher rates to cool. Their updated forecasts show them predicting economic growth of 1% for 2023, an upgrade from their meager 0.4% forecast in March. And the officials expect “core” inflation, which excludes volatile food and energy prices, of 3.9% by year’s end, higher than they expected three months ago.

Immediately after the Fed’s announcement, which followed its latest policy meeting, stocks sank, and Treasury yields surged. The yield on the two-year Treasury note, which tends to track market expectations for future Fed actions, jumped from 4.62% to 4.77%.

The Fed’s aggressive streak of rate hikes, which have made mortgages, auto loans, credit cards and business borrowing costlier, have been intended to slow spending and defeat the worst bout of inflation in four decades. Mortgage rates have surged, and average credit card rates have surpassed 20% to a record high.

The central bank’s rate hikes have coincided with a steady drop in consumer inflation, from a peak of 9.1% last June to 4% as of May. But excluding volatile food and energy costs, so-called core inflation remains chronically high. Core inflation was 5.3% in May compared with 12 months earlier, well above the Fed’s 2% target.

Powell and other top policymakers have also indicated that they want to assess how much a pullback in bank lending might be weakening the economy. Banks have been slowing their lending — and demand for loans has fallen — as interest rates have risen. Some analysts have expressed concern that the collapse of three large banks last spring could cause nervous lenders to sharply tighten their loan qualifications.

The Fed has raised its benchmark rate by a substantial 5 percentage points since March 2022 — the fastest pace of increases in 40 years. “Skipping” a rate hike at this week’s meeting might have been the most effective way for Powell to unite a fractious policymaking committee.

The 18 members of the committee have appeared divided between those who favor one or two more rate hikes and those who would like to leave the Fed’s key rate where it is for at least a few months and see whether inflation further moderates. This group is concerned that hiking too aggressively would heighten the risk of causing a deep recession.

In an encouraging sign, inflation data that the government issued this week showed that most of the rise in core prices reflected high rents and used car prices. Those costs are expected to ease later this year.

Wholesale used car prices, for example, fell in May, raising the prospect that retail prices will follow suit. And rents are expected to ease in the coming months as new leases are signed with milder price increases. Those lower prices, though, will take time to feed into the government’s measure.

The economy has so far fared better than the central bank and most economists had expected at the beginning of the year. Companies are still hiring at a robust pace, which has helped encourage many people to keep spending, particularly on travel, dining out and entertainment.
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European Union antitrust regulators took aim at Google’s lucrative digital advertising business in an unprecedented decision ordering the tech giant to sell off some of its ad business to address competition concerns.

The European Commission, the bloc’s executive branch and top antitrust enforcer, said that its preliminary view after an investigation is that “only the mandatory divestment by Google of part of its services” would satisfy the concerns.

The 27-nation EU has led the global movement to crack down on Big Tech companies, but it has previously relied on issuing blockbuster fines, including three antitrust penalties for Google worth billions of dollars.

It’s the first time the bloc has ordered a tech giant to split up keys of business.

Google can now defend itself by making its case before the commission issues its final decision. The company didn’t immediately respond to a request for comment.

The commission’s decision stems from a formal investigation that it opened in June 2021, looking into whether Google violated the bloc’s competition rules by favoring its own online display advertising technology services at the expense of rival publishers, advertisers and advertising technology services.

YouTube was one focus of the commission’s investigation, which looked into whether Google was using the video sharing site’s dominant position to favor its own ad-buying services by imposing restrictions on rivals.

Google’s ad tech business is also under investigation by Britain’s antitrust watchdog and faces litigation in the U.S.

Brussels has previously hit Google with more than $8.6 billion worth of fines in three separate antitrust cases, involving its Android mobile operating system and shopping and search advertising services.

The company is appealing all three penalties. An EU court last year slightly reduced the Android penalty to 4.125 million euros. EU regulators have the power to impose penalties worth up to 10% of a company’s annual revenue.
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Many of the wigs and false eyelashes labeled “Made in China” that are sold by American retailers may violate U.S. sanctions on North Korea, which is where they are actually manufactured, according to experts.

China imported approximately 30 tons of North Korean-made wigs and false eyelashes in April worth over $22.7 million, according to data from China’s General Customs Administration examined by VOA’s Korean Service.

About half, amounting to more than $11.2 million, were imported by Chinese companies in Henan province. Xiaogang, a city in central Henan province, is the world’s largest wig manufacturing, distribution and export hub.

Although North Korea sealed its border with China in January 2020 at the beginning of the pandemic, trade between the neighbors has resumed gradually since North Korea declared victory over COVID-19 in August 2022. China is North Korea’s biggest trading partner.

The amount of Pyongyang’s wig and false lash exports to China in April shows that “trade is returning after the pandemic” as North Korea’s total exports to China in 2021 “only amounted to $56.3 million,” said Troy Stangarone, senior director at Korea Economic Institute (KEI) to VOA Korean by email.

As North Korea’s exports to China return to pre-pandemic levels, experts said U.S. companies must be vigilant that supply chains do not include Chinese manufacturers that use North Korean labor. U.S. penalties for sanctions violations convictions include “incarceration, fines, and forfeiture of any/all goods imported and proceeds of these crimes,” according to federal law.

“Chinese firms have been known to subcontract with North Korean firms and label the goods as made in China,” Stangarone said. “Any efforts by Chinese firms to directly or indirectly export wigs and fake lashes or any other North Korean goods to the United States would be a violation of U.S. sanctions.”

Despite the sanctions, however, there is still a good chance that those items could end up in the U.S., he added.

$128.6 million in human hair products

China was the top global exporter of human hair products including wigs and fake lashes in 2021, totaling approximately $1.84 billion while the U.S. was the largest importer of those products worth approximately $1.01 billion in the same year.

In April, China was the largest exporter of wigs and other human hair products to the U.S. amounting to $128.6 million.

“If firms utilize China as part of their supply chain, they need to be aware” they could be “unknowingly sending North Korean goods to the United States,” said Stangarone.

The U.S. Treasury issued an advisory in 2017 cautioning American businesses to “closely examine their entire supply chain(s) for North Korean laborers and goods and services or technology” especially “those businesses with operation in high-risk countries.”

The advisory said that North Korea uses forced labor to raise revenue to fund its weapons of mass destruction (WMD) and ballistic missile programs.

The “use of North Korean citizens or nationals as laborers in supply chains could trigger U.S. sanctions, and the issuance of work authorizations for these North Korean nationals is prohibited under UN Security Council resolution 2397” issued in 2017, said the advisory.

Joshua Stanton, a Washington-based attorney who helped draft the Sanctions Enforcement and Policy Enforcement Act in 2016, said, “Importing products made with forced or penal labor into the United States has long been a violation of the U.S. Tariff Act.”

He continued, “If goods are made in whole or in part with North Korean labor, they’re subject to rebuttable presumption that they’re made with forced labor.”

Regulations ban imports from North Korea

The regulations ban imports of goods, services or technology from North Korea. 

In 2019, California-based e.l.f. Cosmetics agreed to pay nearly $1 million for importing over $4 million worth of false eyelash kits from Chinese suppliers that sourced materials from North Korea in violation of the North Korean Sanctions Regulations. 

The U.S. Treasury said the cosmetics company “appears not to have exercised sufficient supply chain due diligence while sourcing products from a region” in which North Korea is “known to export goods.”

“If U.S. Customs and Border Protection’s Office of Trade identifies those [North Korean-made] wigs, it will seize them and sell them at auction,” said Stanton.

Stanton said U.S. Customs and Border Protection (CBP) may rely on tips to identify North Korea-made products such as items coming from an exporter or factory with a known history of employing labor in North Korea, among other ways of detection.

In 2022, CBP seized goods produced by the Chinese companies Jingde Trading, Rixin Foods and Zhejiang Sunrise Garment Group at U.S. ports.

The seizures were based on CBP’s “investigation indicating that these companies use North Korean labor in their supply chains in violation of the Countering America’s Adversaries Through Sanctions Act (CAATSA),” the CBP said in December 2022. 

CAATSA bans the importation to the U.S. of items made by North Korean workers “anywhere in the world,” said the statement.

Although U.N. Security Council sanctions on North Korea do not explicitly list wigs and false lashes as banned export items, China and North Korea could be violating those sanctions, according to Stanton. U.N. sanctions ban the Pyongyang regime from exporting items like coal, textiles and seafood to prevent sales revenue from funding its weapons programs.

“The U.N. sanctions are not required to list every product and item that North Korea exports,” Stanton said.

North Korea’s “export to China is nonetheless a violation of UN sanctions if China fails to ensure that Pyongyang doesn’t use the profits for prohibited activities, including WMD proliferations,” continued Stanton.

North Korea conducted a record number of weapons tests last year to enhance the development of its missile and nuclear programs, a practice that Pyongyang is continuing this year. Its latest attempted launch of a satellite using ballistic missile technology banned by the UN failed on May 31.

Christy Lee contributed to this report.
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Consumer prices in the United States cooled last month, rising just 0.1% from April to May and extending the past year’s steady easing of inflation. At the same time, some measures of underlying price pressures remained high.

Measured year over year, inflation slowed to just 4% in May — the lowest 12-month figure in over two years and well below April’s 4.9% annual rise. The pullback was driven by tumbling gas prices, a much smaller rise in grocery prices than in previous months and less expensive furniture, air fares and appliances.

Tuesday’s inflation figures arrive just as Federal Reserve officials begin a pivotal two-day meeting, after which they’re expected to leave interest rates alone after imposing 10 straight rate hikes dating back to March 2022. On Wednesday, the central bank will likely announce that it’s skipping a rate hike but may hint that it will resume raising rates as soon as July. Top Fed officials have said they’re leaning toward a so-called “skip” to allow time to assess how their rate hikes have affected inflation and the overall economy.

Still, last month’s drop-off in overall inflation isn’t likely to convince the Fed’s policymakers that they’re close to curbing the high inflation that has gripped the nation for two years. The Fed tends to focus more on “core” prices, which exclude volatile food and energy costs and generally provide a clearer view of inflation.

And core prices remained high last month, rising 0.4% from April to May, the sixth straight month of increases at that level or higher. Compared with a year ago, core inflation slipped to 5.3% from 5.5%. That is still far above the Fed’s target of 2%.

Last month’s core inflation was fueled mainly by high apartment rental costs and a second straight jump in used car prices, which soared 4.4% just from April to May. On the other hand, wholesale prices of used cars declined last month, which may foretell lower retail used-car prices in coming months.

Gas prices, adjusted for seasonal patterns, fell 5.6% from April to May; they’re down nearly 20% from a year ago. And grocery prices ticked up just 0.1%, a relief to consumers, though they’re still 5.8% higher than they were a year ago.

The stubbornness of underlying inflation reflects a fundamental challenge for the Fed: The economy has steadily defied long-standing forecasts for a recession, dating back more than a year. Instead, businesses have kept hiring at a healthy pace, average paychecks are climbing and workers are freely spending their larger wages.

Though a resilient economy is great for households and businesses, it may also be helping fuel chronically high inflation. Some economists argue that many companies are keeping prices artificially high, more than is needed to cover their own higher costs, to drive profit growth. The nation’s consumers might have to pull back, en masse, before most businesses will reduce prices. In the meantime, steadily robust hiring is allowing Americans, as a whole, to keep spending.

The Fed has raised its benchmark rate by a hefty 5 percentage points over the past 15 months — the fastest pace of rate increases in four decades. Those hikes have led to much higher costs for mortgages, auto loans, credit cards and business borrowing. The Fed’s goal is to slow borrowing and spending, cool the economy and tame inflation — without causing a deep recession. It’s a notoriously difficult task.

There are some signs that the Fed’s efforts are having the desired effect. Inflation is expected to take another big step down in the June figures that will be reported next month. Price growth could slide as low as 3.2% from a year earlier, according to some economists’ estimates. That would be significantly below inflation’s peak of 9.1% in June 2022, the highest level in four decades.

Yet any sharp declines in May and June will in part reflect the fact that prices soared in both those months last year. As those months drop out of the year-over-year inflation calculations, they are replaced with smaller monthly gains. The effect can sharply lower measures of annual inflation.

Still, core prices are expected to stay high in May, driven up by another jump in used car prices and steady increases in rental costs. Used car prices soared 4.4% just from March to April. Economists expect another increase, though not quite as large, from April to May.
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