https://arab.news/js6u8
WASHINGTON: In the run-up to the G20 Summit next month, finance leaders from the group’s member nations held a conference in Washington this week to discuss key economic issues and risk factors that are affecting the international monetary system and the stability of the global economy.
Food security, rising energy prices, high inflation, cross-border payment systems, financial risks, cryptocurrency and cyber resilience were among the key topics discussed by finance ministers and governors of central banks during the two-day event on Oct. 12 and 13.
Indonesian Minister of Finance Sri Mulyani Indrawati, whose country currently holds the presidency of the G20, said during the conference that the recent tightening of monetary policies and raising of interest rates by advanced and emerging countries has resulted in economic risks across the world.
She added that the global economic situation has become more challenging as nations grapple with issues such as rising inflation, food and energy insecurity, weak growth and geopolitical fragmentation.
“It’s not an exaggeration to say that the world is in danger,” she said.
Indrawati blamed the COVID-19 pandemic and the war in Ukraine for a “reshaping of the global energy market” that has resulted in “energy security concerns,” along with supply shortages and price increases that have effected most countries.
The financial leaders of the G20 reviewed key economic reports that will be discussed during the main G20 summit scheduled to take place in Bali, Indonesia, on Nov. 15 and 16. They also talked about climate-related economic risks and the effects of the pandemic on the financial sector.
One of the key objectives of the conference was to discuss a report and recommendations, published in July, that followed an independent review of Multilateral Development Banks’ Capital Adequacy Frameworks that was launched last year by G20 finance leaders.
MDBs are international and regional monetary institutions, such as the World Bank and the Islamic Development Bank, set up by sovereign states to provide loans and grants to developing and less-wealthy countries. Capital Adequacy Frameworks are designed to enhance the financial stability of these institutions and promote creative means of ensuring capital is available to help developing countries to promote growth and economic and social stability.
Delegates in Washington discussed whether there is now an over-reliance on loans and aid from such banks.
“We believe the Capital Adequacy Framework is the right solution that can help optimize the MDBs’ balance sheet, whether you are going to talk about risk appetite (or) creative financing,” said Indrawati.
She and other financial leaders stressed their support for the commitment of MDBs to global development, especially in developing countries that face increased financial risks, especially during global crises such as the pandemic.
Delegates highlighted the war in Ukraine as one of the main reasons for growing levels of food insecurity and a nutritional crisis affecting many developing nations. Indrawati said the conflict has disrupted supply chains around the world and caused energy prices to rise sharply.
Membership of the G20 comprises the world’s largest developed and emerging economies. Together they represent more than 80 percent of global gross domestic product, 75 percent of international trade and 60 percent of the world’s population.
The members of the group are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK and the US. The EU and Spain participate as permanent guests.
Indonesia is the largest Muslim country in the world, with a population of more than 230 million people, and considered a key global and regional economic powerhouse.
NEW YORK: Oil prices plummeted on Friday as global recession fears and weak oil demand, especially in China, outweighed support from a large cut to the supply target of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
Brent crude futures were down $2.52, or 2.7 percent, at $92.05 a barrel at 11:12 a.m. EDT, while US West Texas Intermediate crude futures fell $2.97, or 3.3 percent, to $86.14.
The Brent and WTI contracts both oscillated between positive and negative territory for much of Friday but were down for the week by 6 percent and 7 percent, respectively.
US core inflation recorded its biggest annual increase in 40 years, reinforcing views that interest rates would stay higher for longer with the risk of a global recession. The next US interest rate decision is due on Nov. 1-2.
US consumer sentiment continued to improve steadily in October, but households’ inflation expectations deteriorated a bit, a survey released on Friday showed.
The improvement in consumer sentiment “is being viewed as a negative because it means the Fed needs to break the spirit of the consumers and slow the economy down more and that’s caused an increase in the dollar and downward pressure on the oil market,” said Phil Flynn, analyst at Price Futures Group in Chicago.
The US dollar index rose 0.7 percent on Friday. A stronger dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.
China, the world’s largest crude oil importer, has been fighting COVID flare-ups after a week-long holiday. The country’s infection tally is small by global standards, but it adheres to a zero-COVID-19 policy that is weighing heavily on economic activity and thus oil demand.
The International Energy Agency on Thursday cut its oil demand forecast for this and next year, warning of a potential global recession.
The market is still digesting a decision last week from OPEC+ when they announced a 2 million barrel per day cut to oil production targets.
Underproduction among the group means this will probably translate to a 1 million bpd cut, the IEA estimates.
Saudi Arabia and the United States, meanwhile, have clashed over the decision.
RIYADH: NEOM, Saudi Arabia’s smart and sustainable city, saw the submission of nine contractors for the design-and-build contract of a water transmission project that will link the desalination plant in Oxagon to the town of Gayal in Tabuk, MEED reported.
The water transmission pipeline extends 100 kilometers, with a diameter of 2 meters.
The bidders include Saudi Al-Ayuni Investment & Contracting Co., Al-Rashid Trading & Contracting Co., Al-Yamama Co., Nesma Group and Saudi Services for Electromechanic Works, according to MEED.
Lebanon’s CAT group, Egypt’s Enppi, China’s Sinopec and Power China have also put in bids.
Close to a dozen water infrastructure projects are planned for NEOM, including this scheme, with a total estimated budget of around $2 billion.
The scope of works includes the installation of a pumping station, storage tanks and water tunnels, MEED said.
Construction works on the 48 sq. km, eight-sided industrial city have already started.
Regions planned for development as part of NEOM also include the Gulf of Aqaba, NEOM Bay, The Line’s Spine, NEOM Mountain Jabal al-Lauz and NEOM Zero.
RIYADH: Demand for cement in Saudi Arabia is expected to rise thanks to the construction of ongoing mega projects, but more efforts are needed to curb carbon emissions, the deputy minister for mining development has warned.
Musad Aldaood made the comments during a workshop entitled “Decarbonizing Cement in the Kingdom” held on Oct. 13 by the King Abdullah University of Science and Technology in the presence of CEOs and representatives of cement sector companies and other parties.
The Kingdom has a vital cement sector that will contribute to its sustainability vision and objectives to reach carbon neutrality, the Saudi Press Agency reported citing the deputy minister.
Saudi Arabia largely focuses on environmental sustainability, a pillar of Vision 2030, especially as cement production is one of the energy-intensive industries and is responsible for 8 percent of global emissions, Aldaood added.
The current ratio of clinker in cement in the Kingdom is up to 90 percent, compared to the global average of 75 percent, Director of Mining Activities Development at the Ministry of Industry and Minerals Resources Mosleh Alemrani said, citing a detailed study carried by the Ministry.
Saudi Arabia has issued a total of 281 licenses to export iron and cement since a ban on the exportation of the commodities was lifted six years ago, the Ministry of Commerce told Al Eqtisadiah on Oct. 12.
The ministry reiterated that the issuance of licenses came after the specific conditions and requirements in accordance with the regulatory controls of the ministerial committee were fulfilled.
Renewable energy projects in the Gulf region are facing “significant delays” that could further slow down the production and export of green hydrogen, according to Moody’s Investors Service.
A new report by the firm warns that while countries are working on producing zero-carbon green hydrogen, as well as low-carbon blue hydrogen, achieving this on a large scale will be “challenging” in the next few years.
The firm highlighted Saudi Arabia, Oman, and the UAE as particularly well-placed to produce and export these energy sources, given their access to cheap renewables, such as solar power, and expertise in water desalination.
It stated: “Auctioning processes for renewable energy projects in the GCC still face significant delays, which derail production targets.
“The development of the renewable energy sources that would power the production of green hydrogen also faces hurdles.”
The report flagged up increases in raw material, commodity, freight and energy prices following the economic recovery in 2021, as pushing up renewable energy prices.
“In addition, more severe and frequent weather events because of climate change could further disrupt production and damage assets,” it said,
The report did highlight the progress being made in green hydrogen projects in the region, including the Helios Green Fuels Project in Saudi Arabia, which has 2 gigawatt electrolyser capacity, and the Neom Green Hydrogen Company, in collaboration with ACWA Power Management and Investments One Ltd, which aims to produce 1.2 million tonnes of green hydrogen-based ammonia per year based on 650 tons of green hydrogen from 4GW of renewable energy.
The document also expressed concerns that while green hydrogen production could “mitigate the negative economic and fiscal impact of lower global oil demand and prices”, it will take time.
“Only green hydrogen will also somewhat reduce GCC countries’ heavy reliance on hydrocarbons and as such their underlying credit exposure to longer-term carbon transition risks. Reducing the economic and fiscal dominance of the hydrocarbon sector in the GCC will only be a gradual process,” said the report.
LONDON British Prime Minister Liz Truss fired her finance minister Kwasi Kwarteng on Friday and scrapped parts of their economic package in a desperate bid to stay in power and survive the market and political turmoil gripping the country.
Kwarteng said he had resigned at Truss’s request after being forced to rush back to London overnight from IMF meetings in Washington.
Truss, in power for only 37 days, then told a news conference she would now allow a key business levy to rise from next year, raising £18 billion ($20.12 billion), as she accepted she had gone “further and faster” than markets had been expecting.
“We need to act now to reassure the markets of our fiscal discipline,” she said.
Truss appointed Jeremy Hunt, a former foreign and health secretary, to replace Kwarteng.
“You have asked me to stand aside as your Chancellor. I have accepted,” Kwarteng said in his resignation letter to Truss, which he published on Twitter.
She said in response: “As a long standing friend and colleague. I am deeply sorry to lose you from the government.
“We share the same vision.”
The pound slid against the dollar after she spoke, trading 1.2 percent lower on the day at $1.1198 and two-year British government bonds, or gilts, turned negative.
The plan for unfunded tax cuts crushed UK assets and drew international censure, but the pound and gilts have started to recover since the government started looking for ways to balance the books.
Kwarteng is the country’s shortest serving chancellor since 1970, and his successor will be the fourth finance minister in as many months in Britain, where millions are facing a cost of living crisis. The finance minister with the shortest tenure died.
Truss’s own position is in jeopardy.
She won the Conservative Party leadership last month by promising vast tax cuts and deregulation to try to shock the economy out of years of stagnant growth, and the fiscal policy Kwarteng announced on Sept. 23 aimed to deliver that vision.
But the response from markets was so ferocious that the Bank of England had to intervene to prevent pension funds from being caught up in the chaos, as borrowing and mortgage costs surged.
The duo had been under mounting pressure to reverse course after polls showed support for the Conservative Party had collapsed, prompting many colleagues to look for ways to force them out of office.
“The party loves the idea of principles and conviction politicians, but staying in power is everything,” one party insider told Reuters. “Ruthless can also be popular.”
Market Rout
Having triggered a market rout, Truss now runs the risk of bringing the government down if she cannot find a package of public spending cuts and tax rises that can appease investors and get through any parliamentary vote in the House of Commons.
Her search for savings will be made harder by the fact the government has been cutting departmental budgets for years.
At the same time Conservative Party discipline has all but broken down, fractured by infighting as it struggled first to agree a way to leave the European Union and then how to navigate the COVID-19 pandemic and grow the economy.
“If you can’t get your budget through parliament you can’t govern,” Chris Bryant, a senior lawmaker from the opposition Labour Party, said on Twitter. “This isn’t about u-turns, it’s about proper governance.”
Underlining how far Britain’s reputation for sound economic management and institutional stability had fallen, a source within the Group of Seven leading nations said G7 finance ministers at a meeting this week focused on the problems in Britain, and not the usual subject of Italy.
In Washington, Kwarteng was told by the head of the International Monetary Fund of the importance of “policy coherence.” His flight back to London was carried live by television news channels. He was fired minutes after arriving back in Downing Street.
In Westminster, Truss has been trying to find agreement with her cabinet ministers on a way to preserve her push for growth with measures acceptable to her lawmakers that would also reassure financial markets.
Rupert Harrison, a portfolio manager at Blackrock and once an adviser to former British finance minister George Osborne, said markets have now almost fully priced in a U-turn.
“(That) means if the U-turn doesn’t come markets will react badly,” he said on Twitter.
Fighting for survival
A Conservative Party lawmaker, who asked not to be named, said Truss’s economic policy had caused so much damage that investors may demand even deeper cuts rebuild confidence.
“Everything’s possible at the moment,” said the lawmaker, who had backed another ex-chancellor, Rishi Sunak, in the leadership race. “The markets have lost trust in the Conservative Party — and who can blame them?“
According to a source close to the prime minister, Truss is in “listening mode” and consulting lawmakers to gauge which parts of the program they would support in parliament.
Credit Suisse economist Sonali Punhani said the government needed to find around £60 billion through tax cut U-turns and further spending cuts.
“It would be challenging to deliver the scale of these cuts, but for them to be credible, these need to be delivered sooner rather than in the latter part of the forecast,” Punhani said.
The latest bout of political drama to grip Britain comes as the Bank of England also prepares to end its intervention in the gilt market. Truss is the fourth prime minister in six turbulent years of British politics.