Tag: recession

  • US could default by next month unless debt ceiling is raised

    US could default by next month unless debt ceiling is raised

    Janet Yellen, the United States Treasury Secretary, has written to Republican House Speaker Kevin McCarthy, warning that the federal government may exceed its spending limit by June 1 if Congress does not raise the debt ceiling. Yellen’s letter, which was published on Monday, noted that available data suggests that the government will no longer be able to cover its expenses in early June if Congress does not raise the limit before then.

    Yellen emphasised the importance of Congress taking action to increase or suspend the debt limit as soon as possible, to ensure that the government can continue to make its payments. While Yellen’s letter indicates the US could enter default as early as June 1, she also noted that it is impossible to predict the exact date when Treasury will be unable to pay the government’s bills.

    The potential for a default has raised concerns among experts about its possible impact on the US economy. It could lead to a fall in the US credit rating, resulting in higher interest rates and a possible recession. The process of raising the US spending limits is typically routine, but it has become increasingly contentious in recent years. Republicans in Congress are pushing for steep cuts to social programs in exchange for their support to raise the debt ceiling this year. In contrast, the Biden administration has called for an increase to the debt ceiling without conditions, stating that debates over various programs can be hashed out during negotiations on the yearly budget.

    Last week, the Republican-led House of Representatives passed a bill that agreed to raise the debt ceiling by $1.5 trillion in exchange for $4.5 trillion in spending cuts for programs like healthcare for low-income communities, renewable energy and transportation. The bill is considered dead on arrival in the Democrat-controlled US Senate, and Biden has stated that he would veto it. However, its passage in the House is considered a victory for McCarthy, who has since called for Democrats to approve the bill and avoid a default.

    Democrats have called for a “clean” debt limit increase without haggling or addendums. Virginia Senator Mark Warner tweeted on Monday that the US has about a month until it defaults on paying its debt and emphasised that this is not new spending, but about paying bills already incurred. On May 9, US President Joe Biden reportedly called for a meeting with Democratic and Republican leaders to discuss spending and the debt limit. The Congressional Budget Office has also stated that it sees an increased risk of the government running out of funds by early June due to tax receipts that were lower than expected.

  • Amazon plans to lay off 10,000 employees due to declining sales

    Amazon plans to lay off 10,000 employees due to declining sales

    Amazon is reportedly getting ready to lay off thousands of office workers due to decreasing sales and worries about an impending recession.

    The e-commerce giant’s office personnel could lose about 10,000 of their employees, according to US media sources who requested anonymity.

    Cuts are anticipated to have an impact on departments like e-commerce and personal devices.

    The business warned it had overhired during the pandemic and had previously implemented a hiring freeze and stopped some of its warehouse expansions. Additionally, it has taken steps to close off some areas of its operations by shelving plans for things like a personal delivery robot.

    The business announced last week that cutting costs would be a priority in its annual review of business operations. “As part of this year’s review, we’re of course taking into account the current macro-environment and considering opportunities to optimize costs,” the e-commerce company said in a statement.

    According to media sources, the precise number of positions that will be eliminated is still uncertain.

    Amazon is battling a dip in online sales after the epidemic saw a surge in its revenue. Despite a 15 per cent increase in overall revenue in the most recent quarter, the company has remained concerned about the forecast as the slowdown spreads to other industries, including its long-profit-boosting cloud computing division, Amazon Web Services.

    On social media, the company’s founder Jeff Bezos, who is no longer serving as CEO but is still chairman of the board, declared that it was time to “batten down the hatches.”

    Amazon joins a long list of other tech firms that have announced layoffs in an effort to signal an impending economic collapse. Included in the list is Meta, the parent company of Facebook, Instagram, and WhatsApp, which recently announced plans to eliminate 11,000 jobs, the largest reduction in staff in company history.

    According to a survey by Challenger, Gray & Christmas, which analyses such announcements, US-based tech companies have cut more than 28,000 jobs overall this year, more than double the number from a year ago.

  • Pakistan to overcome $4 billion external financing gap soon: SBP

    Pakistan to overcome $4 billion external financing gap soon: SBP

    In the midst of intense pressure on foreign currency reserves, Pakistan will soon close its $4 billion shortfall in external finance with the assistance of friendly nations under IMF conditions, according to Acting Governor of the State Bank of Pakistan (SBP) Dr Murtaza Syed.

    He also acknowledged that inflation will continue to be higher for the ensuing 11 to 12 months, which is why the central bank was aiming for an average inflation target of 18 to 20 per cent for the current fiscal year 2022–2023

    According to The News, acting SBP Governor Dr. Murtaza Syed stated that Pakistan has already met its gross external financing requirements of $34 to $35 billion.

    However, Islamabad is also attempting to secure confirmation of $4 billion in inflows from friendly nations like Saudi Arabia, the UAE, and Qatar. According to him, these extra dollar inflows will be used to boost foreign currency reserves and build a safety net in case of a crisis-like circumstance.

    He resisted providing a specific timeline but assured that the $4 billion finance deficit will be closed quickly. He argued that urgent attempts were being made by the government and IMF high-ups to secure confirmation from their respective nations.

    Denying that the scenario was similar to Sri Lanka, he praised Bangladesh and claimed that nation performed properly, chose to return to the IMF, and also increased utility costs while maintaining enough levels of foreign exchange reserves.

    Speaking of increasing inflation, he believed that supply interruptions abroad had set the way for a global super cycle of commodities, leaving Pakistan with no choice but to concentrate on agriculture productivity in order to secure food security.

    According to Murtaza Syed, people would have to deal with this challenging moment because there is no immediate magic wand to manage increased inflation. He said that while it is a challenging time, there is no alternative way to prevent the country from entering a more challenging situation if nothing was done.

    According to the official, the SBP has loosened the cash margin requirements for opening L/Cs for imports and offers incentives to individuals who do so. According to him, the IMF opposed trade restrictions and took action to prevent the depletion of foreign exchange reserves.

    The current pressure on foreign reserves is now anticipated to end within the next two months. He also promoted energy saving as a way to ease the burden of high import costs.

    The senior official believed that as long as the economy’s structural issues persisted, Pakistan will continue to see boom and bust cycles. He gave a recent example in which the nation’s GDP increased by 6 per cent, indicating that the overheating of the economy led to imbalances known as the budget deficit and current account deficit. Although a recession is not imminent, he continued, the economy must be managed carefully.

  • At least 1,300,000 people in KP to lose jobs in 45 days?

    At least 1.3 million people could lose their jobs if a 45-day lockdown is put in place, a report prepared by Khyber Pakhtunkhwa (KP) government’s Planning and Development Department revealed on Sunday.

    The report warns at least 460,000 people working as daily wagers and street vendors are set to lose their employment with “immediate effect”.

    The report, released on Sunday, highlighted the effect of the COVID-19 pandemic on the province’s economy.

    Estimating layoffs caused due to the lockdown in place to stop the spread of the pandemic, the report noted that “daily wage workers, paid worker by piece rate or work performed, paid non-family apprentice and street vendors” were highly vulnerable to the economic impact of coronavirus.

    The report also predicted that the growth of KP’s economy would drop from 3.73 per cent in 2019 to 2.9pc this year, while the gross domestic product (GDP) would go down from Rs13,35,942 million to Rs13,16,160m.

    The report also predicted that overall, some 1.3 million jobs could be lost during a 45-day lockdown. The highest losses would be seen in the transportation and storage sectors with a predicted loss of some 359,393 jobs while construction, manufacturing and wholesale sectors would also be highly affected with job losses of some 295,594, 258,664 and 216,252 respectively.

    The number of jobs lost could increase even more if the lockdown was extended, the report warned, estimating that some 2.7m jobs would be lost if the lockdown was extended to a six-month period while some 4.2m jobs would be lost if the lockdown remained in place for a year.

    However, the report observed that there would be “minimal impact” on the province’s agricultural sector.

    REPORT LAYS DOWN MECHANISM TO MITIGATE IMPACT:

    The report titled Coping Strategy: Mitigating Adverse Impact of COVID-19 on the Economy and Job Market in Khyber Pakhtunkhwa also laid out the provincial government’s mechanism to deal with the impact.

    According to the report, some 1.5 million families in the province will benefit from the federal government’s Ehsaas Cash Disbursement Programme through which they would get Rs12,000 every month.

    The report voiced apprehension that the COVID-19 pandemic would also “render vulnerable” those people who do not fall under the federal government’s cash distribution programme criteria.

    The government would therefore form a committee at the Village Council level that would identify vulnerable families who would receive Rs6,000 from the government.

    Certain sectors would also be exempted from tax payments, the report said. Construction, wholesale, retail and transport sectors would be eligible to benefit from these tax exemptions.

    The government would also adopt a moratorium on loan payments for three months to “allow business higher liquidity to the most affected small and medium enterprises” while “mark-up due for the quarter ending 31 March would have to be paid by 15 June instead of 15 April”.

    The government would also pay advance salaries to officers from grade 1 to 17 to “sustain demand” if needed.

    The government would also consider deferral of payment of utility bills for three months to help support small businesses and shopkeepers, the report further added.

  • Coronavirus recession? The Citizens Archive of Pakistan fires 13 citing ‘financial constraints’

    Coronavirus recession? The Citizens Archive of Pakistan fires 13 citing ‘financial constraints’

    As the country observes a lockdown to curb the spread of coronavirus, The Citizens Archive of Pakistan (CAP), a non-governmental organisation, has fired 13 employees without prior notice, citing financial constraints.

    In a series of tweets, Raza Gillani, a former employee lashed out at the organisation for what he termed as a move to profit from a pandemic.

    He said that that the organisation had fired him along with 13 other employees without a prior notice until the coronavirus situation subsides. He added that while the government funds one project of the organisation, the employees were still working on the other project remotely. “Where is that money going?” he asked.

    In a veiled reference to two-time Sharmeen Obaid-Chinoy who runs the organisation, he said that she makes films depicting the most vulnerable segments of the society but her own organisation was abandoning its most vulnerable employees who have families to sustain in this time of crisis.

    “If downsizing had become so important, why were the directors and those who actually take a hefty salary not fired? Why is it always the most vulnerable employees who are considered a liability at the time of a crisis, if saving money is so important to sustain the organisation?” he asked.

    Later, Raza also posted updates on Twitter stating that the human resource department had assured them that they would be given their notice periods and an additional one-month salary as well. He added that while CAP runs the National History Museum, it was also true that the Punjab government has not paid the salaries of the museum employees for the past six months.

    Following his tweets, CAP, in a statement, said that the organisation relies on the support and funding of donors both private and public to support its core projects.

    They mentioned that they have been struggling for the last several months as they have not received six months of payments. Also, their existing grants have been put on hold as well.

    “Now that the museum is closed for an indefinite period of time due to the government lockdown for COVID-19 pandemic, as a small non-government organisation we are finding it difficult to sustain a large workforce and have had to make some difficult decisions to let some members of our organisation go whilst also having to revisit current employees’ remuneration,” the statement added.

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    CAP also stated that the terminated employees “will receive their salaries for the month of March 2020 along with an additional month of pay for April 2020 to be paid after their four-week notice in accordance with their contracts”.

    The organisation also claimed that should they be back on their feet after the pandemic is over, “employees who have been terminated will be the first we contact in regards to a return to their position”.