British inflation jumps to 1.2%

Shoppers are reflected in a shop window as they walk along Oxford Street in London. (Reuters)
Updated 13 December 2016
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British inflation jumps to 1.2%

LONDON: British annual inflation jumped in November to the highest level in more than two years as a slide in sterling since the Brexit vote lifted fuel costs, data showed Tuesday.
The 12-month inflation rate hit 1.2 percent compared with 0.9 percent in October, the Office for National Statistics (ONS) said in a statement.
Analysts’ consensus forecast had been for a gain to 1.1 percent.
“The Consumer Prices Index (CPI) rose by 1.2 percent in the year to November 2016, compared with a 0.9 percent rise in the year to October. The rate in November was the highest since October 2014, when it was 1.3 percent,” the ONS said in a statement.
It added that rises in the prices of clothing and motor fuels contributed to the increase, offsetting falls in the cost of air and sea travel.
“Fuel prices tend to reflect movements in oil prices and part of the increase in oil prices during 2016 to date can be explained by depreciation of sterling against the US dollar,” the ONS said.
The British pound has faced heavy pressure since Britain voted in June to exit the European Union, resulting in higher import costs.
“Sterling weakness continues to raise the cost of inputs for UK businesses, and there are signs these cost increases are slowly being passed on to consumers,” noted Ben Brettell, senior economist at Hargreaves Lansdown stockbrokers.
“This in turn could hit consumer spending, which has so far held up well despite Brexit-related uncertainty.”


No need for more talks over draft budget: Lebanon finance minister

Updated 5 min 43 sec ago
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.