Greek PM Tsipras to promise economic relief after years of bailout austerity

Greek Prime Minister Alexis Tsipras must strike the right balance between an angry public that wants to be rewarded for years of sacrifices and markets. (AFP)
Updated 07 September 2018
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Greek PM Tsipras to promise economic relief after years of bailout austerity

ATHENS: Greek Prime Minister Alexis Tsipras is expected to announce on Saturday some economic relief for Greeks who have swallowed the bitter pill of austerity during years of financial crisis, in a keynote policy speech that may be overshadowed by protests.
The leftist leader must strike the right balance between an angry public that wants to be rewarded for years of sacrifices and markets, easily unnerved by any sign of deviation from the path of fiscal consolidation in the post bailout era.
The country emerged from its third international bailout last month after eight years of strict supervision by its foreign lenders — its euro zone partners and the Washington-based International Monetary Fund.
Tsipras, who was catapulted to power in January 2015 on promises to end austerity but was later forced to sign up to a new bailout, hopes to boost his sagging poll ratings this year before a planned general election in 2019.
At the annual trade fair in the northern city of Thessaloniki, Tsipras will indicate the beneficiaries of this year’s fiscal outperformance, which the government puts at €800 million ($931.28 million).
He is also expected to outline his medium-term economic policy, pledging tax cuts and lower social security contributions for some groups, while also promising to continue structural reforms and remain fiscally prudent.
Outside the venue where Tsipras will speak, unions have planned rallies to demand a reversal of bailout reforms, which they say have hurt workers rights and plunged Greeks into poverty.
Government officials told Reuters that while Athens wants to pursue a more growth-friendly strategy, it is determined to meet goals it has agreed with official lenders:
“None of the measures (which will be announced by Tsipras) will jeopardize the 3.5 percent primary surplus target,” one official said.
Greece has agreed to maintain an annual primary budget surplus — which excludes debt servicing costs — of 3.5 percent of gross domestic product up to 2022. So far, it has outperformed on fiscal goals and the economy has returned to growth.
Hinging on its fiscal outperformance, the government hopes to avoid implementing a new round of legislated pension cuts next year. It has called the measure “unnecessary” in a country where pensions have already been slashed 12 times since 2010.
“I can say with certainty that the specific measure is not needed to achieve the 3.5 percent primary surplus target,” government spokesman Dimitris Tzanakopoulos said this week.
The issue is expected to be discussed with lenders’ representatives, set to arrive in Athens on Sept. 10 for their first post-bailout quarterly assessment.
During his speech, Tsipras is also likely to defend a deal with Skopje to end a decades-old dispute over the ex-Yugoslav Republic’s name, a sensitive issue in northern Greece which has its own region named Macedonia.
A protest rally against the deal is also planned for Saturday evening in Thessaloniki.


Pakistani central bank lifts interest rate as inflation bites

Updated 20 May 2019
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Pakistani central bank lifts interest rate as inflation bites

ISLAMABAD: Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for a bailout from the International Monetary Fund.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.
Noting average headline inflation rose to 7% in the July-April period from 3.8 percent a year earlier, the central bank said recent rises in domestic oil prices and the cost of food suggested that “inflationary pressures are likely to continue for some time.”

 

It said it expected headline inflation to average between 6.5% and 7.5% for the financial year to the end of June and was expected to be “considerably higher” in the coming year. Expected tax measures in next month’s budget as well as higher gas and power prices and volatility in international oil prices could push inflation up further, it said.
It said the fiscal deficit, which the IMF expects to reach 7.2% of gross domestic product (GDP) this year, was likely to have been “considerably higher” during the July-March period than in the same period a year earlier due to shortfalls in revenue collection, higher interest payments and security costs.
Despite some improvements, financing the current account deficit remained “challenging” and foreign exchange reserves of $8.8 billion were below standard adequacy levels at less than the equivalent of three months of imports.
The central bank said it was watching foreign exchange markets closely and was prepared to take action to curb “unwarranted” volatility, after the sharp fall in the rupee over recent days that saw the currency touch a record low of 150 against the US dollar.
Details of what Pakistan will be required to do under the IMF agreement, which must still be approved by the Fund’s board, have not been announced but already opposition parties are planning protests.
As well as higher energy prices that will hit households hard, there are also expectations of new taxes and spending cuts in next month’s budget to reach a primary budget deficit — excluding interest payments — of 0.6% of GDP.
With the IMF forecasting a primary deficit of 2.2% for the coming financial year, that implies squeezing roughly $5 billion in extra revenues from Pakistan’s $315 billion economy, which has long suffered from problems raising tax revenue.

FACTOID

Pakistan’s economic growth is set to slow to 2.9% this year.