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Justice Department sues Apple, alleging it illegally monopolized the smartphone market. The Justice Department on Thursday announced a sweeping antitrust lawsuit against Apple, accusing the tech giant of engineering an illegal monopoly in smartphones that boxes out competitors, stifles innovation and keeps prices artificially high. (AP)

New Zealand slips into its second recession in 18 months as economy contracts. New Zealand has entered its second recession in 18 months after the latest round of GDP figures confirmed its economy contracted in the last quarter of 2023. (AP)

Western banks warn of risks in EU plan to grab Russian assets, sources say. Some western banks are lobbying against EU proposals to redistribute billions of euros in interest earned on frozen Russian assets, senior industry sources said, fearing it could lead to costly litigation. (Reuters)

US sanctions shipping firm accused of links to Iran, Yemen’s Houthis. The measures come as Washington tries to curb the Yemeni group’s attacks on Red Sea shipping lanes amid the war on Gaza. (Al Jazeera)

Russia’s backdoor to the global banking system is slamming shut. A major lender in Dubai has scaled back Russia-related business, while Turkish lenders have become more cautious. (WSJ)

Bank of Japan exits negative interest rate policy. In a historic—albeit well-anticipated—policy shift, the Bank of Japan (BoJ) formally ended its ultra-easy and nonconventional monetary stance at today's monetary policy announcement. (Wells Fargo)

After 100 brutal days, Javier Milei has markets believing. That Milei had cause to celebrate 13% monthly inflation shows the scale of the economic mess he inherited, and how much he has left to do to fix it. (Economist)

European Central Bank’s Lagarde signals June cut but says future rate path uncertain. European Central Bank chief Christine Lagarde on Wednesday reiterated that policymakers will consider bringing interest rates down in June, but sketched an uncertain path beyond that. (CNBC)

EU firms in China forced to focus on risks over business, lobby group says. More than half of respondents to survey say China’s business landscape has become more political. (Al Jazeera)

Federal Reserve holds interest rates steady, still projects cuts ahead. The Federal Reserve left interest rates unchanged Wednesday and officials tweaked projections in ways that suggest less rate-cutting may lie ahead than previously envisioned. (Axios)

Switzerland becomes first major economy to cut interest rates in surprise move. The Swiss National Bank on Thursday surprised the market with a decision to lower its main policy rate by 0.25 percentage points to 1.5%. (CNBC)

Construction starts plunge 8% as Fed toes line on rates. January’s manufacturing gains were wiped away as the prolonged impact of higher interest rates and labor issues caught up with the sector. (Construction Dive)

 

 

 

Pakistan’s economic crisis: Debt, inflation and recovery

 Colombia Flag

Kendall Payton, editorial associate

After a tumultuous election period, the Pakistani government now must deal with fallout from the country’s mount of foreign debt. The State Bank of Pakistan estimated its debt to be $124.5 billion and 42% of GDP. Though this is not extremely high based on international standards, Pakistan’s annual foreign exchange earnings through exports show that they are not enough to pay for imports.

The country’s post-pandemic recovery started off strong but came to a halt in FY23. Economic disruption stemmed from a few factors, with pressures from:

  • Domestic prices
  • External and fiscal balances
  • Exchange rates
  • Foreign exchange reserves

All happening while world commodity prices have surged, global monetary policy has tightened and ongoing domestic political uncertainty—causing economists confidence in the Pakistani economy to diminish.

Real GDP growth is expected to be modest in FY24. Pakistan is reported to have received a nine-month loan package from the IMF back in June 2023 to help the country stay away from default on sovereign debt obligations amid fiscal strains. Domestic issues also may slow increased export earnings expected in 2024, however, the Federal Investigation Agency’s 2023 laws on illegal foreign exchange dealers has helped stabilize the rupee-USD exchange rate. “There is no decade in which we have not stumbled through a balance-of-payment crisis and suffered ‘sudden stops’ in our economic management, accompanied by rapid, unplanned devaluations of the rupee and a painful spike in the costs of living,” Ali Hasanain, an associate professor of economics at Lahore University of Management Sciences told Al Jazeera. “The government badly needs a plan to tackle this fact. But since this appears almost certainly infeasible, we need to negotiate with our lenders, either through a restructuring of our debt, or through offering equity in Pakistani assets.”

Inflation has spiked more than 30% and approximately 70% of Pakistanis agree that economic conditions have worsened since 2023, according to a Gallup survey poll. Just last June, the country faced threat of default with foreign reserves plunging to $4.4 billion—and more than 50% of the rupee’s value fell against the USD. Though Pakistan’s economic and financial position has improved slightly, “Policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment,” according to the IMF. “The State Bank of Pakistan remains committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility and transparency in the operations of the FX market.”

By the numbers: Customers in Pakistan have averaged 34 days beyond terms, with 100% of credit professionals saying payment delays have increased, per the FCIB Credit and Collections Survey. The most common causes for payment delays are cash flow issues (100%), inability to pay (100%), billing disputes (100%) and unwillingness to pay (100%).

What FCIB Credit and Collections Survey respondents are saying:

  • “Make sure you have received CIA deposit into your bank account before shipping. Central bank has been holding USD up to 10 days.”
  • “It is important to know customer's payment process to avoid misunderstandings or delays due to administrative issues.”
  • “Follow up with the customer’s procurement and finance department as many times as necessary.”
  • “Obtain financial statements on your customers and backstop sales with credit insurance.”

The FCIB Credit and Collections Survey is now open. It covers Argentina, Canada, France and Japan. You will earn ICEU/participation credit for your input. Be sure to share the link with your credit and collections network.  

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Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate