Qatar to Invest $3bn in Pakistan Economy

Summary:

The Qatar Investment Authority's announcement comes as Pakistani PM Shehbaz Sharif visits Doha on an official trip.

The Qatar Investment Authority (QIA) has announced it aims to spend $3bn on various commercial and investment sectors in Pakistan, which is currently facing a dire economic crisis, according to a statement released by Qatar's Amiri Diwan.

Wednesday's announcement was made during a visit to Doha by Pakistani Prime Minister Shehbaz Sharif, who held official talks with Qatari Emir Sheikh Tamim bin Hamad Al Thani after a meeting with the QIA on Tuesday.

"His Highness stressed the importance of the brotherly and strategic relations between the two countries and their aspiration to enhance economic partnership by raising trade exchange and promoting investments through the Qatar Investment Authority," the Amiri Diwan said in its statement.

A senior Pakistani minister who was present during the meeting confirmed to Al Jazeera that the Qatari government has shown its "intention of investing in Pakistan".

"This is very good and more than what we needed," he said. The minister further added that once the Qataris buy Pakistani assets, it will "boost our reserves".

"They are interested in airports, seaport terminals, LNG-fired power plants, solar energy, [and] shares in the stock markets," he said.

Pakistan is currently dealing with serious economic turmoil and faces a balance of payments crisis, with foreign reserves having dropped as low as $7.8bn, barely enough for more than a month of imports.

The country is also contending with a widening current account deficit, depreciation of the rupee against the United States dollar and inflation that hit more than 24 percent in July.

During the session, the two heads discussed bilateral relations between Qatar and Pakistan, and ways to support and develop them in "the fields of defence, economy, investment, trade exchange, energy and sports, in addition to discussing the efforts made by the two countries to combat terrorism", the statement said.

IMF financing in pipeline

The Pakistan representative for the International Monetary Fund (IMF) said last week that the IMF's executive board would meet on August 29 to decide on resuming a stalled $6bn loan facility for Islamabad.

Last month, the IMF said it had reached a staff-level agreement with Pakistan that would pave the way for disbursement of $1.17bn if approved by the IMF board.

Earlier this week, Pakistan's central bank also publicly stated that the country's external financing needs had been "more than fully met" for the current fiscal year, "helping reduce external vulnerability".

Commenting on the announcement, Uzair Younus, director of the Pakistan Initiative at the Atlantic Council's South Asia Center, said that while this investment may help alleviate near-term financing concerns for Pakistan, it does not address the central problem facing the country's economy.

"Pakistan's core issue is its inability to sustainably finance its own foreign exchange needs," Younus said. "The Qataris, through these investments, will expect profits that will need to be repatriated in dollars. One must ask whether Qatar will truly be able to recuperate its investments with a profitable return."

Macroeconomist Ammar H Khan said that the Qatari investment will provide Pakistan with "precious forex liquidity" in a tough environment.

However, he too agreed with Younus, saying the investment will not "alleviate structural problems that plague the country".

"If QIA is able to improve governance of state-owned enterprises through its investment and enhance value," Khan said, "then that would be a welcome benefit."

Source: Al Jazeera

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Alex

Central Bank

South Korea's central bank raised its key interest rate by a quarter-percentage point as expected on Thursday, in a bid to contain inflation and prevent capital outflows as the U.S. Federal Reserve gears up for more hikes.

The Bank of Korea raised its benchmark policy rate by 25 basis points to 2.50%, resuming normal-sized increments after delivering an unprecedented 50-basis point hike in July to curb inflation now at an almost 24-year high.

All but one of 36 analysts in a Reuters poll expected the bank to go for the quarter-point hike, while one expected a half-point hike.

The bank also upgraded this year's inflation forecast to 5.2% from 4.5%, which would be the fastest rate since 1998, and cut its projections for economic growth to 2.6% this year from 2.7% previously.

It sees growth slowing to 2.1% in 2023.

September futures on three-year treasury bonds extended losses after the announcement, falling as much as 0.25 point to 104.41.

The BOK was among the first central banks to abandon pandemic-era monetary stimulus and has hiked a total of two full percentage points since August last year.

South Korean policymakers are now trying to rein in the fastest inflation in over two decades without cratering the economy.

"With economic growth set to slow in the second half of the year and inflation probably already having peaked, we think the tightening cycle will come to an end later this year," said Gareth Leather, an economist at Capital Economics in a note published shortly after the rate decision.

"Weaker economic growth – caused by the slowdown in the global economy and the drag from recent policy tightening – should cause underlying price pressures to subside."

Economists were divided on where rates would be by the year-end. Among the 36 surveyed, three said the central bank would stop at 2.50%, half of respondents said at 2.75%, 14 said 3.00% and one had a 3.25% forecast.

Governor Rhee Chang-yong will hold a news conference at 0210 GMT.

Source: Reutres

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Owen Li

Japan's government described its economy as "moderately picking up" in its monthly economic report, keeping the overall assessment unchanged from the previous month, while noting an upward revision to factory output.

While sounding cautiously optimistic on the world's No. 3 economy, the government flagged risks of a global downturn amid overseas trend of monetary tightening and rising inflation while households face slower wage growth.

"The economy is picking up moderately," the Cabinet Office, which compiled the report, said, "It is expected to pick up ahead as we stand ready to take all possible steps to prevent infections as socioeconomic activity normalises," referring to coronavirus cases.

The report was approved by Prime Minister Fumio Kishida's cabinet ministers on Thursday.

The government upgraded its view on factory output for August as production bounced back from declines seen in April and May as China's anti-coronavirus lockdowns eased.

Factory output showed signs of picking up, the report said, compared with July when production appeared to be stalling. It marked the first upgrade in seven months.

The assessments of other major components of the economy saw no change from the previous month.

Private consumption, which accounts for more than half of Japan's economy, was picking up moderately, the report said, noting the resumption of activity among consumers who are "living with coronavirus" after the lifting of COVID-19 curbs.

"Downward deviation in world economy stemming from global monetary tightening is emerging as risks that weigh on Japan's economy," the report said.

"Attention needs to be fully paid to supply constraints and a price-hike impact on households and corporations."

Japan's economy rebounded at an annualised 2.2% in April-June from COVID-19-induced doldrums.

Still, the pace of growth undershot economists' median estimates, raising doubts about strength of private consumption and expectations for pent-up demand known as revenge spending.

source: Reuters

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Damon

Wall Street rebounds after a three-day slump

US stocks finished higher amid a broad-based rebound, suggesting that investors may bid for a peak of hawkishness by the Fed ahead of Friday's narrative at the Jackson Hole Symposium, an annual meeting of central bankers to discuss important economic issues. While bond yields were slightly higher, the probability of a 75-bps rate hike strengthened to 60.5% overnight, according to the futures pricing on the CEM Group FedWatch Tool.

Dow up 0.19%, S&P 500 rising 0.3%, and Nasdaq advancing 0.41%. All the 11 sectors in the S&P 500 were higher.

Energy stocks shined: OXY (+6.88%), DVN (+3.56%), XOM (+4.17%)

Tech mixed: APPL (-0.22%), AMZN (+0.28%), GOOGL (-0.36%), MSFT (-0.5%), META (-1.2%), TSLA (+2.23%), NVDA (+0.84), NFLX (0.88%), COIN (+0.32%)

Financials down: JPM (-1.05%), C (-0.7%), WFC (-0.16%)

Sluggish economic data: The US pending home sales index fell to the lowest level since March 2020. The core durable goods orders climbed 0.3%, slightly higher than expected.

Nvidia's Q2 FY23 earnings missed: Rev: $6.70B vs. $6.87B est., up 3% annually. EPS: $0.51 vs. $0.56, down 51% annually

Upcoming data & event: US Q2 GDP (Prelim), weekly jobless claims, Jackson Hole Symposium kicks off

Risk-on boosts Asian markets to open higher

The NZX 50 was flat at the open. NZD/USD fell 0.3% to 0.6190, consolidating above 0.6170 a near-term support. The retail sales data for the second quarter is in the spotlight for the local markets.

ASX 200 is set to open higher up 0.22%, futures up 0.45%. AUD/USD was down 0.40% to 0.6910, with near-term support at 0.6850. No major economic data for today.

HSI futures are up 0.12%, pointing to a slightly higher open in HKEX. Chinese stocks were under pressure due to a drop in tech stocks on Wednesday. XPeng Q2 earnings missed, EPS: -$0.46 vs. -$0.12 est. Rev: $1.1B, up 87% annually.

USD loses steam as risk-on recovers: The US dollar index rose 0.01% to 108.56. The other G10 currencies were little changed against the US dollar as market participants were waiting for clues from the Fed.

Crude oil rises for the third straight trading day: Oil prices rose and continued to bounce on the news that OPEC+ may cut output, with Iran's nuclear negotiation in a stalemate.

WTI futures (Nymex) up 0.37%, to $95. 24. Brent futures (ICE) up 1%, to $101.22.

Precious metals rebounded as USD upside momentum slowed: The Comex gold futures rose 0.17%, to $1,764.50 per ounce. Comex Silver futures were up 0.51% to US$19.07 per ounce.

Source: CMC

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Devin

Having endured one lost decade of stagnant growth and declining living standards, Britain is heading for a second. The economy shrank by 0.1 per cent in the second quarter of this year and the Bank of England has forecast that output will fall for five consecutive quarters.

Threadneedle Street now expects inflation, which already stands at a 40-year high of 10.1 per cent, to peak at over 13 per cent this year. Perhaps more alarmingly, the Bank forecasts that it will still be around 9.5 per cent next autumn. Unemployment is expected to increase for each of the next three years, rising from 3.8 per cent at present to 6.3 per cent.

While the coming recession, in the Bank's view, will be comparable to that of the early 1990s, and less severe than those experienced after the 2008 financial crisis or during the Covid-19 pandemic, it will also hit households far harder. Real household disposable income – the income of households after accounting for changes in prices, taxes and benefits – is due to fall in both 2022 and 2023. The cumulative drop anticipated by the Bank's baseline scenario is the largest two-year fall since at least the 1950s. While the poorest households – which spend the greatest share of their income on essentials such as food and fuel – will be the worst affected, almost no one will escape the pain.

That pain is mostly emanating from what economists rather prosaically call a "negative terms-of-trade shock". In straightforward terms, the price of goods that the UK imports, such as energy and food, has soared, reducing our ability to pay for them. According to the World Bank, global energy prices have risen by 165 per cent since the beginning of 2021 and food prices by almost 30 per cent. In effect, the country finds itself poorer than it expected to be.

The combination of a global energy spike, multi-decade inflation highs and industrial unrest has prompted more than the usual number of commentators to make analogies with the 1970s. But most of these comparisons are inaccurate. The structure of the UK jobs market was changed almost beyond recognition by the Thatcherite assault on the trade unions in the 1980s. The labour market today is far more flexible, and worker bargaining power is inherently weaker. Fretting about a wage-price spiral when wage growth is markedly lower than inflation feels almost perverse. The economy is more globalised and supply chains are far more international, and the inflation dynamics are different.

But there is one sense in which looking to the 1970s is instructive. It was a decade in which the British economy was hit by multiple, simultaneous shocks that often pushed politicians to respond in contradictory ways. And, even with the benefit of years of hindsight, it is tricky to say exactly how policymakers should have acted. Much like now, there was no easy way out of the mess.

The Bank of England, at the same time as unveiling its apocalyptic forecasts, increased interest rates by 0.5 percentage points, the largest single rise in 27 years. Since December 2021 it has hiked borrowing costs from just 0.1 per cent to 1.75 per cent. Financial markets expect the Bank's base rate to reach 2.75 per cent by the end of next year.

This is the fastest tightening of British monetary policy in three decades and comes even as the UK falls into recession. Understanding why the Bank is acting to slow an already weak economy means delving into the nature of the UK's high inflation.

Britain is far from unique in suffering from price surges. Inflation is at or near a 40-year high across the eurozone (8.6 per cent) and the US (8.5 per cent). But the main causes vary. In Europe the story is mostly one of high energy and food prices. In the US the decisive factor has been higher services price inflation, as a tight labour market (where workers are in short supply) pushes up wages and adds to the cost base of firms, which are trying to pass some of that cost to consumers.

The UK has a dose of both. While energy prices are the single largest factor, services price inflation is running at 5.7 per cent, its fastest pace since the early 1990s. The labour market – for now, at least – remains tight. There are more advertised job vacancies than unemployed workers, partially due to the supply of potential workers being lower than before the pandemic.

The Bank's rate-setting Monetary Policy Committee is charged by the government with meeting an inflation target of 2 per cent. Its members accept their relative powerlessness when confronted by globally generated energy prices, but they have become convinced that domestically generated price pressures are now a concern. The best way to understand their new strategy is to realise that they have decided a recession is necessary to bring inflation back to target. For the first time since it was granted operational independence by Gordon Brown in 1997, the Bank finds itself playing the role of "bad cop", introducing harsh monetary policy that it hopes is in the long-term interests of the economy.

Ironically, the politicians who have castigated the Bank in recent months for "failing to control inflation", such as the Conservative leadership front-runner Liz Truss, are unlikely to be especially happy with a Bank now acting to bring down inflation.

It is worth stepping back and reminding ourselves exactly how the Bank "controls" inflation. The mechanism is increasing borrowing costs in order to raise mortgage bills, make corporate investment harder, and slow hiring and wage growth.

All of this makes the job of government ministers more difficult. The clear signal from the Bank is that, as politicians intervene to prop up the economy through household support payments or tax cuts, it will raise interest rates faster to bear down on inflation.

But whatever the Bank's intentions, there is no doubt that households need more support. The typical annual energy bill is forecast to rise from £1,971 at present to around £3,600 by October and perhaps as much as £4,400 in April 2023. Just 18 months ago the typical bill was closer to £1,000. According to one estimate by the University of York, two thirds of UK households will be in fuel poverty (defined as spending more than 10 per cent of net total income on energy) by January. Even relatively high earners will struggle to cope with price rises of this magnitude. The median income for households in the top fifth of earners in Britain is around £63,000 after tax – affluent, but not rich enough to comfortably absorb a £2,500 rise in utility bills without cutting back elsewhere. As even the wealthiest reduce their discretionary spending, the wider economy will suffer a secondary blow.

Contemplating such colossal and potentially ruinous hikes in energy bills, the consumer finance expert Martin Lewis has been transferred into an increasingly radical campaigner on fuel poverty and has warned of "civil disobedience, civil unrest" if politicians do not act. A growing number of households are threatening to simply stop paying their energy bills. Don't Pay UK, a campaign urging people to cancel their direct debits, claims to have more than 100,000 supporters.

Few politicians seem to have grasped the sheer scale or likely duration of the coming crisis. Truss is still prioritising tax cuts above all else, through reversing the recent 1.25 percentage point increase in National Insurance, suspending green levies, and the potential removal of VAT from fuel bills. Yet even taken together, this amounts to a giveaway of hundreds of pounds to households as their energy bills rise by thousands. Worse still, a cut in National Insurance would be remarkably badly targeted: the poorest 10 per cent of would accrue a monthly benefit of just 76p, while the richest tenth would be £93.19 better off.

Both the Liberal Democrats and, belatedly, Labour have gone further and pledged to freeze energy bills at their current level. Under their plans, Ofgem, the energy regulator, would be ordered to keep the current price cap in place and the government would meet the difference between the wholesale energy prices paid by the utility firms and the subsidised price for consumers.

While some have attacked the universalist approach of freezing bills and argued for means-tested support, the case for wide-ranging help is clear. The problem with Labour and the Liberal Democrats' approach is not that the packages are too broad but rather that they are too narrow.

The policy focus on households is understandable: households vote, and elected politicians have to pay them attention. But while domestic energy bills are subject to a cap, business ones are not. The bills for small and medium-sized firms are rising by three to five times as their fixed-rate deals end. The British Institute of Innkeeping estimates that pubs will need to trade 20 per cent above 2019 levels to meet rising energy costs, but more than four-fifths of them already report that business is slower than before the Covid-19 pandemic. High energy costs may well cause thousands of otherwise viable businesses to fail over the coming months.

Then there are public services. Schools and hospitals are also exposed to rising energy prices and their budgets have not been increased to cope. Money spent on electricity is money not spent on teaching or care. The Institute for Fiscal Studies has calculated that public services need an additional £8bn this year and extra £18bn next year if their budgets are to be protected from inflation.

With winter coming, the debate has shrunk to a simple question: how does the country get through it? But energy analysts fear high prices will persist for at least another two years. While Labour and the Liberal Democrats' plans have been costed at around £30bn and £36bn respectively, this would only delay the pain by six months. Extending relief beyond that point will be costly.

Other European countries, suffering the same wholesale rise in energy costs, have taken different approaches. To date, the British response has been to mostly pass on price rises to consumers – albeit in a delayed manner, as the price cap is reset each quarter – and to support them through cash rebates. But most of Europe has taken the route favoured by the UK's opposition parties: capping bill rises at source and not passing on the full increase to consumers.

In France, for example, the government has imposed a 4 per cent limit on rises in EDF energy bills – meaning that the French state is effectively subsiding a loss of tens of billions of euros by state-owned EDF (one of the UK's "Big Five" energy suppliers). In Spain wholesale prices have been capped to protect both households and firms, with the shortfall covered by government-backed borrowing by the energy companies. The intention is to increase bills (or taxes) to repay the debt in later years, reducing the intensity of the pain by spreading it out.

In the longer run, heavy investment in nuclear and renewable energy to lessen Britain's dependence on imported energy is vital. Electricity imports have risen from seven terawatt hours in 2010 to almost 30 terawatt hours in 2021. A much greater focus on home insulation and energy conservation is also essential. The cuts made to subsidies for insulation by the Tory-Lib Dem coalition government always appeared short-sighted but they feel especially acute a decade on. A recently resurfaced video from 2010 of Nick Clegg, in which the then deputy prime minister dismisses investing in new nuclear energy capacity because it will not "come on-stream until about 2021 or 2022", demonstrates how short-termist energy policymaking has become.

But projects such as new nuclear plants always take time to pay off. In the next six to 18 months, the pain of higher global energy prices is unavoidable. The real debate is about how that pain is divided up between different households, different firms and the government's own finances.

The answer will doubtless be more government borrowing. And as the state acts to shield households – and eventually firms – from the full measure of higher global energy costs, the Bank may well increase interest rates at a faster pace than it currently plans. A mix of looser fiscal policy and tighter monetary policy may not make a large difference to the overall size of the economy, but it will affect the distribution of the suffering and in ways that risk fracturing the Conservative electoral coalition.

Over the past 12 years, even as real wages have stagnated, the Tories have grown their vote share at four successive general elections. While the party's core demographic has been the over-65s, it has won a significant chunk of the working-age population. Ultra-low interest rates have played an important role: cheap car finance and even cheaper mortgages have meant that, for some, the past decade has not felt lost at all. But while working-age homeowners may welcome tax cuts and new energy support payments, they will also see their monthly mortgage costs rise by £200 to £400. It is hard to see exactly what the Conservatives have to offer to working-age voters if they are experiencing rising unemployment, falling real incomes and higher borrowing costs.

No government can sit by as households and businesses are consumed by a tidal wave of energy price rises. But with inflation high and the Bank of England determined to reduce it, there is no easy route out of the crisis. Truss, highly likely to become Britain's prime minister on 5 September, is keen to reward loyal Tory members by slashing taxes by £30bn. But a can-do attitude and reheated Thatcherite rhetoric cannot compensate for the impact of a trade shock. In the short run, the pain is unavoidable: politicians can influence who feels it most but they cannot make it go away.

Liz Truss has spent the summer rebuking the Bank of England for not tackling inflation. This winter, as it continues to raise rates and mortgage bills surge to deal with that very problem, she may learn that sometimes one should be careful what one wishes for.

Source: New Statesman

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Alex

Russia-Ukraine Conflict

Egypt's net foreign reserves decreased by $236 million in July compared to June 2021, reaching $33.14 billion, according to an official statement issued by the Central Bank of Egypt.

As a result of the global economic crisis and Russia's war on Ukraine, the country's foreign exchange reserves have dropped by $7.8 billion over the past seven months, registering a 19% decrease, compared to $40.93 billion at the end of December 2021.

The Egyptian government had to take measures to reduce the budget deficit and deal with the decline in the cash reserve.

An informed political source close to the decision-making circles in Egypt told Al-Monitor on condition of anonymity that the government decided to take some measures to face the economic crisis, mainly postponing some national projects such as the establishment of the new administrative capital and halting expansion plans and construction of new cities.

The source said that the government also deferred the implementation of some decisions such as imposing major fines on building violations and squatting public lands, as well as postponing a measure to increase bread prices and electricity bills.

"The government is also considering how to gradually lift subsidies on bread and electricity by the beginning of next year in such a way not to cause a public outcry. The economic crisis has affected all of the state sectors," the source said.

He added that the government already increased the prices of drinking water and sewage for home consumption by 40% in May.

"On July 13, the prices of gas and fuel were increased by 10%, for the third time this year, following the increase in prices globally as a result of the global economic crisis," the source noted.

During a May 9 parliament session, member of parliament Mustafa Bakri called on government agencies to halt major national projects until the country could overcome the repercussions of the war in Ukraine.

"Some major national projects should be suspended temporarily despite their importance. Priorities must be taken into account as well as people's needs, especially amid the state of social tension, with the middle class suffering," Bakri said.

He stressed that the increase in the global price of a ton of wheat from $230 to $490 and a barrel of oil from $60 to $115 have greatly affected Egypt's public budget and created a deficit.

The anonymous source said via phone that the government is trying to balance between two measures: the gradual lifting of subsidies and increasing the prices of some services without raising the ire of citizens, and postponing the inauguration of some national projects, in an attempt to reduce the budget deficit and decline in cash reserves.

Hassan Nafaa, professor of political science at Cairo University, told Al-Monitor via phone, "The state's decision to look into postponing the opening of some national projects and delaying measures to increase prices on some government services reflects the state's good political sense and its desire to focus on priorities, something that was missing for years."

He said that the global economic crisis resulting from Russia's war on Ukraine and the US Federal Reserve's continuation of raising interest rates have exacerbated the economic crisis in Egypt, causing further depreciation of the national currency and draining the cash reserves.

"This prompted the state to try and think outside the box in a bid to mitigate the crisis, such as giving up on plans to expand cities, roads and highways and to postpone the inauguration of some megaprojects that had been ongoing for years," Nafaa noted.

He explained that some figures close to the government have publicly called for postponing the implementation of some national projects until the crisis recedes.

He noted that the inauguration of the administrative capital has already been deferred more than once before: the first time in the wake of the coronavirus pandemic in April 2020, and then in June 2021 because some construction and infrastructure works had not been completed.

Economist Hani Tawfiq told Al-Monitor that the government's approach to postpone raising the prices of some services and delaying fines for building violations "is an attempt to try to balance between boosting the state treasury by increasing state service prices, at the same time not angering citizens or burden them with more than what they can handle."

He said that the state believes that citizens can endure an increase in the prices of some services, which would help it to revive its treasury that has faced a major deficit due to increased expenditures and the depreciation of the national currency, in addition to the decline in reserves and the flight of some $20 billion of foreign money, which were considered investments in debt instruments.

"The government does not wish to anger citizens, especially in the current period. This is why it is opting for halting some major national megaprojects, including the inauguration of the administrative capital and the construction of new cities," Tawfiq said.

He concluded, "Egyptian citizens are suffering greatly from the dire economic conditions and the high cost of living, as well as the floating of the pound that resulted in slashing the citizens' salaries and savings. This is why the government decided to take another approach to try and mitigate the crisis."

Source: Al-Monitor

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Devin

With double-digit inflation and an economy teetering on the brink of recession, the cost-of-living crisis has dominated the race for Downing Street.

But the two candidates vying to succeed Boris Johnson as Conservative party leader and UK prime minister have differing approaches to the problem.

Cost Of Living

UK inflation is currently at 10.1 per cent - the highest level in 40 years - with predictions that it could climb to 13 percent in October.

Analysts at Citibank believe it could even surge beyond 18 percent next year on the back of soaring energy costs.

A new energy price cap is due to be announced on Friday, as some experts predict certain households could soon be paying an eye-watering £6,000 (US$7,100) a year for gas and electricity.

A University of York study suggested that more than half of UK households or 15 million people will be unable to keep their homes heated properly by January next year.

The leadership frontrunner Liz Truss has promised tax cuts and reversing increases in National Insurance contributions that fund the public health service and welfare payments.

She is also proposing to axe taxes on fuel which pay for the transition to cleaner energy and rejected "sticking plaster" solutions to the cost-of-living crisis such as direct government aid.

Supporters of the current foreign secretary say she is planning an emergency budget within weeks if she wins the internal party vote.

Her opponent, Rishi Sunak, believes cutting taxes will not have any effect on low-income households as they do not earn enough to pay them anyway.

The former finance minister - privately wealthy through his career in business and by marriage - favours direct help for low-income families more likely to be affected by the rise in prices.

He has called promises of tax cuts during an economic slump and skyrocketing inflation a "fairy tale".

Instead, he has proposed a cut in sales tax (VAT) on energy bills and to lower taxes on commercial properties (business rates).

Energy

Both candidates have officially backed the UK's ambition to achieve carbon neutrality by 2050.

But Truss, who favours all-out investment in energy including controversial fracking technology where it is backed by locals, called for a better way to achieve it without hurting people and business.

She wants more energy to come from the North Sea and backs current UK government policy on investment in nuclear power and renewables.

Brexit

Truss backed remaining in the European Union before the 2016 referendum on membership of the bloc, switching sides after the public voted to leave.

Now unashamedly pro-Brexit, she has spearheaded proposed legislation to override parts of the Northern Ireland Protocol the UK signed with the EU governing post-Brexit trade in the province.

She has promised to take all EU law off the UK statute book to help "turbocharge" growth.

Like Sunak, she has made no proposals to address chronic post-Brexit labour shortages in the UK, particularly of seasonal workers.

Sunak has been an ardent Brexiteer for years and was one of the main backers of the creation of free ports to boost growth.

Financial Regulation

Truss has called for an overhaul of regulators in the City of London financial district if she becomes prime minister.

Notably she wants to merge the Financial Conduct Authority, the Prudential Regulation Authority which oversees banks and is part of the Bank of England, and the Payment Systems Regulator.

Truss has been critical of the Bank of England's response to rising inflation and has proposed examining the statute that gave it operational independence over monetary policy in 1997.

Governor Andrew Bailey noted in response that the UK's financial credibility was dependent on the bank's independence from government.