LONDON (Reuters) - Three of the world's cornerstone institutions - the International Monetary Fund, the World Bank and the Bank for International Settlements - are to work together for the first time to "tokenise" some of the financial instruments that underpin their global work, a BIS official said on Tuesday.

The trio will also work with Switzerland's central bank which has been pioneering tokenisation, the process of turning conventional assets into uniquely coded "tokens" that can be used in faster new systems.

Their collaboration will initially focus on simple but still paper-based processes such as when richer countries donate into some of the World Bank's funds to support poorer parts of the world.

That original pledge can be in the form of what is known as "promissory note." It is that note that could be tokenised, making it easier to transfer when required.

"We will work together ... to simplify the process for making development money available for emerging and developing economies," BIS official Cecilia Skingsley said at conference hosted by the Atlantic Council think tank in Washington.

She added that tokenisation also opens up the possibility of "encoding policy and regulatory requirements" into a "common protocol" for tackling problems such as international money laundering.

She also touched on the new breed of central bank digital currencies (CBDCs), repeating calls for some global rules and technology standards so they can work across the world and with existing payment systems.

"Questions remain," Skingsley said. "Do these standards need to be implemented early on or else they would be difficult to change later? To what extent do they need to be adapted to ensure they can operate with non-CBDC systems?

The International Monetary Fund (IMF) has stressed the pressing need for a substantial surge in green investments to effectively tackle climate change. In a recent blog post, IMF economists Simon Black, Florence Jaumotte, and Prasad Ananthakrishnan emphasized that annual green investments need to skyrocket from $900 billion in 2020 to $5 trillion by 2030 to realize net-zero emissions by mid-century. This call to action comes as the world anticipates the forthcoming COP28 summit in Dubai.

The IMF pinpointed that emerging and developing countries (EMDEs) are especially in need of financial backing, necessitating $2 trillion annually in green investments—a considerable leap from current figures. The private sector is anticipated to play a crucial role, with predictions suggesting it could furnish up to 90% of this funding due to limited public resources.

Present global policies, as per the IMF, are inadequate in meeting the Paris Agreement benchmarks aimed at alleviating climate change. Although existing technologies could implement more than four-fifths of the necessary emission reductions, attaining net-zero also hinges on innovations that are still under development or have yet to be created.

The IMF's focus on investment aligns with India's ambitious climate objectives, known as the "Panchamrit" pledge, which aims for net-zero emissions by 2070. Ahead of COP28, India's Finance Minister Nirmala Sitharaman has emphasized the importance of definitive actions on climate finance and technology transfer. She particularly underscored the need for clear guidance on funding mechanisms and technological advancements to effectively combat climate change.

A decrease in patent filings for eco-friendly technologies since a peak in 2010 adds another dimension to the challenge, signifying a deceleration in innovation precisely when speed-up is required. The IMF's blog serves as a timely reminder of the financial and technological commitments necessary to address the climate crisis, as global leaders and policymakers prepare for crucial negotiations in Dubai.

The IMF also highlighted investment hurdles like foreign exchange volatility and immature capital markets, calling for policy reforms to facilitate private investments in sustainable projects within EMDEs.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Brigid Riley

TOKYO (Reuters) -The U.S. dollar ticked down to a three-month low against peer currencies on Tuesday after slipping overnight on weaker-than-expected new home sales data, while traders hunkered down on bets that the Federal Reserve could start cutting interest rates in the first half of next year.

U.S. new home sales fell 5.6% to a seasonally adjusted annual rate of 679,000 units in October, data showed, below the 723,000 units expected by economists polled by Reuters and sending Treasury yields into a decline.

The dollar index, a measure of the greenback against a basket of currencies, was last at 103.16, hanging around its lowest since Aug. 31. The dollar was track for a loss of more than 3% in November, its worst performance in a year.

Market expectation that the Fed's rate increase cycle has finally come to an end has also put downward pressure on the greenback. U.S. rate futures showed about a 25% chance that the Fed could begin cutting rates as early as March and increasing to nearly 45% by May, according to the CME FedWatch tool.

"Slowing growth momentum, peak rates, rate cuts next year, and unwinding of long positioning: it's the dynamic feeding a weaker U.S. dollar and driving the entire currency complex," said Kyle Rodda, senior financial market analyst at Capital.com.

"Anything that brings that trend into question will change the outlook; however, the bar for that to happen is high," he added, saying the dollar likely has more room to fall.

Traders are now eyeing U.S. core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation - this week for more confirmation that inflation in the world's largest economy is slowing.

PCE tops off a slew of other key economic events this week, including Chinese purchasing managers' index (PMI) data and OPEC+ decision.

After delaying its policy meeting to this Thursday, OPEC+ is looking at deepening oil production cuts, according to an OPEC+ source.

Elsewhere, the Australian dollar briefly touched a near four-month high of $0.6632 against the greenback before easing to $0.6621. Data out Tuesday morning showed that domestic retail sales in October declined from the previous month.

The kiwi also momentarily hit its highest since Aug. 10 at $0.6114 before sliding back down to $0.61015. The Reserve Bank of New Zealand has its monetary policy meeting on Wednesday, where it is expected to keep interest rates steady at 5.50% for the fourth straight time.

Elsewhere, the yen made up some ground on Tuesday in the wake of continued dollar weakening, with dollar/yen inching down around 0.3% to 148.21 yen per greenback.

The Japanese currency may, however, be in for some turbulence depending on the outcome of this week's inflation data from the United States.

"The risk for dollar bears is that U.S. PCE inflation does not come in as soft as hoped," said Matt Simpson, senior market analyst at City Index. "That leaves (dollar/yen) vulnerable to a bounce this week."

By Raphael Satter and Diane Bartz

WASHINGTON (Reuters) - The United States, Britain and more than a dozen other countries on Sunday unveiled what a senior U.S. official described as the first detailed international agreement on how to keep artificial intelligence safe from rogue actors, pushing for companies to create AI systems that are "secure by design."

In a 20-page document unveiled Sunday, the 18 countries agreed that companies designing and using AI need to develop and deploy it in a way that keeps customers and the wider public safe from misuse.

The agreement is non-binding and carries mostly general recommendations such as monitoring AI systems for abuse, protecting data from tampering and vetting software suppliers.

Still, the director of the U.S. Cybersecurity and Infrastructure Security Agency, Jen Easterly, said it was important that so many countries put their names to the idea that AI systems needed to put safety first.

"This is the first time that we have seen an affirmation that these capabilities should not just be about cool features and how quickly we can get them to market or how we can compete to drive down costs," Easterly told Reuters, saying the guidelines represent "an agreement that the most important thing that needs to be done at the design phase is security."

The agreement is the latest in a series of initiatives - few of which carry teeth - by governments around the world to shape the development of AI, whose weight is increasingly being felt in industry and society at large.

In addition to the United States and Britain, the 18 countries that signed on to the new guidelines include Germany, Italy, the Czech Republic, Estonia, Poland, Australia, Chile, Israel, Nigeria and Singapore.

The framework deals with questions of how to keep AI technology from being hijacked by hackers and includes recommendations such as only releasing models after appropriate security testing.

It does not tackle thorny questions around the appropriate uses of AI, or how the data that feeds these models is gathered.

The rise of AI has fed a host of concerns, including the fear that it could be used to disrupt the democratic process, turbocharge fraud, or lead to dramatic job loss, among other harms.

Europe is ahead of the United States on regulations around AI, with lawmakers there drafting AI rules. France, Germany and Italy also recently reached an agreement on how artificial intelligence should be regulated that supports "mandatory self-regulation through codes of conduct" for so-called foundation models of AI, which are designed to produce a broad range of outputs.

The Biden administration has been pressing lawmakers for AI regulation, but a polarized U.S. Congress has made little headway in passing effective regulation.

The White House sought to reduce AI risks to consumers, workers, and minority groups while bolstering national security with a new executive order in October.

By Devayani Sathyan

BENGALURU (Reuters) - The Bank of Korea will hold its key policy rate at 3.50% when it meets on Thursday as inflation remains sticky, according to a Reuters poll which also forecast the first rate cut won't be until the third quarter of 2024.

Although the Bank of Korea (BOK) expected a brief rise in inflation in November the figure came in at nearly twice the central bank's 2.0% target.

Signs of a soft landing in Asia's fourth-largest economy, coupled with a rebound in household debt in one of the most indebted countries in the world, indicate monetary conditions need to remain tight for longer. All 36 economists in the Nov. 21-27 Reuters poll predicted the BOK would leave the base rate at 3.50% on Thursday, its last meeting of the year.

"We expect the Bank of Korea to keep its policy rate at 3.50% at its upcoming meeting. The board is also likely to retain a hawkish bias amid persistent concerns about the upside risks to inflation and household debt growth," noted Krystal Tan, economist at ANZ.

"That said, with policy rate settings already in restrictive territory, the bar for a rate hike is high, considering the risk of exacerbating financial stress."

Median forecasts showed rates staying at 3.50% until mid-2024 and the first 25 basis point rate cut in the third quarter of 2024, one quarter later than predicted in an October poll taken before the last meeting.

Since a May poll, the prediction for the first rate cut has been pushed back from the end of 2023 to the second half of 2024.

Among economists who had a long-term view 85%, or 22 of 26, predicted at least one 25 basis point rate cut by end-September while just 30% expected a cut before July.

That puts the BOK roughly in line with its Southeast Asian peers which were also expected to cut rates by end-September. [ID/INT][PH/INT]

Medians showed rates at 3.00% by the end of 2024.

"We see a high chance that this meeting is their last time making a hawkish-hold decision before shifting to dovish-hold from next year. We see the BOK turning neutral in Q1 2024, dovish in Q2 2024, and cutting in Q3 2024," noted Kathleen Oh, chief Korea economist at Morgan Stanley.

LONDON (Reuters) - Shoppers at British store chains have seen the slowest increase in prices in almost a year and a half but retailers might struggle to keep inflation on its downward path, an industry group said on Tuesday.

The British Retail Consortium said annual shop price inflation dropped to 4.3% in the 12 months to November, its weakest since June 2022 and slower than October's 5.2% rise.

It was the sixth month in a row that the pace of price growth weakened.

Food price inflation fell to 7.8% from 8.8% on the year but rose 0.3% in November from October.

Non-food inflation eased to an annual 2.5% from 3.4%.

BRC Chief Executive Helen Dickinson said there was a risk that the fall in inflation could stall or go into reverse because of rising business rates - a property-based tax - plus new regulations and a jump in the minimum wage.

Britain's broader official consumer price inflation peaked at 11.1% in October 2022 and was 4.6% in October this year.

The Bank of England has paused its run of interest rate increases after 14 consecutive hikes. But Governor Andrew Bailey and other top officials say it is too early to think about cutting borrowing costs.

By Libby George and Rachel Savage

LONDON/JOHANNESBURG (Reuters) -The collapse of Zambia's $3 billion bond rework deal this week is reverberating well beyond the country's borders, raising doubts about the very framework designed to get bankrupt nations back on track quickly.

Zambia's government said on Monday an International Monetary Fund-approved deal with bondholders - agreed in principle less than a month ago - could not proceed due to objections from bilateral creditors, who say the terms of the deal are not comparable to relief offered by a group of countries including France, China and India.

The setback sent the bonds of countries in the midst of debt reworks such as Ghana and Sri Lanka tumbling. It also raised fresh questions about the commitment of Western nations and multilateral lenders to help poor countries claw their way out of unmanageable debt.

"To me there is a real problem, and the real problem goes beyond Zambia," said Brad Setser, a Council on Foreign Relations fellow and former U.S. government official, suggesting the way debt sustainability and market accessibility for low income countries was assessed might need to be adjusted.

The core of the issue is the Common Framework, a G20-backed debt negotiation architecture that aimed to smooth and speed deals for insolvent low-income countries thrust into crisis during the COVID-19 pandemic with a historically complicated tangle of lenders that, for the first time, included China.

It established basic principles at its 2020 launch, with more to be defined and debated along the way. Progress has, however, proven more arduous than expected.

Zambia – the Framework's test case - is entering its fourth year of default and its long, thorny path could deter other struggling countries such as Tunisia, Egypt and Kenya from Common Framework debt reworks.

International bondholders say the Framework failed to provide the transparency on other creditors' concessions needed to cut comparably fair deals. Most agree it provides no clarity on what fair treatment of various creditors would actually look like, nor how the value of concessions given to indebted nations should be calculated.

Milestones such as Zambia's memorandum of understanding (MoU) with bilateral creditors on restructuring $6.3 billion of debt and similar successes for Ghana raised hopes the Framework was working. Now there are once again whispers that it's failing.

"This has not been a success and we need a reset," said Kevin Gallagher, director of Boston University's Global Development Policy Center.

The IMF did not respond to a request for comment sent over a U.S. holiday.

A QUESTION OF FAIRNESS

The current rift centres on "Comparability of Treatment" - a principle from the Paris Club of wealthy creditor nations aimed at ensuring its members don't give outsized concessions compared to private lenders or others outside the group.

Zambia's government said the Official Creditor Committee (OCC) sank the bondholder deal because it fell afoul of that principle under a "base case" scenario. This outraged bondholders, who say they offered more debt relief than bilateral lenders on a net present value (NPV) basis and a principal haircut of 18% when official creditors tabled none.

With no rules on how to calculate concessions, creditors can come to different conclusions regarding the figures.

"One of the founding principles of the Common Framework was indeed Comparability of Treatment. The fact that we've gotten this far without reaching a common understanding of what that is, is indeed unhelpful," said Yvette Babb, a portfolio manager at William Blair.

Tallying different creditors' priorities is tricky: Bondholders target shorter-term cashflows but will accept principal writedowns, while official creditors favour maturity extensions.

"Are you willing to allow deals that allow bondholders to get a lot of money out before official creditors? And are you willing to let bondholders take money out when the IMF is putting money in?," said Setser.

HOW TO FIX IT

Zambia's government said there was no consensus between OCC co-chairs China and France on the concessions needed from bondholders to secure a deal. The OCC statement also did not say which creditor country raised concerns, making it harder to address them, investors said.

Convincing China, which emerged as a key creditor after a decade-long lending spree, to cut deals alongside other creditors has been a core challenge.

China's repeated assertions that it must safeguard its taxpayers' money, its rejection of blanket acceptance that multilateral lenders do not take haircuts and its objections to the IMF's debt sustainability assessments have upended the official lenders' historic approaches to debt deals.

China's central bank and finance ministry did not respond to requests for comment.

Already, a group called the Global Sovereign Debt Roundtable - comprised of development banks, G20 chair India and official and private creditors – is trying to work through the Framework's snags and seek a consensus on net present values and comparability of treatment.

Any such consensus, William Blair's Babb said, would eliminate "a large degree of this discretionary assessment".

"That is a fundamental principle that I think could be agreed on to avoid this becoming a stumbling block in other discussions," she added.

The IMF has also promised to rejig its debt sustainability calculations – key figures in restructurings – and make its process more transparent.

With a record $554 billion of sovereign debt in default globally, according to the Institute of International Finance, getting countries out of distress quickly is key.

Zambia's finance minister has said the long delays have curtailed economic growth and hit the poorest of the population.

Some say the Framework, while flawed, is the only way, and that countries outside it, such as Suriname and Sri Lanka, have also struggled to finalise deals.

"Sovereign debt restructuring is a very ugly, messy process," said Mark Sobel, a former U.S. representative at the IMF, adding its aim was also to cut through the web of competing domestic powers within China to allow it to give debtor countries much-need relief.

"To me, the Common Framework, for better or for worse, is the only game in town."

The World Bank has released a report titled "Safety First" which highlights the significant economic impact of crime on South Africa. The report reveals that crimes cost the country more than 10% of its Gross Domestic Product (GDP) annually. This cost comes in various forms such as transfer costs, spending on protection, and opportunity losses, all of which pose challenges to the nation's fiscal sustainability.

The World Bank's analysis points to a worrying trend in South Africa's crime statistics. Before the pandemic, the country experienced an average of 3,600 violent crimes per 100,000 people and had a homicide rate in 2021 that was six times higher than that of its peers, at 41.9 per 100,000 individuals. As of 2023, South Africa ranks seventh on the Global Organised Crime Index, reflecting a sharp increase in organized criminal activity.

The ripple effects of high crime rates are felt across various sectors:

Businesses, especially small enterprises, face inflated operating expenses due to high protection costs against crime. Additionally, direct losses from criminal activities stifle the private sector's dynamism.

Households suffer from deepened income inequality due to opportunity costs associated with crime.

The public sector is under pressure as resources are diverted from developmental initiatives to policing efforts, impacting fiscal sustainability.

Moreover, inadequate institutional strength hampers effective responses against the escalation of organized crime.

To address these issues, the World Bank recommends targeted policies focusing on reducing the homicide rate and combating organized crime. These measures are considered essential for mitigating the economic damage caused by criminal activities and fostering growth and equity in South Africa.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Leika Kihara

TOKYO (Reuters) -Japan's business-to-business service inflation accelerated in October as a tight job market lifted labour costs, underscoring a broadening of price pressures that could heighten the chance of a near-term end to ultra-loose monetary policy.

The services producer price index, which measures the price companies charge each other for services, rose 2.3% in October from a year earlier, up from a revised 2.0% gain in September, Bank of Japan (BOJ) data showed on Monday.

Information and communication, machinery repair and worker dispatching businesses saw fees increase from year-earlier levels due to higher labour costs.

A surge in inbound tourism drove up hotel fees 49.9%.

The data suggest Japan's economy is making progress towards achieving sustained rises in inflation accompanied by solid wage growth.

BOJ Governor Kazuo Ueda has said inflation has been driven mostly by cost-push factors and must shift to a more demand-driven rise in prices backed by higher wages for the bank to consider normalising its ultra-loose monetary policy.

His remarks have heightened market attention to developments in services prices, which most vividly reflect wages pressures companies face in their businesses.

With inflation having held above the BOJ's 2% target for more than a year, companies have faced unprecedented pressure to compensate employees with pay hikes to retain and lure talent.

Indications from businesses, unions and economists suggest the labour and cost pressures that had set the stage for this year's pay hikes - the largest in more than three decades - will persist heading into next year's key spring wage talks.

A Reuters poll in October showed nearly two-thirds of economists project that the BOJ will end its negative interest rate policy next year.

BEIJING (Reuters) -Profits at China's industrial firms fell 7.8% in the first 10 months of 2023 from a year earlier, official data showed on Monday, as a shaky post-pandemic economic recovery struggles to gain momentum.

The slide followed a 9% profit decline in the first nine months, National Bureau of Statistics (NBS) data showed.

China's economic recovery has been uneven this year, with a brisk start in the first quarter fading quickly in the second before gaining momentum in the third.

Last month's mixed picture only added to the uncertainty as prolonged distress in China's property sector, local government debt risks, soft domestic and global demand, and geopolitical tensions have unnerved investors and bruised corporate profits.

Facing a double whammy of macro headwinds and supply glut, LONGi Green Energy Technology Co, a major domestic solar energy manufacturer, saw its third quarter net profit plummet 44.1% to 2.5 billion yuan ($346.7 million).

With a burst of policy support measures since June having had a modest effect on reviving growth, policymakers are under rising pressure to roll out more stimulus, especially as China faces mounting debt risks and structural challenges.

"Transforming the economic growth mode is more important than pursuing a high growth rate," China's central bank governor said in a speech this month, suggesting an urgent need for longer-term structural reforms as investment-led growth loses steam.

State-owned firms posted a 9.9% decline in earnings in the first 10 months, foreign firms recorded a 10.2% slide and private-sector companies saw profits down 1.9%, according to a breakdown of the NBS data.

Industrial profits data covers firms with annual revenues of at least 20 million yuan ($2.74 million) from their main operations.

($1 = 7.2922 Chinese yuan)