By David Lawder

(Reuters) -World Bank Group President Ajay Banga on Tuesday said proposed new contributions from wealthy countries combined with balance sheet changes could boost the bank's lending capacity by $100 billion to $125 billion over a decade.

Banga told a Council on Foreign Relations event that the contributions would come outside the bank's normal shareholding structure and regular country contributions to the International Development Association fund for the poorest countries.

They would include U.S. President Joe Biden's proposed $2.25 billion supplemental budget request for the World Bank, along with expected contributions from Germany, Japan, South Korea, Saudi Arabia and Nordic countries, he said.

"I believe that if all this goes through, including the U.S., we could raise somewhere between $100 billion and $125 billion of extra lending capacity in the bank, which is pretty good. Not enough, but good," Banga said.

The total increase he described would include measures now underway to stretch the bank's balance sheet, such as a leverage ratio increase agreed in April that would yield $50 billion in new lending over 10 years, a World Bank spokesperson said later.

The bank is also examining other ways to expand lending, including providing more loan guarantees, lending against callable capital that is pledged but not paid-in, and special bonds that can serve as hybrid capital.

MISSION SHIFT

Banga said he expected shareholders at the World Bank's annual meetings in Marrakech, Morocco, in October to formally adopt a new vision statement that expands its role beyond reducing poverty and promoting shared prosperity to incorporate global challenges such as climate, pandemics, food insecurity and fragility.

"I think the twin goals have to change to being the elimination of poverty. But on a livable planet," he said, adding that he expects support from all shareholders.

Banga said that he has not yet held any discussions with the United States and China regarding a general capital increase and changes to the bank's shareholding structure.

China, India and Brazil got larger shareholdings in the bank in a 2018 capital increase and would likely want more say in a future capital increase, Banga said.

The former MasterCard CEO, who took over the World Bank's top job in June, has said he wants to build a "better bank" - increasing its urgency, focusing it on high-impact, replicable projects and expanding beyond its anti-poverty mission - before seeking a general capital increase from shareholders.

He told the CFR event that he was impressed by the dedication and talents of the bank's staff, but its organizational structure was "dysfunctional," holding it back.

Asked about the legacy of his presidency, Banga said: "I'm going to fix the plumbing ... I want people to say when I'm gone, that I left the bank working much better than what I got it."

CAPITAL NEEDS

Banga said G20 countries will struggle to agree with an experts' report commissioned by the group that calls for a massive capital infusion into the World Bank and other multilateral development banks to help finance the $3 trillion in annual spending needed by 2030 for climate adaptation, resilience and mitigation.

But he said the bank's resources, even with moves to stretch its balance sheet, are woefully inadequate, with paid-in capital of just $22.6 billion for the World Bank's International Bank for Reconstruction and Development over its 78-year history.

"That is a pimple on a dimple on an ant's left cheek compared to what we need in the world," Banga said.

Banga said that deeper conversations were needed on the World Bank's future funding, but added that he would "not try and put an idealistic number out there" for the size of a future capital increase.

By Giuseppe Fonte

ROME (Reuters) - Italy's government plans to raise its 2024 budget deficit target to between 4.1% and 4.3% of gross domestic product (GDP), up from the 3.7% goal set in April, sources familiar with the matter told Reuters on Monday.

The fiscal gap next year is, however, seen below 4% of GDP under current trends.

That allows leeway worth several billion euros which will help Prime Minister Giorgia Meloni to fund measures in the upcoming 2024 budget.

Among her top priorities, Meloni intends to earmark more than 9 billion euros ($9.5 billion) to extend to 2024 the tax cuts that have helped middle and low-income workers cope with high consumer prices this year.

Italy is also preparing to raise this year's budget deficit above the current target of 4.5% of GDP due to the growing impact of costly fiscal incentives for home improvements.

Separate sources last week said the updated 2023 goal would be in the region of 5.5% as a proportion of GDP.

For 2024, the upcoming budget has been made challenging by a slew of weak data that cast a shadow over Italy's near-term growth prospects, hurting tax revenues.

The country's GDP shrank by 0.4% in the second quarter from the first and industrial output was weaker than expected in July, getting the third quarter off to a faltering start.

Moreover, the negative impact on Italy's economy from European Central Bank (ECB) interest rate hikes to curb inflation will intensify in the coming months, economists warn.

The Treasury currently estimates Italy can still grow by 0.9% or 1% this year, broadly in line with the current target, while the 1.5% forecast in 2024 is likely to be revised down to 1.1 or 1.2%.

All figures are still subject to some changes as talks within the government continue.

Meloni's cabinet is expected to meet on Wednesday to unveil a raft of economic targets in the Treasury's annual Economic and Financial Document.

($1 = 0.9439 euros)

By Tom Westbrook

SINGAPORE (Reuters) - The dollar stood by 10-month highs against a basket of major currencies on Tuesday, supported by U.S. bond yields scaling 16-year peaks, while the yen tiptoed deeper into the intervention danger zone.

A combination of resilient economic data, hawkish Federal Reserve rhetoric and a budget deficit to be financed by borrowing has the 10-year Treasury yield up more than 45 basis points (bps) in September to top 4.5% for the first time since 2007.

Rates markets are priced for an almost 40% risk of another Fed hike this year, against slimmer chances for another rise in Europe, and the difference has helped prop up a dollar many had bet would swiftly fall as the Fed signalled an end to hikes.

The euro nursed Monday's 0.5% drop and was parked by a six-month low at $1.0584. It's on course for a 3% drop in the quarter, its worst quarterly percentage loss for a year.

Sterling is also set to snap three quarters of gains, with a loss of 3.8% over the three months to September. It fell to a six-month low of $1.2195 overnight and traded only a whisker above that level in the Asia session. [GBP/]

The U.S. dollar index touched its highest since November at 106.1 on Monday and was at 106.03 on Tuesday.

"From here it eyes levels around 107.20," said analysts at Australia's Westpac bank. "Few currencies will resist the bullish dollar macro resiliency theme and the euro and Chinese yuan look more vulnerable than most."

Last week also brought more signs that central banks beyond the Fed are reaching the end of their hiking cycles.

The Swiss franc has tumbled through its 200-day moving average to hit its lowest since June after the central bank surprisingly kept short-term rates on hold.

The yen has slowly but inexorably slid toward the 150-per-dollar mark as policymakers stuck with ultra-easy settings.

The psychological level is seen as a likely red line for the finance ministry, whose warnings of possible intervention have stepped up in recent weeks. Traders have an eye on a Tuesday meeting of political leaders and Bank of Japan officials.

The yen hit 148.97 to the dollar on Monday and last traded at 148.88.

Rising commodity prices have provided some support to the antipodean currencies, though they have been mostly sideways for the past month or so. The Aussie was last steady at $0.6417 and the kiwi at $0.5962. [AUD/]

China's yuan held at 7.3099, but only thanks to its trading band midpoint being fixed some 1400 bps firmer than forecast, leaving it very close to the weak end of its allowed trading band.[CNY/]

U.S. consumer confidence and home sales data is due later on Tuesday, with slight weakening seen on both fronts though there are doubts that that could much dent the dollar.

"Even if the U.S. economy is headed for a slowdown, the dollar could find support on the back of haven demand given broad based concerns over weak global growth," said Rabobank's senior FX strategist Jane Foley.

"We remain of the view that the dollar is unlikely to weaken significantly until Fed rate cuts are firmly on the horizon," she said. "We are currently trading fairly close to our long-held euro/dollar $1.06 target. We see downside risk to this."

========================================================

Currency bid prices at 0056 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0584 $1.0592 -0.07% -1.22% +1.0596 +1.0581

Dollar/Yen

148.8950 148.8200 +0.04% +0.00% +148.9000 +148.7450

Euro/Yen

157.58 157.71 -0.08% +12.32% +157.7100 +157.3900

Dollar/Swiss

0.9127 0.9120 +0.07% -1.30% +0.9130 +0.9119

Sterling/Dollar

1.2206 1.2213 -0.05% +0.93% +1.2215 +1.2207

Dollar/Canadian

1.3458 1.3455 +0.01% -0.69% +1.3461 +1.3449

Aussie/Dollar

0.6419 0.6423 -0.05% -5.82% +0.6425 +0.6416

NZ

Dollar/Dollar 0.5964 0.5968 -0.03% +0.00% +0.5969 +0.5962

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

NEW YORK (Reuters) -The board of the International Monetary Fund said on Monday it had completed a third review of Suriname's $630 million program, allowing the government of the South American country to withdraw about $52 million.

The IMF also sees Suriname and China, its only official or private creditor without a debt agreement, advancing in debt talks before the next program review.

"The authorities have made concerted efforts to advance debt restructuring negotiations, with the agreements in line with program parameters reached with all creditors except China," said in a statement Kenji Okamura, the fund's deputy managing director. "Both sides expressed commitment to work towards an agreement on comparable terms with other creditors by the next review."

The government and the fund had struck a staff-level agreement late last month. The board's approval allows the government to draw about $52 million, most of which will be used for budget support.

Even as Suriname did not meet all performance criteria, the board also approved the government's request for a waiver "based on the corrective measures already taken."

Pension plans for the largest U.S. companies are at their healthiest in over a decade, according to financial services firm Aon (NYSE:AON). The average pension "funded ratio" for public companies in the S&P 500 stock index was 102% as of last Thursday, marking the highest level since at least the end of 2011 when the ratio stood at around 78%.

The funded ratio is a measure of a pension's financial health, comparing a company's pension assets against its liabilities. Essentially, it assesses the money a pension currently has on hand versus the funds a company needs to pay future pension income to workers.

"This is a really good thing," Byron Beebe, global chief commercial officer for Aon, said on Monday. "It's at the highest it's been in a really long time." However, as the American Academy of Actuaries points out, pension funding is merely a "financial snapshot ... at a single moment," and can change based on factors like the health of the U.S. economy.

This improvement in pension funding is significant for workers. A better funded status makes it more likely companies will keep their pensions active and reduces the risk of benefit cuts for some workers. In extreme cases, underfunding can lead to benefit cuts. Companies with failed pensions may transfer their obligations to the federal Pension Benefit Guaranty Corp., which guarantees pension benefits up to a limit, based on age.

Pensions in the private sector have become rarer over the decades as companies have replaced them with 401(k)-type plans. Defined-benefit plans peaked in 1983 with 175,000 plans in the private sector, but by 2020 that number had declined to about 46,000, according to U.S. Department of Labor data. Many of these plans are now "frozen" and no longer allow workers to accrue benefits.

The recent improvement in pension funding is largely attributable to three factors: a rise in interest rates, strong stock performance, and policy changes to how some companies fund their plans, according to John Lowell, partner at October Three, a pension consulting firm. Higher interest rates on bonds generally mean companies don't have to contribute as much money to their pensions today to satisfy future benefits. Furthermore, companies have become more proactive about making contributions to their plans to ensure they're fully funded due to rising insurance premiums paid to the PBGC.

Companies have also adopted investment strategies that fluctuate less with the whims of the investment markets, said Beebe at Aon. For a portion of the portfolio, they buy bonds whose income matches that of future pension promises, offering more predictability.

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

The U.S. is witnessing a notable surge in energy costs, with oil futures escalating by approximately 30% over the last quarter, adding significantly to inflationary pressures. This rise in prices, which began in the summer, presents a formidable task for the Federal Reserve as it grapples with managing consumer price inflation, particularly with the escalating cost of energy.

If the increase in oil prices persists, it could potentially decelerate consumption and economic growth. However, strategists at Goldman Sachs have indicated that such a scenario would represent a bearable obstacle for the U.S. economy. They maintain that despite the potential negative impact on consumption and economic growth, the resilience of the U.S. economy will be tested but manageable if the rise in oil prices continues.

The upward trend in energy prices is contributing significantly to headline inflation, amplifying the challenges faced by the Federal Reserve. The central bank's efforts to manage these inflationary pressures are being tested as it navigates the escalating cost of energy.

Strategists at Goldman Sachs continue to express confidence in the resilience of the U.S. economy amidst these challenges. They anticipate that the economy will be able to withstand this headwind if the rise in oil prices persists over the coming months.

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

KYIV (Reuters) - An International Monetary Fund monitoring mission started work on Monday on the second review of a $15.6 billion multi-year loan program for Ukraine.

Vahram Stepanyan, IMF's resident representative, said in a statement that the discussions with the Ukrainian government would be held on recent economic developments and fiscal, financial and structural policies.

The IMF's four-year programme for Kyiv is part of a $115-billion global package to support the economy as Ukraine battles Russia's invasion.

Ukraine's economy has been hit by the 19-month-old war and the government has relied heavily on Western aid to finance social and humanitarian payments.

The government has said Ukrainian businesses have adjusted to the new wartime reality and that the economy has been recovering more quickly than expected this year.

"After a decline of 29.1% last year, today we see a gross domestic product growth," Yulia Svyrydenko, economy minister, said in a post on Facebook (NASDAQ:META).

"Now we can say with confidence that the economy has adapted to force majeure conditions. We predict that the positive trend will continue."

Official statistics showed that GDP grew by 19.5% in the second quarter of the year compared with the same period a year earlier.

The economy ministry expects the economy to grow by about 4% this year and by up to 5% next year.

Ukraine has already received about $3.6 billion from the IMF so far this year, according to finance ministry data.

India's rapid economic growth, the fastest among major economies, is under threat as increasing household debt payments diminish consumer spending power. This trend, highlighted by recent data from the Reserve Bank of India, has emerged as a significant concern for the robustly expanding economy.

The data shows that the nation's household financial assets, which include bank deposits, cash, and equity investments, have declined after accounting for debt servicing and consumption. As a percentage of the country's GDP, these household assets have decreased from 7.2% in the previous fiscal year to 5.1% in the fiscal year that ended in March.

This reduction indicates a significant drop in spending power for Indian households. The increasing burden of debt repayments appears to be a key factor in this worrying trend, potentially restricting the flow of funds that fuel this rapidly growing economy.

The implications of this trend could be far-reaching, as consumer spending plays a vital role in driving economic growth. With household debt payments on the rise and consumer spending power decreasing, there are concerns that this could slow down India's accelerating economic growth.

This situation underscores the challenge faced by policymakers in balancing economic growth with household financial health. As India continues its economic expansion, addressing this issue will be crucial to sustaining momentum while ensuring the financial stability of its households.

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

By Anant Chandak and Susobhan Sarkar

BENGALURU (Reuters) - Thailand's central bank will leave its key policy rate unchanged at 2.25% on Wednesday and likely through 2024, marking an end to a year-long tightening cycle, according to a Reuters poll, though a few economists still expect one final hike.

Despite inflation in Thailand edging up slightly to 0.88% in August, it remained below the central bank's 1-3% target range for a fourth consecutive month, suggesting little need for the Bank of Thailand (BOT) to continue hiking.

Governor Sethaput Suthiwartnarueput recently said both economic growth and inflation were expected to be lower than previously forecast due to softer tourism spending and a weak economic outlook for China, the country's major trading partner.

A strong majority of economists in a Sept. 18-22 poll, 21 of 27, expected the BOT to keep its benchmark one-day repurchase rate at 2.25% on Wednesday. Only six forecast another quarter-point hike to 2.50%.

"The BOT will switch to a wait-and-see mode. It is actually in a relatively comfortable position to take its time in terms of making its policy decisions because growth is strong, inflation is low," said Lavanya Venkateswaran, senior ASEAN economist at OCBC.

"We don't see inflation coming back to within BOT's target for the rest of this year at least, and possibly even in Q1 next year ... so I don't think in the near term there's a need to rush into further hikes."

None expected the central bank to raise interest rates at the following meeting in November. Median forecasts showed interest rates remaining at 2.25% through next year.

However, there was a split among those with a longer-term view on rates, with 47% of economists, nine of 19, expecting the BOT to keep rates at 2.25% until end-2024, while six predicted another hike to 2.50%, and four anticipated a cut -- three to 2.00% and one to 1.75%.

"Despite growth slumping ... it's clear the BOT is determined to raise rates at least one more time to reach its estimated neutral rate," noted Aris Dacanay, ASEAN economist at HSBC.

By Nick Carey

(Reuters) - The European Union and Britain need to take urgent action to postpone rules for electric vehicles traded between the bloc and the UK that will trigger 10% tariffs, Europe's car industry group said on Monday.

"Driving up consumer prices of European electric vehicles, at the very time when we need to fight for market share in the face of fierce international competition, is not the right move," European Automobile Manufacturers' Association (ACEA) president and Renault (EPA:RENA) CEO Luca de Meo said in a statement ahead of a planned trade meeting between EU and UK officials this week.

Under the EU-UK post-Brexit trade deal, EVs need to have 45% EU or UK content from 2024, with a 50%-60% requirement for their battery cells and packs, or face British or EU import tariffs of 10%.

The problem is that neither carmakers in Britain nor the EU have built up their EV supply chains sufficiently to meet those requirements and have called for the rules to be postponed until 2027.

Stellantis (NYSE:STLA) has said British car plants will close with the loss of thousands of jobs unless the Brexit deal is swiftly renegotiated, while Ford (NYSE:F) has said it will slow the transition to electric.

The ACEA has said the rules could cost carmakers up to 4.3 billion euros ($4.57 billion) in tariffs and hit output.

So far, the EU executive has been reluctant to renegotiate the deal.

In June, Stefan Fuehring, a European Commission official overseeing the post-Brexit EU-UK trade agreement, said the EU rules of origin were "fit for purpose" and that the bloc was not considering changing them.

($1 = 0.9400 euros)