July 7, 2024
3 mins read

Rachel Reeves becomes first woman finance minister

Labour had put the economy at the heart of its election manifesto, targeting growth and wealth creation as key priorities in government, while its emphasis on the latter is not normally associated with the party’s traditionally leftist policies…reports Asian Lite News

Rachel Reeves, Britain’s first woman finance minister, is a former child chess champion and Bank of England economist who has pledged to grow the nation’s economy while showing strong fiscal discipline.

Reeves, 45, becomes chancellor of the exchequer after her centre-left Labour party won Thursday’s UK general election by a landslide, ending 14 years of rule by the right-wing Conservatives.

“It is the honour of my life to have been appointed chancellor of the exchequer,” Reeves wrote on social media platform X after her appointment by new Prime Minister Keir Starmer.

“To every young girl and woman reading this, let today show that there should be no limits on your ambitions.”

Labour had put the economy at the heart of its election manifesto, targeting growth and wealth creation as key priorities in government, while its emphasis on the latter is not normally associated with the party’s traditionally leftist policies.

“Economic growth was the Labour Party’s mission,” Reeves added Friday.

“It is now a national mission. Let’s get to work,” said the married mother of two children.

Reeves recently told company bosses that Labour had become “the natural party of British business”, adding that the party would show “iron discipline” over public finances.

The comments drew comparisons with ‘Iron Lady’ Margaret Thatcher, Britain’s first woman prime minister.

Unlike Conservative leader Thatcher, who privatised key sectors after becoming prime minister in 1979, Reeves wants a form of renationalisation, notably for energy, as she takes inspiration from policy enacted by US President Joe Biden.

Labour has pledged to create Great British Energy, a publicly owned company that would spearhead funding, alongside the private sector, for the “green” transition away from fossil fuels.

James Wood, senior teaching associate in political economy at the University of Cambridge, said Labour and Reeves were seeking a “responsible” approach to the public purse.

“When she talks about being an iron chancellor, I think what she means is: we’re going to balance the books and we’re going to be responsible — and we’re going to try and get Britain’s economy running… in a responsible way,” he told AFP.

London-born Reeves tapped into public anger over Sunak’s predecessor Liz Truss, whose unfunded 2022 mini-budget crashed the pound and sent mortgage rates soaring, worsening a cost-of-living crisis.

“They want to distance themselves from fiscal irresponsibility, not making big promises about spending that they can’t possibly keep,” Wood added.

Reeves, whose parents were teachers, is no stranger to outmanoeuvring opponents.

She became British girls’ chess champion aged 14 before studying philosophy, politics and economics at the University of Oxford, which was followed by a Master’s degree at the London School of Economics.

After graduating, she worked as an economist for a decade, first at the Bank of England before switching to the private sector.

While working for British retail bank HBOS, the global financial crisis struck in 2008, resulting in her employer receiving a huge bailout, along with other lenders, from Gordon Brown’s Labour government.

In 2010, when the Conservatives entered power in a coalition with the Liberal Democrats, Reeves was elected Labour MP for Leeds West in northern England.

Eleven years later, Starmer appointed her as Labour’s finance spokesperson. Her sister Ellie Reeves is also a Labour MP.

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Pakistan Risks Overstretching Itself in Yemen War

Pakistan’s expanding military role in Saudi Arabia amid the Yemen conflict could strain its defence resources and fragile finances…reports Asian Lite News Desk Pakistan’s military involvement in the war in Yemen may prove unsustainable because of mounting financial pressures and competing security demands, according to a new report. Islamabad’s growing military presence in Saudi Arabia risks stretching its defence resources while exposing the country to greater strategic and economic challenges. An article by Andrew Wilson in One World Outlook describes Pakistan’s involvement as a case of “fiscal and strategic overreach”, arguing that the country lacks the financial flexibility to sustain an expanded military commitment. Pakistan’s external finances depend heavily on an International Monetary Fund (IMF) programme, financial support from Gulf countries and remittances from Pakistani workers in the region. The report argues that deeper military involvement in the conflict could place additional pressure on these sources of financial stability. It also warns that deploying troops and military equipment abroad could weaken Pakistan’s capacity to address security challenges along its eastern border and deal with two domestic insurgencies. The move could also draw Islamabad into a conflict it has sought to approach cautiously. A Reuters report in May, citing Pakistani security and government sources, said Islamabad had deployed around 8,000 troops, a squadron of approximately 16 aircraft, mostly JF-17 fighter jets, two drone squadrons and a Chinese HQ-9 air-defence battery to Saudi Arabia. According to those sources, Riyadh was financing the deployment, with Pakistani personnel operating the equipment. The sources also said a confidential agreement contemplated the possibility of deploying up to 80,000 troops. Islamabad has not confirmed those figures, although it has acknowledged its military presence in Saudi Arabia, including the deployment of fighter jets at King Abdulaziz Air Base from April. The One World Outlook article argues that Saudi financial support can cover allowances and operating expenses but cannot easily replace military equipment needed elsewhere or resolve the political and strategic challenges of participating in the Yemen conflict. Pakistan’s defence budget is another concern. For the 2026-27 financial year, the federal government allocated PKR 3 trillion, or approximately $10.8 billion, to defence services. The allocation represents an 18 per cent increase from the original PKR 2.55 trillion provision and amounts to around 2.1 per cent of projected gross domestic product (GDP). Defence spending accounts for approximately 16 per cent of the federal government’s PKR 18.8 trillion expenditure. Military pensions are budgeted separately at PKR 822 billion, while debt servicing costs stand at approximately PKR 8 trillion, more than two-and-a-half times the defence allocation. The report argues that these competing financial obligations leave little room for additional military expenditure without placing further pressure on public finances. Pakistan’s reliance on IMF assistance also limits its fiscal flexibility. The country must meet the conditions attached to the programme, including a primary budget surplus target of 2 per cent of GDP and continued restraint on development spending. According to the article, these requirements make it difficult for Islamabad to finance an additional military commitment without compromising other budgetary priorities. Pakistan’s economic indicators offer limited reassurance. Economic growth for the 2025-26 financial year is estimated at between 3.6 and 3.7 per cent, while inflation reached approximately 10.3 per cent in September following an energy price shock. Foreign exchange reserves stood at around $21.5 billion at the end of September. Although this marks an improvement from the low levels recorded in 2023, the report notes that the reserves cover only a few months of imports. Financial assistance from Gulf partners remains central to Pakistan’s external stability. The article says Islamabad holds approximately $8 billion in Saudi deposits at its central bank. In July, the State Bank of Pakistan said Riyadh had extended the maturity of $5 billion in deposits to December 2028, easing the country’s immediate external financing requirements. A further $3 billion deposit was also extended in the spring. However, the article argues that these arrangements provide temporary relief rather than long-term financial independence, particularly as regional conflict threatens the stability of the Gulf economies on which Pakistan relies. The report concludes that Pakistan faces a difficult balance between supporting Saudi Arabia militarily and preserving the financial and military resources needed to address its domestic and regional challenges.
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