Pakistan to seek largest loan package from IMF

Daniel Fowler
October 11, 2018

In a statement, Lagarde said she met with Finance Minister Asad Umar, State Bank Governor Tariq Bajwa and members of their economic team.

The projected economic growth of the sub-Sahara Africa from 3.1 percent this year to 3.8 percent in 2019 is not enough to create the needed jobs for the growing population of the region, the Fund added.

The Director of Fiscal Affairs Department, IMF, Vitor Gaspar, while unveiling the 2018 Global Fiscal Stability Report, at its ongoing yearly meetings with the World Bank Group, in Nusa Dua, Indonesia, said the country's fiscal challenge was not all about revenue shortfalls, but also wise investment of available resources in critical projects that aid growth.

These policies have contributed to a slowdown in economic growth, which is happening just as trade tensions with the USA are starting to bite.

In its World Economic Outlook (WEO), the International Monetary Fund said foreign exchange interventions should be limited to address disorderly market conditions, something which RBI Governor Urjit Patel also talked about.

Lagarde said later that she believed Chinese authorities were taking steps to maintain growth, stability and investor confidence amid the trade conflict, but faced a "complicated" balancing act to keep its fiscal situation under control.

The IMF said a high interest burden and risks from rising yields in India also require continued focus on debt reduction to establish policy credibility and build buffers.

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Adjustments would occur as domestic production displaces higher-priced imports, the model shows, but in the long run, the U.S. GDP would still be 1.0 percent below a baseline without these tariffs, while China's GDP output would be one half percent below the baseline.

He said that without free trade, there would be no hope of helping millions of people escape dire poverty.

The IMF, whose autumn meetings with the World Bank get under way on the Indonesian resort island of Bali this week, also noted that while the banking system has been shored up by regulators in the decade since the 2008 global financial crisis, easy financial conditions are contributing to a buildup of vulnerabilities such as high debt levels and "stretched" asset valuations.

Despite the Federal Reserve's interest rate increases, financial conditions "have eased further" in the U.S.as equity valuations have stayed lofty.

"The government has chose to approach the International Monetary Fund for stabilisation and an economic recovery programme", said the Finance Ministry in a statement after the stock market suffered an over 1,300-point plunge, losing nearly 270 billion Pakistani rupees ($2 billion) of its capitalisation - the highest single-day loss in a decade.

At its annual meeting in Bali it downgraded its prediction to 3.7% from 3.9% in July.

The latest bailout talks come amid increased scrutiny over China's infrastructure loans to Pakistan. The Finance Minister shared with the World Bank leader, the vision of the new government and its priorities. "Our probability that we would attach to further bad news has gone up", Obstfeld said.

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