Pakistan to start talks with International Monetary Fund as rupee continues to fall

Gladys Abbott
October 9, 2018

Pakistan's finance minister told the daily Dawn newspaper on Saturday that the government had not yet decided whether it would go to the IMF, and had not sketched out a formal proposal to the fund ahead of the Bali summit.

The Pakistani government has chose to approach the International Monetary Fund (IMF) for a bailout to address the mounting balance of payments crisis faced by the South Asian country, Finance Minister Asad Umar announced on Monday. Both figures would mark the slowest rate of Chinese expansion since 1990, when its growth rate was slashed in the aftermath of the violent suppression of pro-democracy protests. It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the United States and 6.6 percent for China.

"We have to find a way to get out of this hard situation", he said.

Further out, China's economic growth is expected to slow gradually to 5.6 per cent as the government shifts to "a more sustainable growth path" and addresses financial risks, the International Monetary Fund said.

"The forecast does not incorporate the impact of further tariffs on Chinese and other imports threatened by the United States, but not yet implemented, due to uncertainty about their exact magnitude, timing, and potential retaliatory response", according to the International Monetary Fund.

The IMF is now predicting 3.7 per cent global growth in both 2018 and 2019, down from 3.9 per cent for both years.

In the World Economic Outlook report released in July, the Bretton Wood institution had projected that Nigeria's economy would grow by 2.1 percent in 2018 and 2.3 percent in 2019.

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The possible failure of Brexit negotiations also dampened the eurozone's growth outlook.

The IMF expects growth in Russian Federation at 1.7 percent this year and 1.8 percent next year, it said in an update to its World Economic Outlook on Tuesday.

They show that a burst of strong growth, fueled partly by USA tax cuts and rising demand for imports, was starting to wane.

The IMF warned the uncertainty caused by the trade disputes "could lead firms to postpone or forgo capital spending and hence slow down growth in investment and demand".

Maurice Obstfeld, the IMF Economic Counsellor, warned against the rising tide of protectionism, saying that without multilateralism "the world will be a poorer and more risky place". "For an economy that has become addicted to foreign loans and bailouts, the future is very much like the past", said Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC.

It found that global GDP output under this scenario would fall by more than 0.8% in 2020 and remain roughly 0.4% lower in the long-term compared to levels without these effects, which "inflict significant costs to the global economy, especially through its impact on confidence and financial conditions".

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