China trade war and Brexit threaten global growth says International Monetary Fund

09 Octubre, 2018, 10:35 | Author: Arnold Perez
  • Currency dealers say market movements triggered by PM's remarks about approaching IMF for bailout. ─ Reuters  File

Yesterday, Minister for Finance Asad Umar said that the government had chose to initiate negotiations with International Monetary Fund (IMF) for the recovery and stabilization of national economy.

Prime Minister Imran Khan made the decision on Monday after meeting with top economic advisers, Umar said in the interview.

"Notwithstanding the present demand momentum, we have downgraded our 2019 United States growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation", he said, adding that China's expected 2019 growth is also marked down.

International Monetary Fund (IMF) chief economist Maurice Obstfeld has said the fund has not been formally approached by Pakistan for financial assistance, and the country's cooperation with China has both financial benefits and risks.

The government took the decision after the friendly countries did not bail it out despite Prime Minister Imran Khan himself going to Saudi Arabia seeking investment. Advisor to Prime Minister on Commerce Razak Dawood, who had accompanied the PM, described his Saudi Arabia visit as "it was terrible to beg from Saudi Arabia".

He said the talks would be held for "such a programme, a stabilisation, a recovery programme, on which basis we could overcome this financial crisis".

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The IMF concluded a consultative visit last week with a warning that Pakistan needed to quickly secure "significant external financing" to stave off a crisis, though it did not suggest who could supply the money.

Asad Umar will meet International Monetary Fund officials on the sidelines of the meeting, where he will discuss the challenges confronting the Pakistani economy and the proposed International Monetary Fund loan programme.

The ministry of finance in an official statement said, "Immediately upon assuming office, the present government had expressed serious concerns over the dire economic situation of the country and had committed to undertake a quick evaluation of all possible options".

"The government inherited 6.6% of fiscal deficit, more than a trillion rupees of unaccounted for losses in the energy sector and an unprecedented and debilitating current account deficit running at $2 billion a month".

Noting that growth in the United States, buoyed by a procyclical fiscal package, continues at a robust pace and is driving USA interest rates higher, Obstfeld said U.S. growth will decline once parts of its fiscal stimulus go into reverse. In addition, regulatory duties on non-essential imports have had to be introduced to curb the unnecessary growth in imports.

The government had announced that it was ready to take "decisive corrective measures" to put the national economy back on track, raising the prospects for early finalisation of an International Monetary Fund bailout package, carrying huge political and economic costs.

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