Pakistan formally requests International Monetary Fund for bailout

Ivan Schwartz
October 12, 2018

Formally launching the International Monetary Fund and World Bank annual meetings on the Indonesian resort island of Bali, Lagarde urged countries to "de-escalate" trade conflicts and fix global trading rules instead of abandoning them.

On a general note, the International Monetary Fund said it was time to build fiscal space against the risk of downturn, stating that building cash was crucial to economic growth and stability.

"It is time to build fiscal space against the next downturn".

The report applied a stress to the USA public sector assets, heavily concentrated in public pension funds, mortgages and student loans, finding that a scenario involving a severe recession, higher long-term interest rates and rapid falls in stock and real estate prices would shrink United States public net worth by an equivalent of 26 per cent of GDP by 2020.

And, overall, it may help to put public wealth to work at the service of societies' economic and social goals.

But after a decade of recovery, the net worths of most Group of Seven economies are now negative, it said. "So, clearly, that is a priority".

The IMF and Pakistan on Thursday launched talks on a new bailout program aimed at easing a mounting balance of payments crisis in the South Asian country. Those will be priorities for the tax administration side.

China's rate of growth could decline by as much as a full percentage point or more by 2019 if a "worst-case" scenario materialises, involving further tariffs, a commensurate Chinese counter-response and a collapse in confidence by businesses and markets.

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The IMF expects the US economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.

Developing nations make up about 48 percent of world trade, up from 33 percent in 2000, while the number of people living in extreme poverty has been reduced by half since 1990 to now just about 1 billion, according to the World Bank.

Maurice Obstfeld, IMF's chief economist and director of research said whatever affects the three major economies will affect the whole region as majority of the countries relies on their trajectories.

He contended that China had "already retaliated" against his tariff increases.

Debt in advanced economies, since the global financial crisis, has increased quite substantially while the private sector has been very gradually leveraging, he added.

Writing in Pakistan's Express Tribune newspaper on Monday, he argued that the crisis facing Pakistan "has more to do with the incumbent governments postponing many fiscal decisions near the end of their tenures but still going on a spending spree to get more votes in next elections".

The size of Pakistan's debts to China has prompted concern from US Secretary of State Mike Pompeo, who told CNBC that he would be watching to see whether Khan's government used IMF funds to pay off Chinese loans.

Other reports by GizPress

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