IMF warns Pakistan against ‘excessive loans’ from China

13 October, 2018, 10:02 | Author: Mary Valdez
  • Finance Minister Asad Umar says decision is taken after consulting leading economists

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 unsafe place".

For the record, the International Monetary Fund has lowered the growth projections for both India and China by 0.4 percent and 0.32 percent, respectively, from its annual April's WEO.

That includes President Donald Trump's imposition of tariffs on US$250 billion in Chinese goods, as well as on aluminium, steel and other products worldwide. That was why; he said the Pakistan Tehrik-i-Insaf led government had made a decision to take measures to take the country out of the crisis.

For emerging market and developing economies, gradually tightening USA monetary policy, coupled with trade uncertainties and - for countries such as Argentina, Brazil, South Africa, and Turkey - distinctive factors, have discouraged capital inflows, weakened currencies, depressed equity markets, and pressured interest rates and spreads, he said.

What are the risks to global growth?

Maurice Obstfeld, the IMF's chief economist, said at a media briefing about the fund's latest World Economic Outlook: "When you have the world's two largest economies at odds, that's a situation where everyone suffers".

"Notwithstanding the present demand momentum, we have downgraded our 2019 U.S. growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".

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Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector and nonbank financial intermediation, it added.

Over the weekend, the PBOC cut bank reserve requirement ratios for a fourth time this year to ease credit conditions and support businesses, including exporters hit by the USA trade war. "Growth has proven to be less balanced than hoped". Against a basket of currencies, the yuan has depreciated less. "We will have to take a loan to support the falling economy".

China and the U.S. trade war might also unleash an inflation surge worldwide.

"We will get out of this".

Pakistan's currency plunged by about 7 percent on Tuesday after the government said it would seek emergency bailout loans from the International Monetary Fund.

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.

The IMF and World Bank meetings, attended by more than 19,000 delegates, showed no sign of disruption from an offshore quake early Thursday morning between Bali and Java island that killed three people.

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