International Monetary Fund says Pakistan has not asked it for a bailout so far

Kenny Grant
October 10, 2018

Pakistan's fiscal deficit was on target to hit 7.2 percent of gross domestic product in the fiscal year ending in June 2019, but the government has introduced measures to bring it closer to 5 percent.

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While the global economy is still on track to match last year's pace, which was the strongest since 2011, the new outlook suggests fatigue is setting in and the overall performance masked divergence with mounting weakness in emerging markets from Brazil to Turkey.

But the already tricky transition has been complicated by US President Donald Trump's use of import tariffs to punish China for what he considers predatory trade practices.

It predicted 2.9 percent US growth this year, dropping to 2.5 percent next year, and to 1.8 percent in 2020, as the effect of USA tax cuts wears off and the trade war with China inhibits growth.

The fund cut its 2019 United States growth forecast from 2.7 per cent to 2.5 per cent, and the China growth forecast from 6.4 per cent to 6.2 per cent.

The IMF has also projected the economy will grow at an average of 4,7 percent between next year and 2023. The IMF also warned the new government that growth would likely slow and inflation rise further if it does not act fast.

"If you have the world's two largest economies at odds, that is a situation in which everyone, everyone is going to suffer", International Monetary Fund chief economist Maurice Obstfeld said Tuesday.

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Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation seeing forecast upgrades.

"Considerable progress was made in Russian Federation in recent years to shore up financial stability, including by closing weak banks, introducing reforms to the resolution framework, enacting measures to reduce dollarization, and increasing the risk weights of unsecured consumer and mortgage loans", the International Monetary Fund said. The US dollar gained by over Rs6.50 to touch the new high in the open market, while in the interbank market it rose by Rs9 to reach Rs133.64.

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".

The UK economy, meanwhile, is expected to grow 1.4 percent this year and 1.5 percent in 2019 - falling behind nearly all of Europe, with the exception of heavily-indebted Italy.

The trade deficit has gone up 8.6 percent this year to $31 billion.

The repercussions for the United States and China would be particularly severe, with 2019 GDP losses of more than 0.9 percent in the United States and 1.6 percent in China in 2019.

In September, the US implemented another round of tariffs on $200 billion worth of Chinese goods, which were met with countermeasures out of Beijing on $60 billion worth of USA goods. It also assumes that Trump imposes a 25 percent tariff on imported cars and auto parts.

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