Tuesday, 16 October, 2018

IMF warns of increased risks to global financial system

PM Khan talks to media persons in Lahore. —DawnNewsTV PM Khan talks to media persons in Lahore. —DawnNewsTV
Elsie Buchanan | 10 October, 2018, 08:54

The IMF during the recent talks with Pakistan had noted that government should devalue its currency by 15 percent during ongoing fiscal year.

Pakistan's government had previously said seeking help from the International Monetary Fund was the last option and would prefer succour from friendly nations, widely interpreted as a reference to traditional allies China and Saudi Arabia.

LCCI President Almas Hyder said government should start immediate consultation with the stakeholders as increase in dollar value would spoil trade and economic activities, besides hitting the common man. "Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks", he added.

With global economy slowing down and countries across the world erecting trade barriers, Valecha says it is highly unlikely that exports from Pakistan will have a sharp turnaround.

But it singled out U.S. president Donald Trump for blame after he imposed tariffs on European Union steel and aluminium and on hundreds of billions of dollars of Chinese trade.

Downside to this situation, he said, is that the request for a bailout will more likely than not ensure that the Pakistani rupee remains at very weak levels.

Oil prices, which account for about 80 percent of Saudi public income, have increased by more than 70 percent since June past year to over $80 a barrel.

The IMF has cited short-term risks such as rising inflation and inflation expectations, high credit growth, and the challenging external environment for the lower 2018 and 2019 growth projections, which has also increased concerns of overheating.

How bad could the trade war get?

U.S. growth this year remained steady at 2.9 percent but is set to slow in 2019 as the effect of Trump's sweeping tax cuts wear off and the trade dispute with China begins to set in.

Trump decries calls to impeach Kavanaugh as an ‘insult to American public’
His first day on the bench is Tuesday when he and his colleagues will hear arguments about longer jail terms for repeat offenders. But when asked again Sunday about it, he said different rules might apply if the same party controls the Senate and White House.


Mr Obstfeld said the world would become a "poorer and more unsafe place" unless world leaders worked together to raise living standards, improve education and reduce inequality.

Obstfeld spoke at the World Economic Outlook press conference in Indonesia, where the global body focused on the growth of the Asian economy.

In addition to the revised outlook for the rest of this year, the International Monetary Fund has downgraded expectations for China in 2019 - from 6.6 percent to 6.2 percent.

What about the United Kingdom and Brexit?

According to a media report, State Bank of Pakistan had viewed that the exchange rate of Rs137 to a dollar by the end of current fiscal year in June 2019 would be sufficient to address the challenges.

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

It believes Brexit will fundamentally change parts of the United Kingdom economy, leaving some workers out of a job.

It's not just the world's two most powerful economies that stand to be affected by trade policy. It called for a tightening of monetary policy, a move the Reserve Bank of India did not take when it kept interest rates unchanged last week.

However, Chancellor Philip Hammond is still expected to borrow around £16bn in 2023 to plug the gap between tax revenues and public spending.

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