Published: Wed, October 10, 2018
Business | By Eloise Houston

Pakistan says it will seek International Monetary Fund bailout as reserves dwindle

Pakistan says it will seek International Monetary Fund bailout as reserves dwindle

The Pakistani government has chose to approach the International Monetary Fund (IMF) for a bailout to address the mounting balance of payments crisis faced by the South Asian country, Finance Minister Asad Umar announced on Monday.

The IMF, in the WEO report, said inflation pressures in sub-Saharan Africa had broadly softened, with annual inflation projected to drop to 8.6 per cent in 2018 and 8.5 per cent in 2019, from 11 per cent in 2017.

The IMF is now predicting 3.7 per cent global growth in both 2018 and 2019, down from 3.9 per cent for both years.

The global organisation said that India's growth has rebounded from "transitory shocks" such as the demonetisation of high value currency notes and the introduction of the Goods and Services Tax. It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the US and 6.6 percent for China.

Pakistan's current account deficit widened 43 percent to $18 billion in the fiscal year that ended June 30, while the fiscal deficit has ballooned to 6.6 percent of gross domestic product.

It said trade tensions between the U.S. and China, which has led the countries to implement tarriffs against each other, had played a role in the tempered global expectations.

"In the United States, momentum is still strong as fiscal stimulus continues to increase, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariffs imposed on $200 billion of USA imports from China", IMF report said.

In the October edition of the report, International Monetary Fund cut the growth projections for 2018 to 1.9 percent.

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

A few countries, such as Argentina, are expected to suffer contractions.

Given a weaker than expected performance in the first half of this year, the growth estimates for the eurozone were revised down 0.2 point to 2.0 percent in 2018.

It also said renewed impetus to reform labour and land markets, along with further improvements to the business climate, are crucial.

"Priority areas in Russian Federation include improving property rights and governance, enhancing the institutional infrastructure, reforming labor markets, and investing in innovation and infrastructure", the report added.

Khan's decision came after the Pakistani stock markets tumbled by 3.4 percent on Monday after Khan said the day before that he was still exploring options outside the International Monetary Fund.

Global trade is projected to expand by 4.2 percent this year, six tenths less than expected in July and almost a full point lower than the forecast in April.

The central bank has raised interest rates to the highest in three years to help shore up confidence in the economy.

It said, the prediction is lower due to recent increase in oil prices and the tightening of global financial conditions.

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