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Dar assures nation IMF deal on track a day after cancelling Washington visit

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The World Bank and International Monetary Fund’s spring meetings get underway later this week with an ambitious reform and fundraising agenda likely to be overshadowed by concerns over high inflation, rising geopolitical tension and financial stability.

“Growth remains historically weak – now and in the medium term,” IMF managing director Kristalina Georgieva said during a speech last week.

The fund now expects global growth to fall below three percent this year, and to remain at close to three percent for the next half a decade – its lowest medium-term prediction since the 1990s.


Close to 90 percent of the world’s advanced economies will experience slowing growth this year, while Asia’s emerging markets are expected to see a substantial rise in economic output – with India and China predicted to account for half of all growth, she said.

Low-income countries are expected to suffer a double shock from higher borrowing costs and a decline in demand for their exports, which Georgieva said could fuel poverty and hunger to increase.

Updated growth projections published in the IMF’s World Economic Outlook on Tuesday will provide a broader look at how different countries are coping, with additional publications to detail fiscal and financial challenges to the global economy.

Tackling inflation remains a priority

This year’s spring meeting will be held against the backdrop of high inflation and ongoing concerns about the health of the banking sector following the dramatic collapse of Silicon Valley Bank.

Georgieva told AFP last week that central banks should continue battling high inflation through interest-rate hikes, despite concerns that it could further inflame the banking sector.

“We don’t envisage, at this point, central banks stepping back from fighting inflation,” she said during an interview on Thursday.

“Central banks still have to prioritize fighting inflation and then supporting, through different instruments, financial stability,” she said.

Ahead of the spring meetings, the IMF and World Bank also called on wealthier countries to help plug a $1.6-billion hole in a concessional lending facility for low-income countries that was heavily-used during the Covid-19 pandemic.

Many low-income countries are now facing mounting debt burdens due in part to the higher interest-rate environment.

US pushes for World Bank reforms

The spring meeting also provides an opportunity to make progress on an ambitious US-backed agenda to reform the World Bank so it is better-prepared to tackle long-term issues like climate change.

US Treasury Secretary Janet Yellen told AFP in an interview that she expects member states will agree to update the World Bank’s mission statement to include “building resilience against climate change, pandemics, and conflict and fragility,” to its core goals.

Global growth to fall below 3% in 2023: IMF chief

Yellen said she also expects an agreement to “significantly” stretch the World Bank’s financial capacity, which “could result in an additional $50 billion in extra lending capacity over the next decade.”

The changes will likely fall to the bank’s next president to implement, with current World Bank president David Malpass due to step down early from a tenure marked by concerns over his position on climate change.

Malpass is widely expected to be replaced by US-backed former Mastercard chief executive officer Ajay Banga, who was the only person nominated for the position.
 
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So Dar making u-turn?

IMF asking to curb strategic assets, won’t talk to IMF, cancel US visit, and now deal on track.

PDM fanboys, your turn.
 
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IMF helping Pakistan to get support from friends

Anwar Iqbal
April 15, 2023

WASHINGTON: The International Monetary Fund (IMF) has said that it’s working ‘hand-in-hand’ with Pakistan and its bilateral donors to ensure that Islamabad gets the financial support it needs to stabilise the economy.

Finance Minister Ishaq Dar told reporters in Islamabad on Friday that the UAE has confirmed financial support of $1 billion to Pakistan, removing a key obstacle to securing a much-awaited bailout tranche from the IMF. Last week, Saudi Arabia also told the IMF it would provide financing of $2 billion to Pakistan.

“Financing is required, and the financing needs are about what is currently in the programme, and this is where we are also hand-in-hand with the authorities and the bilateral supporters of Pakistan, working to ensure that the financing needs for the programme and beyond are assured,” Jihad Azour, who heads IMF’s Middle East and Central Asia Department, told reporters in Washington.

At a Thursday afternoon briefing in Washington, where the World Bank Group is holding its spring meetings, Mr Azour dispelled the impression that the Fund was dictating terms to Pakistan.

“When it comes to the future, … It’s a sovereign decision. The authorities of Pakistan will decide what are the reforms, what type of programmes they want, and what type of relationship they decide to have with the Fund,” he said. “The Fund stands ready, as it did in the past several decades, to assist Pakistan.”

Asked for an update on IMF-Pakistan talks for the resumption of the 2019 loan-package, Mr Azour said: “Pakistan is at a critical juncture today, and decisive actions are required to stabilise the economy.”

The policies that the Pakistani government adopted recently go in the right direction, he said, adding that the country needed to focus on two key points to stabilise the economy.

“On the one hand, (it needs) to maintain monetary stability by addressing the issue of high inflation that has exceeded 35 per cent, and it also (needs to) maintain a flexible exchange rate to protect its economy from external shocks,” he said.

“Discussions between the authorities and the IMF are ongoing, … to ensure that the measures that Pakistan needs to take, and are part of the review, are met,” he said. The IMF and Pakistan, he said, were also working together to ensure that Pakistan successfully completes the programme.

Responding to a question about the Fund’s long-term engagement with Pakistan, Mr Azour pointed out that the IMF “has been very supportive to Pakistan over the years with several programmes.” The latest programme, signed in 2019, needed “several modifications” to cater to the shocks that Pakistan went through, during and after the Covid pandemic.

“It’s very important for the Pakistani economy to address the imbalances and to maintain macroeconomic stability, and this is the stopping point: addressing inflation that is in double digits for the last three years, is a priority with or without the review,” the IMF official said. “Reducing constraints to trade and exports by having the right exchange rate policies is also important for the Pakistani economy and the Pakistani people, with or without an IMF programme.”

Similarly, “addressing the consequences of the flood by mobilising international assistance and channelling funds to ... the most affected is a priority for Pakistan, with or without a program,” he added. “Therefore, the priority for us is how to help Pakistan and the Pakistani economy to weather a period of economic tension (and) uncertainties.”

Mr Azour also indicated that the Fund was concerned about the current (“very active”) political situation in Pakistan.

“This is in the context of the programme that we have already agreed with the authorities on, and we have ensured that it’s based on a certain number of actions, based on a certain number of priorities. We have worked extensively with the authorities to make sure that those priorities are met,” he said.
 
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“During the meetings between the Pakistani delegation and IMF staff and management, there was agreement on the need to maintain strong policies and secure sufficient financing to support the authorities’ implementation efforts.

“The IMF is supporting these efforts and looks forward to obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the 9th EFF review.”

Porter’s statement did not give details on the additional financing amount, but implied that the staff-level agreement could still be a few steps away for Pakistan as the country is required to arrange fresh foreign exchange inflow.

Before the new bilateral support, reports suggested that at least $5 billion of inflow was required to be arranged – even after the narrower current account deficit.

China’s rollover of $2 billion, and refinancing of another $2 billion – which included $1.3 billion from the Industrial and Commercial Bank of China (ICBC) and $700 million from China Development Bank – is not categorised as a new inflow.

On Friday, Pakistan had announced financial support from the UAE, days after Minister of State for Finance Aisha Ghaus Pasha also said Saudi Arabia had assured the IMF it will provide a $2 billion loan to the South Asian country.
 
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