Pakistan rupee plunges in de facto devaluation as International Monetary Fund talks loom

Lloyd Doyle
October 10, 2018

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.

"Nonetheless, despite trade tensions and continued monetary policy normalisation in a few advanced economies, global financial markets have remained buoyant and appear complacent about the risk of a sudden, sharp tightening in financial conditions".

The IMF also sees a darker outlook for the world economy mostly as a result of tariff wars between the United States and China, the two largest economies.

The IMF report said "protectionist rhetoric" was being "increasingly turned into action", warning such uncertainty "could lead firms to postpone or forgo capital spending and hence slow down growth in investment and demand".

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.

It maintained a 5.3 per cent growth forecast for the Southeast countries in 2018, but lowered the 2019 estimate slightly to 5.2 per cent.

The government inherited 6.6 percent of fiscal deficit, more than a trillion rupees of unaccounted for losses in the energy sector and an unprecedented and debilitating current account deficit running at $2 billion a month.

The report warned that growth "may have peaked in some major economies".


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.

However, the International Monetary Fund cautions that it has a "poor track record of predicting recessions".

The International Monetary Fund (IMF) on Tuesday downgraded its outlook for the world economy, warning that the imposition of import tariffs between the United States and China were taking its toll on global trade.

The IMF expects the US economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.

To cool inflationary pressure, the American central bank, the Federal Reserve, is raising interest rates, which acts as a further attraction to global capital because returns are higher.

Islamabad has cut the size of the biggest Chinese "Silk Road" project in Pakistan, a reconstruction of the main rail line between the port city of Karachi and Peshawar in the northwest by $2 billion, citing government concerns about the country's debt levels. The Nasdaq Composite dropped 7.44 points, or 0.10 per cent, to 7,728.51 at the opening bell.

However, stimulus measures by Beijing are likely to soften the impact of the tariffs.

Other reports by Iphone Fresh

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