Published: Thu, October 11, 2018
Money | By Ralph Mccoy

China Trade War to Hurt Global Economic Growth

China Trade War to Hurt Global Economic Growth

"The economy would stabilise once Pakistan would receive funds from the IMF", said a market analyst.

The latest IMF "World Economic Outlook" report released at the IMF-World Bank Annual Meetings in Bali on Tuesday hints at possible further negative shocks to growth prospects.

The country's foreign currency reserves dropped by $627 million in late September to $8.4 billion, the largest weekly drop in years that left barely enough to cover sovereign debt payments due through the end of the year.

The situation is similar to 2013, when after the elections, the new government in Pakistan obtained $5.3 billion from the International Monetary Fund to reinvigorate its ailing economy.

IMF's Financial Counsellor and Director, Tobias Adrian, who said the fund was not against borrowing, said, "When debts are raised for infrastructure projects, it is good".

"Since mid-April, rising U.S. interest rates and a stronger U.S. dollar - coupled with intensified trade tensions - have triggered a reversal in portfolio flows, an increase in borrowing costs, and a weakening in local currencies in some emerging markets", the report noted.

With weakening growth and uncertainties over trade, smoothing the economic impact of structural adjustments and de-risking "is a very hard act of judgment that policymakers in China have to struggle with", Vitor Gaspar, director of the IMF's fiscal affairs department, told reporters at a separate briefing on its Fiscal Monitor, a report that tracks the state of countries' public finances.

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In addition to trade tensions, the International Monetary Fund mentioned aging populations, rising interest rates and unexpectedly high inflation as other potential economic risks.

UBG chairman and FPCCI former president Iftikhar Malik said the IMF programme will come with specific external, fiscal and monetary measures, which will likely result in slowdown in GDP growth to around 4 percent compared to GDP growth of 5.8 percent in FY18, besides further hike in interest rates.

"It's inevitable that central banks make the decisions that they make".

"He said in the case of Nigeria, the rise in oil prices is sustaining economic activity, but oil exporter", pointing out that oil prices could decline at some point, and so it is important to have some constraint on how much debt is issued.

The Group of 24 (G-24), a chapter of the G-77, was established in 1971 to coordinate the positions of developing countries on worldwide monetary and development finance issues and to ensure that their interests were adequately represented in negotiations on global monetary matters.

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".

This comes after the Government also revived upwards growth projection for this year, saying the economy is showing signs of recovery despite a number of challenges and risks.

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