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Pakistan Seeks Largest Loan Package From IMF

11 October 2018

China is in danger of stoking risks to the country's financial stability as policies to avert a growth slowdown amid trade tensions with the US undercut efforts to reduce threats to the economy stemming from high leverage, the International Monetary Fund (IMF) said in a report released Wednesday.

Pakistan's foreign currency reserves have fallen to $9 billion, half of what they were two years ago, according to the State Bank of Pakistan, despite GDP growth of 5.8 per cent, the highest in a decade, reports Efe news.

The annual financial meetings take place at a time of growing concern over trends other than trade, such as moves to raise borrowing costs in the USA and some other regions to help cool growth and keep inflation in check.

The IMF expects the USA economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast. It left 2018 growth forecasts for the two countries unchanged at 2.9 percent for the USA and 6.6 percent for China.

The IMF predicted United Kingdom growth to would be 1.4% in 2018, rising to 1.5% in 2019, while the eurozone 2018 growth forecast was cut to 2.0% from 2.2%.

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'A sharp tightening of global financial conditions could be triggered by a further escalation of trade tensions or by a sudden shift in risk sentiment caused by rising geopolitical risks or policy uncertainty in major economies'.

Lagarde said she expected to meet in Bali with Pakistan's finance minister, Asad Umar, who has said he intends to seek a bailout loan from the International Monetary Fund to address his country's balance of payments crisis.

The IMF said Monday that the global economy will grow 3.7 percent this year, the same as in 2017 but down from the 3.9 percent it was forecasting for 2018 in July.

China's economy could also take a hit: The IMF revised its forecast for economic growth in 2019 down to 6.2 percent, slightly lower than previous estimates and down from 6.6 percent this year.

Russian Federation was among the few energy-rich emerging market countries whose growth forecasts were bumped up.

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The IMF says there is a "risk of contagion" as investors become increasingly nervous about the strength of emerging markets, with the risk of capital flows towards the USA accelerating. "So, we will be listening very, very attentively when and if they come to us".

Interest rate rises in the U.S. are "legitimate and necessary", Christine Lagarde has said in defence of the Federal Reserve after President Trump called America's ratesetters insane.

Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies such as the European Union. Trump has justified the higher USA tariffs as a response to the trade imbalance between the two countries, and China has swiftly responded with higher levies on US imports.

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.

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Pakistan Seeks Largest Loan Package From IMF