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International Monetary Fund to launch financial assistance talks with Pakistan

11 October 2018

International Monetary Fund (IMF) chief Christine Lagarde on Thursday defended central bank rate hikes in a veiled rebuke to Donald Trump after the USA president blamed "crazy" Fed policies for contributing to financial market turmoil. The most recent was in 2013 when Islamabad got a $6.6 billion loan to tackle a similar crisis.

Citing the impact of US taxes on Chinese imports, however, the International Monetary Fund shaved the outlook for China next year to 6.2 percent, which would be the country's slowest growth since 1990.

"In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term", he said.

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 USA undercut efforts to reduce threats to the economy stemming from high leverage, the International Monetary Fund (IMF) said in a report released Wednesday.

The IMF predicts the global economy will grow by 3.7 percent in 2018 and 2019 - a 0.2 percentage point downward revision from previous forecasts.

Global economic expansion remains strong, but the trade war could potentially shock investor confidence, with "significant adverse consequences" for global macroeconomic activity, Tobias Adrian, IMF monetary and capital markets department director, told reporters.

Since the last GFSR in April, global economic conditions have become less balanced, with a more pronounced divergence between advanced and emerging economies.

Lagarde said in a statement that the request came during her meeting with Pakistani finance minister Asad Umar, and central bank governor Tarik Bajwa on the sidelines of the International Monetary Fund and World Bank annual meetings in Bali.

"While Nigeria will grow from 1.9 per cent in 2018 to 2.3 percent in 2019, South Africa and Angola are projected to move from 0.8 to 1.4 and -0.1 to 3.1 per cents respectively". It now expects the global economy to only expand by 3.7% in 2018 and 2019, down from 3.9% before.

An IMF report released Wednesday said global growth could be at risk if emerging markets deteriorate further or trade tensions escalate.

"An IMF team will visit Islamabad in the coming weeks to initiate discussions for a possible IMF-supported economic programme", Lagarde said in statement.

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

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

"We need to join hands to fix the current trade system, not destroy it", she added.

Despite the Federal Reserve's interest rate increases, financial conditions "have eased further" in the U.S.as equity valuations have stayed lofty.

International Monetary Fund to launch financial assistance talks with Pakistan