Tuesday, 25 June, 2019

International Monetary Fund raises Japan growth forecast, cuts global estimate due to trade tension

Christine Lagarde  International Monetary Fund  Flickr Christine Lagarde International Monetary Fund Flickr
Deanna Wagner | 12 October, 2018, 11:21

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. The group recently downgraded global growth forecasts.

Thursday's magnitude 6.0 quake offshore north of Bali shook the area where the IMF-World Bank delegates are meeting, but there were no signs of significant damage.

The State Department response on Pakistan's IMF bailout request appeared to be in sync with the statement made by IMF Managing Director Christine Lagarde.

The U.S. and Chinese exchanges of penalty tariffs in their dispute isn't helping, she said.

International Monetary Fund 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.

Treasury Secretary Steven Mnuchin met with People's Bank of China Governor Yi Gang on Thursday on the sidelines of the IMF-World Bank meeting. "At least we should know where those loans went", he said while while chairing a meeting of his Cabinet.

The IMF also warned in its twice-yearly report on the Asia Pacific region that the market rout seen in emerging economies could worsen if the US Federal Reserve and other major central banks tightened monetary policy more quickly than expected.

Over the weekend, the PBOC cut bank reserve requirement ratios for a fourth time this year to ease credit conditions and support businesses, including exporters hit by the USA trade war.

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Speaking to reporters in Brussels, Margaritis Schinas said: "We are not there yet". The challenge for May will be in selling the formulation to the whole cabinet.

That would include boosting foreign currency reserves that could be used in a crisis, as well as working with local bond markets to build a local investor base, rather than relying on financing from overseas.

"[To] really understand the extent and composition of that debt, both in terms of sovereign, in terms of state-owned enterprises and the like of it", she continued, "the Fund needs a full picture so that we can actually really appreciate and determine the debt sustainability of that country, if and when we consider a programme".

The yuan currency CNY=CFXS lost over 8 percent between March and August at the height of market worries, though it has since pared losses as authorities stepped up support measures.

Lagarde added that those outflows were inevitable as the world braced for impacts from trade frictions.

"A sudden deterioration of risk appetite, rising trade tensions, and political and policy uncertainty could also lead to tighter financial conditions", the report said on Friday. "We're working with every single one of our countries to prepare them in case it gets worse".

He said the earlier housing projects failed to take off because the country had no financing packages and that the State Bank of Pakistan had been directed to set up a National Financial Regulatory Body in 60 days time.

The formal request follows an apparent 7 per cent central bank devaluation of Pakistan's rupee currency on Tuesday after Pakistani President Imran Khan announced it would seek financial assistance to ease a mounting balance of payments crisis.

The IMF and World Bank meetings, attended by more than 19,000 delegates, showed no sign of disruption from an offshore quake early Thursday morning between Bali and Java island that killed three people.