Pakistan Engages in Crucial Talks at IMF and World Bank Meetings in Washington

Minister Aurangzeb held discussions with World Bank President, Rajeev Banga, focusing on Pakistan’s economic situation.

Washington: The Boards of Governors of the International Monetary Fund (IMF) and the World Bank held meetings in Washington, where central bank governors, finance ministers, and economic experts from around the world gathered to exchange views on global economic perspectives, poverty eradication, and economic development.

Federal Minister for Finance, Muhammad Aurangzeb, participated in the meetings, representing Pakistan’s interests. During his visit to the United States, Pakistani officials are engaged in negotiations with the IMF, aiming to secure a new loan program to bolster the country’s economy.

Meanwhile, the U.S. Department of State has announced its support for Pakistan’s new loan program. The Pakistani delegation, led by Minister Aurangzeb, is actively advocating for Pakistan’s economic stability and progress.

Minister Aurangzeb held discussions with World Bank President, Rajeev Banga, focusing on Pakistan’s economic situation. He expressed gratitude to the World Bank for its cooperation and support. Additionally, Minister Aurangzeb met with officials from the Saudi Ministry of Finance in Washington, where Saudi Arabia pledged its support for Pakistan’s economic development.

On the other hand, U.S. Department of State spokesperson, Matthew Miller, stated during a press briefing that Pakistan and the IMF have made progress in staff-level discussions last month. He praised Pakistan’s efforts to strengthen its economy and expressed unwavering support for the country’s economic success.

Miller reiterated the United States’ commitment to Pakistan’s prosperity, highlighting the enduring business and investment ties between the two countries.

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The engagement at the IMF and World Bank meetings underscores Pakistan’s commitment to addressing economic challenges and fostering international cooperation for sustainable development. These discussions are vital steps towards securing financial support and advancing Pakistan’s economic agenda on the global stage.

IMF sees lower inflation, higher growth in Pakistan

The International Monetary Fund (IMF) expects a marked decline in inflation and has projected at rate of 24.8 per cent – which is a downward revision – for 2023-24 (FY24) followed by 12.7pc in 2024-25 (FY25).

Inflation rate in the previous fiscal year 2022-23 (FY23) was 29.2pc.

The IMF In its latest report “World Economic Outlook: Steady but Slow: Resilience amid Divergence” has also said that Pakistan will witness a higher GDP growth rate of 2pc in the current fiscal year, which was just 0.2pc in FY23.

At the same time, the forecast says the growth rate would jump to 3.5pc in FY25 – showing a consistent upward movement at a time when Pakistan badly needs economic revival amid sticky inflation and high interest rates.

Moreover, the unemployment is projected to decrease to 8pc FY24 against 8.5 recorded last year and further slide to 7.5pc in the fiscal year.

GLOBAL ECONOMY

As far as the global economy is concerned, the IMF see another year of slow but steady growth, with the US strength pushing world output through headwinds from lingering high inflation, weak demand in China and Europe, and spill overs from two regional wars.

The IMF forecast global real GDP growth of 3.2pc for 2024 and 2025 – the same rate as in 2023. The 2024 forecast was revised upward by 0.1 percentage point from the previous World Economic Outlook’s estimate in January, largely due to a significant upward revision in the US outlook.

“The global economy continues to display remarkable resilience with growth holding steady and inflation declining, but many challenges still lie ahead,” Pierre-Olivier Gourinchas, the IMF’s chief economist, told reporters.

A potential escalation of the Middle East conflict after Iran’s rocket and drone attack on Israel could have a “strong effect” on limiting growth, he said, adding that it would raise oil prices and inflation, triggering tighter monetary policy from central banks.

The report described an “adverse scenario” in which a Middle East escalation would lead to a 15pc increase in oil prices and higher shipping costs would hike global inflation by about 0.7 percentage points.

The IMF forecast that global median headline inflation will fall to 2.8pc by the end of 2024 from 4pc last year, and to 2.4pc in 2025.

US, EUROPE DIVERGE

The IMF revised its forecast for 2024 US growth sharply upward to 2.7pc from the 2.1pc projected in January, on stronger-than-expected employment and consumer spending. It expects the delayed effect of tighter monetary and fiscal policy to slow US growth to 1.9pc in 2025, though that also was an upward revision from the 1.7pc estimate in January.

European Central Bank President Christine Lagarde has cited the stark divergence between the US and Europe, which is facing slower growth and faster-falling inflation.

The latest IMF forecasts bear this out, with a downward revision to the eurozone 2024 growth forecast to 0.8pc from 0.9pc in January, primarily due to weak consumer sentiment in Germany and France. Britain’s 2024 growth forecast was revised down by 0.1 percentage point to 0.5pc amid high interest rates and stubbornly high inflation.

CHINA PROPERTY WOES

The IMF left unchanged its forecast for China’s 2024 growth to fall to 4.6pc from 5.2pc in 2023, with a further drop to 4.1pc for 2025. But it warned that the lack of a comprehensive restructuring package for the country’s troubled property sector could prolong a downturn in domestic demand and worsen China’s outlook.

Such a situation could also intensify deflationary pressures, leading to a surge in cheap exports of manufactured goods that could stoke trade retaliation by other countries – a scenario that Yellen warned about during a trip to China earlier this month.

Gourinchas said, however, that China’s stronger-than-expected first-quarter growth may prompt an upward revision to the outlook.

The IMF recommended that China accelerate the exit of non-viable developers and promote the completion of unfinished housing projects, while supporting vulnerable households to help restore consumer demand.

But the global lender noted bright spots in some big emerging market countries, raising its growth forecast for Brazil in 2024 by half a percentage point to 2.2pc and increasing the forecast for India’s growth by 0.3 percentage point to 6.8pc.

It noted that Group of 20 large emerging market countries are playing a bigger role in the global trading system and have the capability to shoulder more of the growth burden going forward.

But the IMF said low-income developing countries continue to struggle with post-pandemic adjustments and greater levels of economic “scarring” than middle-income emerging markets. As a group, these low-income developing countries saw their 2024 growth forecast cut to 4.7pc from an estimate of 4.9pc in January.

RUSSIAN RESILIENCE

In one of the biggest surprises, Russia’s 2024 growth forecast was increased to 3.2pc from the 2.6pc projected in January.

The report said the increase partly reflected continued strong oil export revenues amid higher global oil prices despite a price-cap mechanism imposed by Western countries, as well as strong government spending and investment related to war production, along with higher consumer spending in a tight labor market. The IMF also upgraded Russia’s 2025 growth forecast to 1.8pc from 1.1pc in January.

Ukraine’s growth, which is highly dependent on economic aid from the West, is forecast to slow to 3.2pc in 2024 and accelerate to 6.5pc in 2025.

While initial price spikes for grains, oil and other commodities have faded since Russia’s 2022 invasion of Ukraine, a widening of the conflict could cause them to intensify.