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Tag: IMF

  • IMF Warns of Slowing Global Growth Amid Trump Tariffs and Policy Uncertainty

    The International Monetary Fund (IMF) has cut its global growth forecasts. It now sees a distinctly threatened world economy as a result of U.S. President Donald Trump’s recent trade policy decisions and the uncertainty they are creating around the globe. In its latest World Economic Outlook published in April 2025, the IMF projected that world growth would be 2.8% in 2025, down 0.5 percentage points from the same organization’s estimate made just three months earlier. The growth forecast for 2026 has also been lowered a bit, now set at 3.0%.

    This downward revision follows a broad tariff policy introduced by the United States on April 2, which effectively slaps universal duties on imports. In the wake of this, the global financial world has grown even more anxious, with not a few policymakers and analysts now fretting over the apparent disintegration of the post-World War II economic order.

    India’s Resilience Tested but Growth Outlook Dips

    India is still on track for relatively notable growth compared to other countries, but it was not immune to the IMF’s latest round of downgrades. The country’s gross domestic product growth is now projected at 6.2% for the fiscal year that ends in March 2026, which is down by 0.3 percentage points from where the IMF had previously pegged it in January. And the IMF sees this moderation basically flowing from two areas: trade disruptions and overarching global uncertainty.

    As India moves forward, it is expected that the growth rate will nudge up slightly to 6.3% in the next fiscal year. Also, inflation is likely to remain in comfortable territory, with the Consumer Price Index projected to be up 4.2% in FY26 and 4.1% in FY27. These are the sort of stable fundamentals that should underpin investor confidence. But even so, the unfolding global situation may continue to exert some pressure on India’s external sector.

    Global Economic Risks Climb Sharply

    The IMF has some alarming news: the chances of a global downturn are rising. The Fund isn’t formally calling for a recession, but it’s now estimating a 30% chance that the world will experience something similar in 2025. That’s nearly double the 17% risk it assessed earlier this year. What seems to be driving this increase is a combination of the sheer size of the policy shifts and how uncertain we’re all now feeling about what will happen next.

    The IMF stressed that although growth is still above levels that would ordinarily result in a recession, the current path we’re on is fraught with risks. Inflation, which had seemed to be heading decisively downward, is now being marked up, and across the world, the process of getting inflation to settle down in a more normal range seems to be stalling.

    Tariffs Trigger Retaliation and Broader Disruptions

    The trade conflict has already pushed retaliation to a blistering pace. China, contending with U.S. tariffs that are hitting some goods at levels as high as 245%, has struck back, levying its own steep counter-tariffs that hit 125% on a number of American goods. And it’s not just China that’s getting squeezed; other parts of the world, including the Euro area, are caught in the crossfire. Multiple European companies are watching their business hit walls that are only going to get higher as trade relations deteriorate.

    The IMF is cautioning that the recalibration of the capital markets and the shifting around of the flows of capital have the potential to create some very choppy waters for several countries, especially those that have a high level of debt and are designated as emerging economies. In the Fund’s concluding remarks, it urged countries around the globe to work together in a renewed spirit of international cooperation to avoid those types of reforms that retreat from the global trading system.

  • India’s GDP Growth Prediction for FY25 is Raised by 20 Basis Points to 7% by the IMF

    For fiscal year 2024–25 (FY25), the IMF increased India’s growth prediction by 20 basis points (BPS), bringing it up to 7% from 6.8%. The improvement in private consumption, especially in rural India, is the reason for the improvement in the growth projection, according to the International Monetary Fund’s (IMF) World Economic Outlook (WEO).

    The International Monetary Fund (IMF) revised its GDP growth prediction for India up from 6.5% in April to 6.8%. The UN’s international financial agency maintained its projection for the 2025–26 fiscal year (FY26) of 6.5% growth in the GDP of Asia’s third-largest economy.

    The International Monetary Fund also noted that its earlier projection for global economic growth in 2023 was 3.3% and that its current forecast for this year is 3.2%, both of which are unimpressive. Prior to the pandemic disrupting economic activity in 2019, global growth averaged 3.8% annually.

    Optimism for Global Growth Curbed; Downgraded US Projection

    As a result of slowing US activity and a dropping out in Europe, the world economy is expected to have modest growth in the coming two years. The International Monetary Fund has issued a warning about the slowing down fight against inflation, which could lead to a postponement of interest rate cuts and the maintenance of strong dollar pressure on emerging countries.

    Although it increased its 2025 prediction by 0.1 percentage point to 3.3 percent, the International Monetary Fund maintained its 2024 forecast of 3.2% global real GDP growth unchanged from April. Forecasts fall short of preventing growth from plunging into “the tepid twenties,” as warned by IMF managing director Kristalina Georgieva.

    Inflation is predicted to continue falling globally, from 6.7% in 2023 to 5.9% this year and 4.4% in 2025, after spiking to 8.7% in 2022 due to the fast recovery of the global economy from the pandemic recession. As a result of the first quarter’s disappointing performance, the International Monetary Fund lowered its growth prediction for the United States for this year from 2.7% to 2.6%.

    Service prices stayed high due to wage growth in the labor-intensive sector, and the International Monetary Fund (IMF) cautioned that inflation could rise in the near future due to increased costs of imported goods caused by rekindled trade and geopolitical tensions.

    GDP Projections for India and China

    According to official statistics, India’s GDP expanded by 8.2% in FY24. Both 2022–23 and 2021–22 saw economic growth of 7.2% and 8.7%, respectively. During its most recent monetary policy meeting, the Reserve Bank of India (RBI) increased its GDP prediction for FY25 from 7% to 7.2%.

    This year, the International Monetary Fund raised its growth prediction for China to 5% from 4.6% in April, although it fell short of 5.2% in 2023, in part due to a spike in Chinese exports in early 2024.

    Prior to the release of Monday’s (July 15, 2024) data, the world’s second-largest economy—China—had expanded at a slower-than-expected 4.7% annual rate from April through June, down from 5.3% in the first three months of the year. This was before the IMF prediction was made public.

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  • Pakistan’s Economic Crisis – Explained

    The Islamic Republic of Pakistan was formed in 1947 after the partition of the British Indian Empire. The country was, initially, a dominion of the British Commonwealth until 1956, when it drafted and framed its own constitution. Ranked among the emerging and growth-leading economies through its rapidly growing middle class, the country’s political history since independence is characterized by periods of significant economic and military growth as well as economic and political instability.

    Pakistan is geographically, ethnically, and linguistically diverse and is a member of the United Nations, the Shanghai Cooperation Organisation, the Organisation of Islamic Cooperation, the Commonwealth of Nations, the South Asian Association for Regional Cooperation, and the Islamic Military Counter-Terrorism Coalition.

    Current Economic Crisis
    Bail-Out Loans & History
    Talks With IMF For Loans
    Conclusion

    Current Economic Crisis

    It was Pakistan’s rising economic crisis that led to a political stand-off between the then Prime Minister Imran Khan and the current Prime Minister Shahbaz Sharif, who took office in April 2022.  However, the country’s economy has been steadily dwindling as its forex reserves fell to a 9-year low reaching below USD 3 billion in early February 2023. The country’s currency, the Pakistani Rupee, has seen a steep fall to reach Rs. 271.50 against one US dollar. Inflation within the country is at a 48-year high with just enough foreign reserves to cover imports for less than a month. The country’s consumer price index in January 2023 had increased by 27.6% and the wholesale price index increased by 28.5%.

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    Unsurprisingly, the rising inflation has led to an exponential price increase in essential commodities like wheat, onions, gas cylinders, etc. To add to its woes, the oil companies of the country are on the verge of collapse due to the ongoing economic crises and its currency devaluation. This has also led to a lot of petrol pumps running out of fuel disrupting everyday life. The breakdown of the national electricity grid of the country also led to nationwide power outages, specifically affecting Karachi, Islamabad, Lahore, and Peshawar.

    Pakistan’s rising expenses are adding to its troubles as the country’s high borrowing led to total debt and liability of Pakistani Rupees 59,697.7 billion in FY ’22. This amount was approximately 89% of the country’s total GDP. Unemployment and poverty are proving huge hindrances to food, healthcare, and wages for the citizens of the country.

    Bail-Out Loans & History

    By the year 2008, Pakistan’s external debt was Pakistani Rs. 6435 billion. Being an election year, Pakistan People’s Party came to power in that year and during its five-year tenure, increased the country’s debt by 135% to reach Pakistani Rupees 15096 billion by the year 2013. This amounted to 64% of the country’s GDP. A large increase in this debt was domestic with external debt increasing by 22%. Hence the external debt which was at USD 42.8 billion in 2008 reached USD 52.4 billion in 2013.

    Pakistan’s Economic Crisis Deepens

    The elections of 2013 brought Nawaz Sharif to power under whose rule, the external debt increased by 226.8% from USD 52.4 billion to USD 75.3 billion. The primary reason for this debt increase was the China-Pakistan Economic Corridor through which Pakistan procured loans from China and, in return, awarded contracts to only Chinese companies. This also resulted in high imports from China. Imran Khan came to power in 2018 and subsequently added to the increasing external debt to USD 110.6 billion during his rule.

    As per IMF data, it has disbursed 21 loans to Pakistan over the years, the first request emerging from the country as early as 1958. Since then, IMF had agreed to disburse a total loan amount of USD 31.73 billion of which USD 20 billion has been disbursed through different transactions like Stand by Arrangements (SBA), Extended Fund Facility (EFF), Extended Credit Facility (ECF) and Structural Adjustment Facility Commitment (SAFC). An IMF loan is released in these different installments based on certain norms that are set by the lender.

    Talks With IMF For Loans

    Nathan Porter, leading the IMF mission began talks with the Pakistan government represented by their finance minister, Ishaq Dar, on January 31st, 2023. The talks failed to reach a satisfactory conclusion for Pakistan regarding its immediate requirement of USD 1.1 billion loan amount to prevent the country’s bankruptcy. The country is on the verge of defaulting on its external liabilities and is heavily dependent on the IMF’s loan. The loan amount is a part of the USD 6.5 billion loan program. IMF said – “Virtual discussions will continue in the coming days to finalize the implementation details of these policies.”

    Conclusion

    As inflation mounts and poverty rules the country, Pakistan is in dire need of monetary help from the IMF. However, this loan is also feared to increase inflation and price hikes for the common citizens of the country, further increasing their burdens. The ongoing Russia-Ukraine hostilities are adding to rising inflation around the globe as well. It remains to be seen, how the current government of Pakistan handles the ongoing economic crisis.

    FAQs

    Why is Pakistan in an economic crisis?

    Pakistan’s economic crisis is caused by economic mismanagement, political uncertainty, high inflation and energy prices, and urgent foreign debt payments.

    What role can international organizations, such as the IMF, play in helping Pakistan navigate its economic crisis?

    IMF and other international organizations can help Pakistan by providing financial assistance, technical expertise, policy advice, and coordination to support economic growth, but such assistance may come with conditions that could be politically and socially difficult to implement.

    What impact has the economic crisis had on the daily lives of Pakistani citizens, particularly those living in poverty?

    The economic crisis in Pakistan has made it harder for people, particularly those in poverty, to afford basic necessities like food and healthcare due to rising inflation, unemployment, and expensive imported goods.

    What is the impact of the economic crisis on Pakistan’s job market?

    The economic crisis in Pakistan has led to rising unemployment rates, limited job opportunities, and job losses in the manufacturing, construction, and public sectors.