IMF bails out cash-strapped Pakistan with new loan; India hosts two-day WTO meeting- Current Affairs
Under the new loan deal, Pakistan will receive $6 billion from the IMF in addition to $2 to $3 billion from the World Bank and Asian Development Bank over the next three years.
Sangeeta NairMay 13, 2019 14:50 IST
Story 1- IMF bails out cash-strapped Pakistan with a new loan deal
Following months of negotiations, Pakistan and the International Monetary Fund have reached an agreement, wherein the IMF has agreed to provide the cash-strapped nation with bailout fund worth $6 billion.
The agreement is Pakistan's 22nd bailout with the IMF, as the country struggles to deal with its falling economy, triggered by low growth, soaring inflation and mounting debt.
- In a televised address recently, Pakistan's finance advisor Abdul Hafeez Sheikh announced that the nation has a $12 billion gap in its annual payments and it doesn’t have the capacity to pay them. Sheikh made the announcement while announcing the new agreement with the IMF.
- Under the new loan deal, Pakistan will receive $6 billion from the IMF in addition to $2 to $3 billion from the World Bank and Asian Development Bank over the next three years.
- The agreement comes weeks after former World Bank official Sheikh was appointed as Pakistan’s adviser on finance, following the sudden resignation of Pakistan’s Finance Minister Asad Umar.
- The loan deal aims to support Pakistan’s strategy to enable a more balanced growth by reducing the internal and external imbalances, improving the business environment, increasing transparency, strengthening institutions and protecting social spending.
The IMF deal announcement comes just when there is growing discontentment over the measures taken by Imran Khan-led Pakistani government to resolve the economic crises, including devaluation of the Rupee by 30 percent since January 2018, sending inflation to five-year highs.
As per a government report published on May 10, Pakistan's growth rate is set to hit an eight-year low, with the country’s GDP rate likely to sink to 3.3 percent as against a projected target of 6.2 percent.
Since Pakistan joined the IMF in 1950, the nation has had 21 bailouts, with the last one worth $6.6 billion being issued in 2013.
The country is facing a huge financial crunch after the United States cut $300 million worth military aid to the nation.
Pakistan is also facing possible sanctions from the Financial Action Task Force, an anti money-laundering monitor based in Paris, for failing to control terror financing. The organization is expected to soon take a decision on whether to add Pakistan to a blacklist. If initiated, the move would trigger automatic sanctions, which would further weaken Pakistan's economy.
In international bailout efforts, the UAE, which is Pakistan’s largest trading partner in the Middle East, recently offered $3 billion to support the nation’s dwindling economy.
Saudi Arabia also pledged $6 billion in funding and entered a 12-month deal with the nation during Pakistani Prime Minister Imran Khan’s visit to the kingdom in October 2018.
However, the gulf funding has failed to reverse the economic situation of the nation, as high fuel prices, low tax yields and rising inflation continue to stall its growth.
Story 2- India hosts two-day WTO ministerial meeting
India is hosting a two-day ministerial meeting of the World Trade Organisation (WTO) from May 13-14, 2019 in New Delhi. Ministers from 16 developing nations and six least developed would be taking part in the meeting.
The issues that are expected to be discussed during these two days include deadlock on the appointment of WTO's appellate body members and the way forward on reforms at the global trade body.
The meeting aims to bring together developing nations and the least developed nations on a common platform to share their concerns on various issues affecting the trade organization and work together to address these issues. It is being held at a time when the multilateral rules-based trading system is facing serious and grave challenges.
• The two-day meeting aims to be interactive, in order to give an opportunity to the ministers to discuss various issues and future course of the organization.
• The first day will involve a meeting of senior officials of the participating countries and on the second day, the ministerial meeting will be held.
• During the meeting, the developing countries and the LDCs will be given an opportunity to build consensus on the way forward regarding the WTO reforms, while preserving the fundamentals of the multilateral trading system enshrined in the WTO.
• The discussions will primarily focus on getting a direction on how to constructively engage on issues in the WTO, both institutional and negotiating, in the run-up to the Twelfth Ministerial Conference of the WTO to be held in Kazakhstan in June 2020.
• The participants include Bangladesh, China, Malaysia, Indonesia, Kazakhstan, Malawi, Brazil, Guatemala, Barbados, Argentina, Benin, Chad, Guyana, Egypt, Jamaica, Central African Republic, Nigeria, Oman, Saudi Arabia, Uganda, Turkey and South Africa.
• All the participants together will aim to build consensus on how to move forward on the WTO reforms, while preserving the fundamentals of the multilateral trading system.
There have been increasing unilateral measures and counter measures by members in recent past and standoffs in key areas of negotiations and appointments in the appellate body that threaten to dismantle the dispute settlement mechanism of the WTO and impact the position of the trade body as an effective multilateral organization.
The stand offs and deadlocks have given rise to demands from various quarters to reform the WTO.