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The IMF Faces An Uncertain Future (FX Street)

October 29, 2018

By Northern Trust Economic Research Department 

From the article: 

Earlier this month, the International Monetary Fund (IMF) conducted its fall meetings in Bali, Indonesia. The economic outlook released as background for the occasion was titled "Challenges to Steady Growth." The report highlighted "mounting uncertainties—not only over economic policies, but also over the global framework of international relations within which policies are made."

Uncertainty is also mounting around the IMF itself. Rising nationalism around the world has fostered suspicion about the motives and actions of multilateral organizations. Using domestic funds to benefit other countries, or allowing an outside body to dictate domestic policy, runs counter to the broadening desire to put home country first. 

... 

According to a 2018 study by the Center for Global Development, 23 BRI participants are "at risk of debt distress." Pakistan, with the key China-Pakistan Economic Corridor, is the most vulnerable. China is reportedly financing about 80% of Pakistan's external debt on its own terms, with external repayments projected to rise by 65% to $12.7 billion in 2019. It seems extremely unlikely that Pakistan will be able to meet these obligations, leading it to reach out to the IMF for aid. The U.S., however, has expressed reluctance to have IMF funds make Chinese creditors whole. 

Read the full article here.

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Senior Fellow, Director of the US Development Policy Initiative