Tag: IMF

India may clock 8% GDP growth for FY24, says chief economic advisor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s Chief Economic Advisor V Anantha Nageswaran on Wednesday, May 8, said the possibility of growth touching 8% in the fiscal is quite high. “India is aiming at maintaining growth in the 6.5-7% range in the coming years,” he said. The International Monetary Fund had recently pegged India’s growth projection for FY24 at 7.8%, slightly more than the government’s projection of 7.6%.

If the growth remains above 7%, this would be the second consecutive year after COVID-19 that the economy would have grown over 7%. As of now, the IMF estimates a 6.8% for FY25, lower than the Reserve Bank of India’s expectation of a 7% growth. “If FY25 growth projection of RBI turns out to be correct or even an underestimate it would be the fourth consecutive year of 7% or higher growth rate.”

India’s gross fixed capital formation (GFCF) declined for two years. However, the CEA highlighted that there has been a significant pickup in FY22 and FY23, and the trend continues in FY24. GFCF represents the total value of physical assets (such as machinery, equipment, buildings, and infrastructure) produced for use in the production process over a specific period within an economy. It measures the net increase in the stock of fixed assets in an economy.

Also Read: IBA chief weighs in on RBI’s new stricter rules for project financing

Nageswaran said, “An ideal growth rate for the economy will be between 9.5% and 10% like China’s for over three decades after 1979 but the geopolitical context has shifted and, therefore, we need to be able to grow on the basis of domestic economy strengths, and whatever impediments are still there, we should look to remove them.”

According to the CEA, the tax GDP ratio has been improving steadily, which is commensurate with the per capita income, in line with nominal GDP growth. He stressed that there is a need to allow the organic evolution of these trends. “At the moment inflation is well within RBI reference range; with normal monsoon inflation to head to target range.”

Compliance burdens, rules and regulations at the state level need to be worked on for manufacturing to grow. “The economy is better placed than before to pursue non-inflationary growth,” he said.

The CEA highlighted that the private sector has come off its balance sheet. There has been a shrinking in the net savings surplus for the private corporate sector, which implies that they are investing. On the other hand, households seem to be saving less but savings are channelised into physical assets. The external sector balance, CEA said, remains quite comfortable.

Also Read: India’s April fuel consumption climbs up 6.1% year-on-year

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Be cool, composed & careful — IMF chief tells countries to take actions that do not derail global economy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund’s (IMF) managing director Kristalina Georgieva said businesses, economies and countries should be careful about taking actions that can derail the global economy. “Anyting that distorts energy prices, pushes them up, then this beautiful trend of inflation going down and growth in positive territory, can be disturbed. So the most important thing for everybody is to be cool, composed and careful,'” she told The Economist, as part of the Milken Institute’s global conference.

The IMF is also sticking to its baseline scenario of the US Fed cutting interest rates this year despite some fears on the contrary, which is a US rate hike to cool inflation. “Let’s remember this, inflation is not just in the hands of the Fed. It is also in the hands of American businesses repairing supply chains that play the role of bringing inflation down. Could that be derailed? It could, but as we say in our baseline scenario we would see inflation going down to target this year and the Fed starting to cut,” she said.

The IMF chief later also spoke about China, saying it is “facing a fork in the road”, with its aging population and its strategy of massive exports in a more fragmented world not working any more. She said the IMF has advised China to open up its economy, tackle the real estate problem more forcefully and make it disappear and orient the economy towards domestic consumption.

She added the real estate problem has eased but it’s still there, forcing people to save more rather than spend . “That is very bad as the Chinese people think of property as their pension and when property goes down they don’t spend as they worry about the future. Create confidence in people so that they don’t have to save so much and spend so little. And confidence is a hard thing to gain,” she said, adding it’s hard for China to switch from the known to the unknown but the IMF will continue with its engagement.

Kristalina Georgieva also told The Economist that the ongoing decade is likely to witness “tepid” growth with global growth seen around 3% against the pre- pandemic 3.8% . Some economies with poor fundamentals could perpetually witness turbulence , while some will stagnate as still others could transform with the help of technology, AI and capital, she said.

Also Read: Global housing shortages are crushing immigration-fueled growth

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Pak PM Sharif discusses new loan programme with IMF chief Georgieva in Riyadh

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Pakistan Prime Minister Shehbaz Sharif has met IMF chief Kristalina Georgieva and discussed a new loan programme for the cash-strapped country to put the economy back on track.

In a meeting on the sidelines of the World Economic Forum (WEF) Special Meeting in Riyadh, the premier thanked Georgieva, the International Monetary Fund (IMF) Managing Director, for her support to Pakistan in securing the US $3 billion standby arrangement (SBA) from IMF in 2023 that was now nearing its completion.

Pakistan secured the US $3 billion IMF programme in June 2023, which helped it avert a sovereign default. It is seeking a new long-term Extended Fund Facility (EFF) after the current SBA expires in April.

“Both sides also discussed Pakistan entering into another IMF program to ensure that the gains made in the past year were consolidated and its economic growth trajectory remained positive,” according to a statement issued by the PM Office on Sunday.

Sharif reiterated his government’s commitment to put Pakistan’s economy back on track.

Finance Minister Muhammad Aurangzeb has said Islamabad could secure a staff-level agreement on the new programme by early July.

Islamabad says it is seeking a loan over at least three years to help achieve macroeconomic stability and execute long-overdue and painful structural reforms, though Aurangzeb has declined to detail what size of the programme the country seeks.

If secured, it would be Pakistan’s 24th IMF bailout.

The US $350 billion economy faces a chronic balance of payments crisis, with nearly US $24 billion to repay in debt and interest over the next fiscal year — three times more than its central bank’s foreign currency reserves, according to Geo News.

According to the state-run PTV News post on X, this was the first meeting between the prime minister and Georgieva since his re-election last month. They last met in Paris in June 2023 on the margins of the Summit for New Global Financial Pact.

The IMF Executive Board is expected to meet on Monday to decide on the final tranche of USD 1.1 billion under SBA, the post said.

IMF chief Georgieva appreciated the leadership of Sharif for timely securing SBA last year, according to the statement.

During the meeting, the prime minister said that he had directed his financial team to carry out structural reforms, ensure strict fiscal discipline and pursue prudent policies that would ensure macro-economic stability and sustained economic growth.

The IMF MD shared her institution’s perspective on the ongoing programme with the premier, including the review process.

Separately, Prime Minister Sharif highlighted the “global inequity” in healthcare while speaking at a panel discussion on ‘Redefining Global Health Agenda’ during the special meeting of WEF.

“Today, I think the first and foremost problem is global inequity,” he said, adding that the Covid-19 pandemic had “exposed” these imbalances and gaps. “Imagine the global North and the global South; distribution of vaccines and so on and so forth,” he said.

He further said that climate change had “completely changed the landscape”. “ Pakistan does not contribute (to) even a fraction of emissions. Yet we are on the red list of climate change and in 2022, we experienced the worst floods in Pakistan (…)and we had to invest hundreds and billions of rupees to rehabilitate people.” This is the prime minister’s second trip to Saudi Arabia in less than a month. He last went on a three-day visit to the kingdom, which was his first foreign visit since he was re-elected as premier.

Separately, Sharif held a meeting on Sunday with Islamic Development Bank (IDB) President Muhammad Sulaiman Al Jasser, where they both agreed upon the earliest completion of various ongoing projects of the IDB in Pakistan.

During the meeting, held on the sidelines of the WEF, the premier thanked the IDB for investing USD 1 billion in various projects during the previous PML-N-led tenure, a statement on PML-N’s X account said.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IMF’s Gita Gopinath: Emerging markets grapple with historic low FDI

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Foreign direct investment (FDI) in emerging markets has plummeted to its lowest point in two decades, as revealed by Gita Gopinath, the First Deputy Managing Director at the International Monetary Fund (IMF).

In a recent interview with CNBC, Gopinath highlighted the alarming trend of dwindling global FDI flows, particularly noting a significant reversal in China. However, she underscored that this decline is not isolated to China alone but extends across emerging markets as a whole.

Gopinath elaborated on the concerning statistics, stating, “If you look at emerging markets as a whole, we have seen what I would describe as weak net flows into the emerging market group as a whole. If you look at the share of global flows that they are receiving – pre-pandemic their share was 25%, but now it is 20%.”

Gopinath attributed this decline to several factors, including robust growth prospects in the United States, faltering growth trends in major emerging market economies, and significant interest rate differentials between advanced economies and emerging markets.

The implications of this downturn in FDI are far-reaching, posing challenges to the economic development and stability of emerging markets worldwide. As these nations navigate through uncertain economic landscapes, policymakers are faced with the urgent task of implementing measures to stimulate FDI inflows and reignite growth trajectories.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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IMF raises India’s FY25 growth forecast to 6.8%; pegs global growth at 3.2% in 2024, 2025

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund (IMF) has raised India’s growth forecast for the current fiscal year by 0.3 percentage points to 6.8%, compared with its earlier January update. The latest projections were part of the IMF’s World Economic Outlook update for April.

Although the IMF has revised India’s growth forecast up, it still trails the Reserve Bank of India’s estimate of 7% growth in FY25. Thereafter, the IMF sees India’s growth slowing to 6.5% by FY26, at the same level as its previous update in January.

“Growth in India is projected to remain strong at 6.8% in 2024 and 6.5% in 2025, with the robustness reflecting continuing strength in domestic demand and a rising working-age population,” the IMF said in its report.

The IMF sees India’s consumer price inflation cooling off from an average of 5.4% in FY24, to 4.6% in FY25, and further to 4.2% in FY26.

The inflation projections are marginally higher than Reserve Bank of India (RBI) estimates, which pegs FY25 consumer inflation to average 4.5%.

Global Outlook

The IMF said in its report that the global economy remains remarkably resilient, with growth holding steady as inflation returns to target.

Global growth, estimated at 3.2% in 2023, is projected to continue at the same pace in 2024 and 2025, the IMF said in its report. The forecast for 2024 is revised up by 0.1 percentage point from the January World Economic Outlook Update.

“Despite gloomy predictions, the global economy remains remarkably resilient, with steady growth and inflation slowing almost as quickly as it rose. The journey has been eventful, starting with supply-chain disruptions in the aftermath of the pandemic, an energy and food crisis triggered by Russia’s war on Ukraine, a considerable surge in inflation, followed by a globally synchronised monetary policy tightening,” said Pierre-Olivier Gourinchas, Chief Economist at the IMF.

“Even more encouraging, we now estimate that there will be less economic scarring from the pandemic—the projected drop in output relative to prepandemic projections—for most countries and regions, especially for emerging market economies, thanks in part to robust employment growth. Astonishingly, the US economy has already surged past its prepandemic trend,” the IMF said in its report.

The IMF’s latest forecast for global growth five years from now—at 3.1%—however, is at its lowest in decades, the agency warned.

Advanced economies are expected to see growth rise slightly, with the increase mainly reflecting a recovery in the euro area from low growth in 2023, whereas emerging market and developing economies are expected to experience stable growth through 2024 and 2025, with regional differences, as per IMF.

For advanced economies, growth is projected to rise from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. In the United States, growth is projected to increase to 2.7% in 2024, before slowing to 1.9% in 2025, as gradual fiscal tightening and a softening in labour markets slow aggregate demand.

In emerging markets and developing economies, growth is expected to be stable at 4.2% in 2024 and 2025, with a moderation in emerging and developing Asia offset mainly by rising growth for economies in the Middle East and Central Asia and for sub-Saharan Africa.

Growth in China is projected to slow from 5.2% in 2023 to 4.6% in 2024 and 4.1% in 2025 as the positive effects of one-off factors—including the post-pandemic boost to consumption and fiscal stimulus—ease and weakness in the property sector persists, IMF said.

“Nevertheless, the projection for global growth in 2024 and 2025 is below the historical (2000–19) annual average of 3.8%, reflecting restrictive monetary policies and withdrawal of fiscal support, as well as low underlying productivity growth,” the report said.

Global Inflation Outlook

Global headline inflation is expected to fall from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies, the IMF said in its report. IMF said that prices of fuel commodities are projected to fall in 2024 by, on average, 9.7%, with oil prices falling by about 2.5%.

Risks to Growth Outlook

The risks to the global outlook are now broadly balanced, said the IMF. On the downside, new price spikes stemming from geopolitical tensions, including those from the war in Ukraine and the conflict in Gaza and Israel, could, along with persistent core inflation where labour markets are still tight, raise interest rate expectations and reduce asset prices, it said.

A divergence in disinflation speeds among major economies could also cause currency movements that put financial sectors under pressure, IMF said in its report. High-interest rates could have greater cooling effects than envisaged as fixed-rate mortgages reset and households contend with high debt, causing financial stress, it added.

In China, without a comprehensive response to the troubled property sector, growth could falter, hurting trading partners, the report pointed out. IMF said that amid high government debt in many economies, a disruptive turn to tax hikes and spending cuts could weaken activity, erode confidence, and sap support for reform and spending to reduce risks from climate change. Geo-economic fragmentation could intensify, with higher barriers to the flow of goods, capital, and people implying a supply-side slowdown, the IMF warned.

On the upside, looser fiscal policy than necessary and assumed in projections could raise economic activity in the short term, although risking more costly policy adjustment later on, IMF said. Inflation could fall faster than expected amid further gains in labor force participation, allowing central banks to bring easing plans forward. Artificial intelligence and stronger structural reforms than anticipated could spur productivity, it said.

“As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation touches down smoothly, by neither easing policies prematurely nor delaying too long and causing target undershoots…Cross-country differences call for tailored policy responses,” the report added.

ALSO READ | Central banks globally may start cutting rates by second half of 2024: IMF

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Central banks globally may start cutting rates by second half of 2024: IMF

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund (IMF) expects major central banks worldwide to start cutting key policy rates by the second half of the year, as inflation declines and inflation expectations remain anchored, it said in its latest World Economic Outlook report released on Tuesday.

“With inflation projected to continue declining toward targets and longer-term inflation expectations remaining anchored, policy rates of central banks in major advanced economies are generally expected to start declining in the second half of 2024,” the IMF said.

Among major central banks, by the fourth quarter of 2024, the Federal Reserve’s policy rate is expected to decline from its current level of about 5.4% to 4.6%, the IMF said in its report.

The Bank of England is expected to reduce its policy rate from about 5.3% to 4.8%, and the European Central Bank (ECB) will reduce its short-term rate from about 4.0% to 3.3%, the IMF added.

For Japan, the IMF said, policy rates are projected to rise gradually, reflecting growing confidence that inflation will sustainably converge to target over the medium term despite Japan’s history of deflation.

The report also highlighted that, though major central banks have raised policy interest rates to “restrictive” levels, concerns about high rates leading to an economic downturn globally did not materialise for several reasons.

“To counter rising inflation, major central banks have raised policy interest rates to levels estimated as restrictive. As a result, mortgage costs have increased and credit availability is generally tight, resulting in difficulties for firms refinancing their debt, rising corporate bankruptcies, and subdued business and residential investment in several economies. The commercial real estate sector, including office markets, is under especially strong pressure in some economies, with rising defaults and lower investment and valuations, reflecting the combined effects of higher borrowing costs and the shift toward remote work since the pandemic,” it said in the report.

Concerns of a global economic downturn caused by a sharp rise in policy rates, however, have not materialised as some central banks—including the ECB and the Federal Reserve—raised their nominal interest rates after inflation expectations started to rise, resulting in lower real rates that initially supported economic activity, the report concluded.

The Bank of Japan has continued to keep policy rates near zero, resulting in a steady decline in real interest rates, the IMF said, adding that, by contrast, the central banks of Brazil, Chile, and several other emerging market and developing economies raised rates relatively quickly, resulting in earlier increases in real interest rates.

Second, the IMF said, households in major advanced economies were able to draw on substantial savings accumulated during the pandemic to limit the impact of higher borrowing costs on their spending.

Third, changes in mortgage and housing markets over the pre-pandemic decade of low interest rates have limited the drag of the recent rise in policy rates on household consumption in several economies, the IMF added.

“As the global economy approaches a soft landing, the near-term priority for central banks is to ensure that inflation comes down smoothly; they should neither ease policies prematurely nor delay too long and risk causing target undershoots,” the IMF said in its report.

The IMF has pegged global growth, which stood at 3.2% in 2023, to continue at the same pace in both 2024 and 2025.

ALSO READ | IMF raises India’s FY25 growth forecast to 6.8%; pegs global growth at 3.2% in 2024, 2025

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Kristalina Georgieva elected to serve as IMF Managing Director for another five years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund’s Executive Board has elected Kristalina Georgieva to continue serving as its Managing Director for a second five-year term, according to an official statement.

This decision was taken by consensus, according to the IMF.

Georgieva’s second five-year term will commence on October 1, 2024. She has been serving as IMF’s Managing Director since October 1, 2019.

Under Georgieva’s leadership, the IMF approved more than $360 billion in new financing for 97 countries since the start of the pandemic. Additionally, it also provided debt service relief to the poorest, most vulnerable members and allocated nearly $650 billion under a Special Drawing Rights (SDR) allocation.

The IMF over the last five years has also secured a 50% quota increase to bolster its permanent resources and also agreed to add a third Sub-Saharan African chair to the IMF board.

“Looking ahead, the Board welcomes Ms. Georgieva’s ongoing emphasis on issues of macroeconomic and financial stability, while also ensuring that the Fund continues to adapt and evolve to meet the needs of its entire membership,” an IMF statement said.

A Bulgarian national, Georgieva has previously served as World Bank’s CEO from January 2017. She was also interim president for the World Bank Group between February and April, 2019. She has also served at the European Commission as Commissioner for International Cooperation, Humanitarian Aid and Crisis Response along with its Vice President for Budget and Human Resources.

“The IMF’s financial support, policy advice and capacity development work—delivered by our exceptional staff—have contributed to countries’ capacity to deal with high uncertainty and abrupt shifts in economic conditions. We are and will remain a transmission line of good policies for our members and will continue to strive to be more effective, incisive and a welcoming place for countries to come together to tackle global challenges,” Georgieva said after being re-elected.

Last week, the IMF said that it will nudge its global growth forecast slightly higher, while warning that the world economy still risks a “Tepid Twenties” this decade if inflation and debt challenges are not addressed.

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IMF sees growth edging higher but still warns of ‘Tepid Twenties’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund hinted it would nudge its global growth forecasts slightly higher, while warning that the world economy still risks a “Tepid Twenties” this decade if inflation and debt challenges aren’t addressed.

Global growth will be “marginally stronger” in the IMF’s new predictions, to be published April 16, Managing Director Kristalina Georgieva said in a prepared speech for delivery Thursday in Washington. The most recent outlook, from January, envisaged an expansion of 3.1% this year and 3.2% in 2025.

Robust consumption and investment, as well as easing supply-chain problems, are among the drivers of strong growth in the US and many emerging-market economies, she said. But the IMF chief added that inflation was not yet fully defeated and debt levels in most countries are too high.

“Without a course correction, we are indeed heading for ‘the Tepid Twenties’ – a sluggish and disappointing decade,” she said, pointing out that the fund’s medium-term outlook for global growth remains “well below its historical average” at just above 3%.

She also called on central banks to avoid premature or delayed monetary easing, which risks triggering new inflation surprises or pouring cold water on economic activity.

“The Fed is acting prudently,” she said in an interview with Atlantic Council President Fred Kempe following the speech, which she gave at the think tank. The Biden administration also will likely “look at what can be done so that the economy doesn’t overheat to a point that is not healthy,” she said, while warning that a strong dollar for a long time risks causing financial stability worries for other nations.

“There’s policy capacity for the US to manage that famous soft landing well,” Georgieva said. “So fasten your seatbelts — at some point we will be landing.”

Countries should bring their debt to sustainable levels and pursue policies to boost productivity growth via green and digital transformation, she said.

Georgieva, who’s poised to win a second five-year term as head of the fund, spoke ahead of its spring meetings held jointly with the World Bank in Washington next week.

Fresh off a trip to China near the end of last month, Georgieva said that the nation’s leadership is aware that it must chart a new course for its economy by being more decisive with failing companies in its property sector, boosting domestic demand and following through on reforms of state-owned enterprises and resolving local government debt challenges. All of that is important beyond China’s borders, given the impact on other countries in Asia and the rest of the world.

“China making good choices would be good for everybody,” she said.

Industrial Policy

She also highlighted an increase in industrial policy actions worldwide last year, citing an analysis that shows more than 2,500 interventions. China, the European Union and the US account for almost half of the total, she said.

“There is a need for caution” in such measures, Georgieva said. But she added that there’s a case for industrial policy to help address market failures, like encouraging innovations that tackle climate change.

Trade tensions have risen in recent months as the US and Europe criticize China for adopting what they call unfair policies to promote industries including electric vehicles, arguing the result is overcapacity that distorts global prices. China has pushed back, saying the current output of green industries is far from meeting demand, and vowing to rely on markets to remove overcapacity where it exists.

The IMF chief also warned that there’s a growing divergence within and across country groups, with the US economy rebounding strongly while Europe has a more gradual recovery.

Low-income countries suffered the most severe scarring effect from the pandemic, and fragile and conflict-affected economies are bearing the heaviest burden, she said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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IMF faces push to cut billions in fees for large borrowers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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For years, the International Monetary Fund has collected billions of dollars in fees from its biggest borrowers, a practice that penalized those most in need. Now, with its coffers refilling and interest rates running high, the world’s lender of last resort is considering giving them a break.

The IMF released a statement last week saying that “a number” of its board members were open to reviewing policies around surcharges, the fees that it charges nations that borrow more than their allotted share or take longer to repay. The rates have climbed above 8% on some loans, with the burden carried by a handful of countries including Argentina, Egypt and Ukraine topping $6 billion.

Brazil President Luiz Inacio Lula da Silva, as host of the Group of 20 this year, promised to make it a top issue amid his calls to reform the international financial system. Representative Chuy Garcia, an Illinois Democrat, plans to reintroduce legislation from 2022 directing the Treasury Department to support a review and end of surcharges, his office said Tuesday.

The IMF describes the fees as a necessary part of its financial model, meant to discourage borrowing too much or taking too long to repay. Borrowers and their supporters say they drain resources needed for essentials such as food and healthcare, and are increasingly punitive given faster inflation and higher interest rates.

The board plans another meeting on the topic in June, according to people familiar with the process who asked not to be identified discussing internal deliberations. It’s still not clear how many board members support the idea of cutting the fees.

“In this perfect storm situation, it’s particularly egregious to be facing these surcharges,” said Michael Galant of the Center for Economic and Policy Research, a progressive think tank that supports surcharge relief. He said the extra charges make loans from other sources, including China, more attractive and risk diluting the fund’s influence.

The fees have been around for years, but higher global interest rates, particularly from the Federal Reserve and European Central Bank, mean that the total rate on some loans from the IMF is now more than 8%. That’s double the level before the Covid-19 pandemic.

As well, the number of countries paying the fees has risen. Twenty-two nations are currently pay surcharges, up from eight in 2019 as the economic and political risks of the post-pandemic world have pushed the IMF’s lending to a near-record $150 billion to almost 100 countries. Fund data compiled by CEPR indicate that 40% of nations that need to repay the fund in the next five years are paying the fees.

The IMF board’s discussion of surcharges came as part of a review of its precautionary balances, the money the fund keeps in store to protect against possible losses. The IMF is on track to hit its target of $33 billion (25 billion SDR) in precautionary balances by the end of this month, ahead of schedule.

The fund’s executive board will start looking into the surcharge issue this summer, which “may present options for possible changes” and will take into account the implications for borrowers and the fund’s risk management, the IMF said in a response to questions. A change to the policy would require 70% of the board’s voting power to approve.

In the fund’s 2022 discussions on precautionary balances, a number of directors didn’t see merit in exploring changes to the policy, noting that the average cost of borrowing for the IMF at that time was well below market rates.

The US, the IMF’s biggest shareholder, has signaled a willingness to reconsider the issue. Treasury Under Secretary for International Affairs Jay Shambaugh said in a speech in September that the Biden administration was open to new approaches that help countries while protecting the IMF’s balance sheet and incentivizing repayment.

“The countries most in need of resources for development usually are those most penalized,” Mauricio Carvalho Lyrio, the Brazilian ambassador managing the G-20 agenda this year, said in an interview last month. He added that the IMF should set up a framework that’s “conducive for poor countries to have access to better and bigger resources.”

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘Consistently inaccurate’: Former CEA Krishnamurthy Subramanian criticises IMF over India growth numbers

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Krishnamurthy Subramanian, Executive Director at the International Monetary Fund (IMF), on Saturday said that the global body’s GDP growth forecasts for India under his tenure have been ‘consistently inaccurate’.

His statement came after the IMF distanced itself from Subramanian‘s 8% growth projection for India, with its spokesperson Julie Kozack stating that Subramanian’s remarks did not represent the views of the IMF and were in his role as the country’s representative at the global body.

Post IMF’s clarification, Subramanian on X said, “During my tenure at @IMFNews (since Nov-22), IMF staff’s estimate of India’s growth rate has been consistently INACCURATE. While India’s growth has been >7%, IMF staff estimates have all been <7%. In contrast, I’ve made accurate predictions.”

To back his comments, Subramanian went on to highlight a few predictions made in the past.

“See my Sep-21 prediction – Expect more than 7% growth for India this decade: CEA Subramanian (https://tinyurl.com/56dpsh3b). And actual growth FY21-22=9.7%; FY22-23=7.0%; FY23-24 (estimate)=7.6%. The Data speaks! In contrast, check IMF staff predictions. For FY 23-24, in Nov-22 and Jan-23, IMF staff predicted growth=6.1%. In Apr-23, they lowered it to 5.9%. In Nov-23, they predicted 6.3%. And actual growth estimate (NSSO) for FY23-24 =7.6%; IMO, will be revised to ~8%.”

He stated that the IMF staff’s error margins are ‘huge’.

“So, IMF staff’s error margins are HUGE: 1.9% in Nov-22 & Jan-23 estimates, 2.1% in Apr-23 estimates, and 1.7% in Nov-23 estimates. Similarly, even FY23-24 growth estimates of IMF staff <7%. Data clearly shows whose prediction is more accurate! Need I say more?”

During my tenure at @IMFNews (since Nov-22), IMF staff’s estimate of India’s growth rate has been consistently INACCURATE. While India’s growth has been >7%, IMF staff estimates have all been <7%. In contrast, I’ve made accurate predictions. See my Sep-21 prediction – Expect more… https://t.co/ih1jDDVdk1

— Prof. Krishnamurthy V Subramanian (@SubramanianKri) April 6, 2024

At an event in the national capital on March 28, Subramanian said the Indian economy could grow at 8% till 2047 if the nation redoubles the good policies that it has implemented in the last 10 years and accelerate reforms.

“So, the basic idea is that with the kind of growth that India has registered in the last 10 years if we can redouble the good policies that we have implemented over the last 10 years and accelerate the reforms, then India can grow at 8% from here on till 2047,” PTI quoted him as saying.

When asked about his statement, IMF spokesperson Julie Kozack told media in Washington, “The views conveyed …by Subramanian were in his role as India’s representative at the IMF”.

Kozack highlighted that the Executive Board of IMF comprises executive directors who are representatives of countries or groups of countries.

“And that’s distinct, of course, from the work of the IMF staff,” Kozack added.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow