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Pakistan’s new government seeks more IMF assistance
On top of facing legitimacy questions following chaotic, violent elections tainted by widespread undemocratic practices, Pakistan’s new coalition government is inheriting an economy in crisis. These economic problems have been fueled by high energy costs, political dysfunction, flooding, and supply chain issues.
An economy in freefall. Pakistan inflation hovers around a whopping 30%, and its GDP fell 0.6% in 2023, per the World Bank. Meanwhile, Tabadlab, an Islamabad-based think tank, recently warned that the country’s debt is a “raging fire” that’s become unsustainable: Interest payments are eating up roughly 57% of government revenues.
“Unless there are sweeping reforms and dramatic changes to the status quo, Pakistan will continue to sink deeper, headed towards an inevitable default,” Tabadlab’s report said.
What can be done? Pakistan barely avoided debt default last year thanks to the help of a short-term IMF lending agreement, but that’s set to expire in April. The incoming government reportedly plans to pursue a $6 billion loan from the IMF to help it stay afloat. The IMF has signaled it’s open to discussing another arrangement with the new government, but we’ll be watching to see whether Pakistan’s political turmoil becomes an obstacle to securing more funds.
Hard Numbers: Alt-aid for Gaza, 2024 economic outlook, Continent-sized drug racket busted, Stolen bear on the loose
30 million: Canada has made a new pledge to send nearly $30 million in aid to Gaza. The move comes after Canada followed the US lead in cutting funding to UNRWA, the UN relief agency, in light of Israeli accusations that members of the organization had participated in the Oct. 7 attacks. According to the last full year of data, in 2022 Canada gave about $24 million to UNRWA. The new batch of Canadian aid will be delivered by other UN agencies such as UNICEF, the UN Population Fund, and the World Health Organization. (What’s UNRWA and why is it controversial? Read our explainer here.)
1.4: The IMF’s latest forecasts see Canada’s economy expanding by 1.4% this year, good for second place in the G7’s league of wealthy democracies. The top spot goes to the US, which is expected to grow 2.1% in 2024. Behind Canada, France is in third place at 1%.
19: The US this week charged 19 people from the US, Canada, and Mexico with running a pan-North American drug trafficking scheme involving as much as $28 million worth of methamphetamines, cocaine, and fentanyl, destined chiefly for the streets of Canada. A dozen of the suspects have been arrested, and the others remain at large.
500: Speaking of criminals at large, Canadians, please keep an eye out for anyone trying to sell you a 500-pound taxidermied polar bear. You can’t miss it: It’s 12 feet tall and frozen forever in a “scary roaring bear” pose. Again, it weighs 500 pounds. It was stolen from a resort in Edmonton last month in a rash of taxidermy heists valued at more than $25,000.Hard Numbers: Trump lashes out at judge, PNG emergency, Khan’s cricket bat returns, Argentina gets IMF cash, Belichick leaves Patriots
370 million: Former President Donald Trump, during the final day of his civil fraud trial in New York City on Thursday, accused the judge, Arthur Engoron, of having his “own agenda.” In closing arguments, Attorney General Letitia James and her team said Trump’s company issued false and inflated financial statements from 2011-2021. She is asking for nearly $370 million in penalties and a lifetime ban against Trump from the Empire State’s real estate industry. Engoron, who endured a bomb threat at his house in the suburbs early Thursday, said he hopes to issue a ruling by Jan. 31.
14: Papua New Guinea has declared a 14-day state of emergency after at least 15 people were killed in rioting in the Pacific Island nation’s two largest cities, Port Moresby and Lae. The violence kicked off after police went on strike Wednesday over their paychecks being chopped by as much as half. The government attributed it to an administrative glitch and said it would be corrected. But amid high unemployment and rising costs, that failed to ease tensions.
2: Pakistan’s Peshawar High Court reinstated the electoral symbol – a cricket bat – of former Prime Minister Imran Khan’s political party, Tehreek-e-Insaf, ahead of general elections on Feb. 8. The two-member bench at Khyber-Pakhtunkhwa decided that the Election Commission of Pakistan acted illegally when it stripped the party of its symbol last month. Khan, imprisoned on graft charges, is a popular politician and former cricket star. Meanwhile, a local leader from Khan’s party, Shah Khalid, was shot dead in the same northwestern province on Thursday.
4.7: The International Monetary Fund is granting Argentina access to $4.7 billion as part of a debt restructuring plan. The loan is a lifeline for newly installed President Javier Milei, who’s battling annual inflation that has topped an eye-watering 160%. It also comes just ahead of Argentina’s Feb. 1 deadline for a $2.7 billion repayment to the IMF for an earlier outlay.
24: After 24 years and six Super Bowl titles, Bill Belichick is stepping aside as coach of the New England Patriots. While Belichick had one year remaining on his contract, Robert Kraft, the team’s owner, said they mutually agreed on his departure. “What Bill accomplished, in my opinion, will never be duplicated,” Kraft said of Belichick, who’s expected to look for coaching opportunities elsewhere. Meanwhile, Nick Saban, head football coach at the University of Alabama, has announced his retirement after 17 seasons.
Chainsaw cuts path to new Argentina-IMF deal
Argentine President Javier Milei’s dramatic spending cuts have provoked protests at home, but they’ve won him plaudits from abroad. On Thursday, an IMF delegation lands in Buenos Aires, reportedly to restart a $44 billion bailout program for the crisis-wracked country.
The eccentric, “anarcho-capitalist” Milei, who at times campaigned wielding a chainsaw, promised to slash spending to address an economic crisis that has driven inflation above 150% and plunged almost half of the population into poverty.
Since taking office, he’s halved the number of government ministries, devalued the currency by more than 50%, and deregulated dozens of industries. He’s now asking Congress for another 600 changes that would filet government regulations, expand presidential powers, and crack down on protests.
The IMF, which suspended its lending to Argentina last August after the previous government missed key reform targets, says his actions to date are “bold.” A fresh deal would unlock about $3 billion more in assistance, and not a moment too soon: Argentina owes the fund roughly that amount over the next two months.
The bigger question: Milei’s party has few seats in a largely hostile Congress – his power comes from a popular mandate for change. Keeping that mandate – which he will need to continue his one-man radical reform program – will require him to show, soon, that the economic shock and pain he is inflicting on society is worth it. The clock is ticking.
IMF expects real GDP growth in the G7
The title of the IMF’s new World Economic Outlook says it all: “Navigating Global Divergences.” The organization expects Canada’s real GDP to grow by 1.6% next year, followed by the US at 1.5%. Both countries are ahead of the expected Euro area average of 1.2% and the advanced economy average of 1.4%. Meanwhile, the United Kingdom is expected to manage a paltry 0.6% percent, up from 0.5 in 2023, as it faces pandemic fallout and the lingering effects of Brexit.
Developing states, meanwhile, are expected to post higher growth than their advanced economy counterparts, with China looking at 4.2% and India at 6.3%. The developing and emerging economies group is looking at 4% growth in 2024, consistent with its numbers from the last two years.
The takeaway? The IMF is projecting low and slow growth throughout much of the world and “little margin for policy error.” That’s going to have politicians and civil servants on edge, particularly as geopolitical crises intensify. That’s the bad news. The good news is that these numbers suggest the odds of a soft landing are up, and slow growth is better than a recession.
Staving off default: How unsustainable debt is threatening human progress
Three-fifths of the world's lowest income countries are debt distressed and in danger of default. Navid Hanif, assistant secretary-general for economic development at the United Nations, tells GZERO's Tony Maciulis that we need to make debt more sustainable by restructuring it. Hanif believes multilateral development banks, such as the World Bank, should offer affordable longer-term loans with lower interest rates to allow least developed countries better opportunities to deal with crises like climate change, poverty, and educating children.
During a conversation at the World Bank/IMF spring meetings in Washington, DC, Hanif explains how a financial divide will eventually become a development divide, which is not good for the world. He explains the urgency of the growing debt problem.
However, Hanif also expresses optimism about the potential for progress coming after years of the pandemic, citing the growth in people gaining access to the internet and a renewed commitment to climate goals.
The world "is more coupled than we think"
Rania Al-Mashat, the Egyptian Minister of International Cooperation, tells GZERO's Tony Maciulis that the pandemic taught us how interconnected we truly are; no one nation can solve a problem as big as climate change, food insecurity, or geopolitical strife on its own. Al-Mashat makes the case for looking beyond the short term problems of inflation and toward longer-term solutions for the most pressing issues of our time.
In a conversation at the World Bank/IMF spring meetings in Washington, DC, she explains the key outcomes of last year's UN Climate Conference COP27, held in her home country, and what the road ahead looks like for climate financing and confronting the looming sovereign debt crisis.
Al-Mashat also states that in the coming months we will learn the new framework and path forward for the World Bank and IMF, institutions whose models have been both challenged and criticized during this historic period of global crises.
Hard Numbers: Environmentalists targeted, World Bank outlook improves, mass shooting in Louisville, fiery cocktails in Northern Ireland, Winnie-the-Pooh gets punched
24: This year alone, at least two dozen environmental activists have already been murdered or disappeared in Mexico and Central America, according to an investigation by The Guardian. Many are from indigenous communities protesting against mining activities on their traditional lands.
2: Outgoing World Bank President David Malpass revised the international lender’s 2023 global growth outlook on Monday, bumping it from 1.7% to 2%. He credited China’s improved economic trajectory for the change. Malpass, who plans to step down in June, kicked off his final World Bank/IMF Spring Meetings with the news.
145: The mass shooting at a bank in Louisville, Kentucky, on Monday was at least the 145th incident of its kind in the United States since the start of this year, according to the Gun Violence Archive. Five people – including a close friend of the state governor – were killed and nine injured when a disgruntled bank employee opened fire.
4: On the eve of President Biden’s trip to Northern Ireland to celebrate the 25th anniversary of the Good Friday Agreement, at least four men were spotted hurling petrol bombs at police. The incident occurred during a parade organized by people who oppose the agreement, which ended decades of conflict between Irish nationalists and the British government. For more on the contentious history, read our primer here.
300: A wildly popular new patch worn by Taiwanese fighter pilots shows a native Formosan black bear punching Winnie-the-Pooh – a common satirical stand-in for Chinese president Xi Jinping – in the face. The patch has been around for a year, but orders blew up this weekend after China conducted its mock invasion of Taiwan. A little e-commerce research shows that you too can own one of these patches for a mere 300 NT$ (about US $9.60).