logo
Tariffs aren't answer to imbalances: IMF

Tariffs aren't answer to imbalances: IMF

Express Tribune3 days ago
Listen to article
Global current account balances widened sharply in 2024, reversing a narrowing under way since the global financial crisis of 2008-2009, the International Monetary Fund (IMF) said on Tuesday, warning that tariffs were not the answer.
In its annual External Sector Report, which assesses imbalances in the 30 largest economies, the IMF noted that external surpluses or deficits were not necessarily a problem but could cause risks if they became excessive.
It said prolonged domestic imbalances, continued fiscal policy uncertainty, and escalating trade tensions could deteriorate global risk sentiment and elevate financial stress, hurting both debtor and creditor nations.
The report took aim at US President Donald Trump's imposition of higher import tariffs against nearly every trading partner, which his administration says is aimed at increasing revenues and righting longstanding trade deficits.
"A further escalation of the trade war would have significant macroeconomic effects," it said, noting that higher tariffs would reduce global demand in the short term and add to inflationary pressures through rising import prices.
Rising geopolitical tensions could also trigger shifts in the international monetary system (IMS), which in turn could undermine financial stability, it said.
This year's report, based on 2024 data, showed the widening of global current account balances was due largely to increased excess balances in the world's three largest economies – the US, China and the euro area.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Nikkei falls as traders lock in gains after rally
Nikkei falls as traders lock in gains after rally

Business Recorder

time37 minutes ago

  • Business Recorder

Nikkei falls as traders lock in gains after rally

TOKYO: Japan's Nikkei share average dropped on Friday, trimming a weekly advance that brought the index to the brink of a record, as traders locked in gains spurred by a newly inked trade deal with the United States. The Nikkei 225 Index slid 0.9% to close at 41,456.23, trimming its five-day advance to 4.1%. The broader Topix, which hit an all-time high on Thursday, also dropped 0.9%. The trade deal, announced late on Tuesday by US President Donald Trump, reduced a reciprocal tariff on Japanese goods and autos-specific levies to 15% from the 25% Washington had threatened previously. Shares of industrial robot maker Yaskawa Electric dropped 6%, paring a steep three-day advance. Mitsubishi Motors plunged 7.9% after the automaker reported an 84% drop in first-quarter operating profit. The Nikkei's 14-day relative strength index (RSI), a technical measure for an investment momentum, reached 77.8 on Thursday, the highest since the stock gauge hit its all-time high of 41,889.16 in July 2024.

PIDE holds seminar: Country's macro-economic indicators show signs of improvement
PIDE holds seminar: Country's macro-economic indicators show signs of improvement

Business Recorder

time37 minutes ago

  • Business Recorder

PIDE holds seminar: Country's macro-economic indicators show signs of improvement

ISLAMABAD: Economists at a seminar while highlighting key economic challenges of Pakistan have said that the country's macroeconomic indicators have shown signs of improvement, such as declining inflation which is below five percent and a recent upgradation of credit rating by S&P from CCC+ to B-. Speaking at an event organised by Pakistan Institute of Development Economics (PIDE) here on Friday, they, however, emphasised the need to transition from mere stabilisation to robust growth to benefit the common people. The event brought together senior officials from the Ministry of Planning, Development and Special Initiatives, researchers, and economists to engage in a rigorous policy discussion. Speaking on the occasion, Dr Haider Ali explained that the seminar aimed to deliberate on aligning short-term macroeconomic stabilisation efforts with long-term sustainable growth strategies under the URAAN Pakistan framework. URAAN Pakistan is a strategic initiative by the Planning Commission built on the '5Es': Exports, E-Pakistan (digitalization), Environment, Energy, and Equity. Dr Khurram Ejaz presented a comprehensive overview of the current economic context and proposed strategies to move towards a stable growth path under URAAN Pakistan. He noted that Pakistan's economy has faced a multitude of external and internal shocks, including post-pandemic disruptions, the Russia-Ukraine conflict, and the devastating 2022 floods. These factors pushed the country toward fiscal and balance-of-payment crises, culminating in the signing of an Extended Fund Facility (EFF) with the IMF in September 2024. The IMF programme emphasised restoring macroeconomic stability through fiscal tightening, monetary policy, and external sector stabilisation. While it succeeded in curbing inflation and modestly reviving growth estimated at 2.7 percent, it limited the fiscal space for development spending capped at 2.6 percent of GDP. Dr Ejaz contrasted this with the ambitious targets of URAAN Pakistan, which envisions 6 percent GDP growth by 2029 with significantly higher employment generation. He acknowledged a critical financing gap between what is possible under the IMF framework and what URAAN Pakistan aspires to achieve. He proposed following five initial strategies to bridge this gap: (i) repositioning Development Finance Institutions (DFIs) to fulfill their core mandate rather than investing in low-risk securities; (ii) migrating suitable PSDP projects to Public-Private Partnership (PPP) mode to crowd in private capital; (iii) issuing diaspora, green, and SDG-linked bonds to unlock innovative financing; (iv) devolving social sector expenditures to provinces in a phased manner, and (v) reducing losses from state-owned enterprises (SOEs) and monetising non-strategic public assets such as ports under a structured asset recycling programme. Dr Nasir Iqbal questioned the underlying assumption that low growth is due to limited PSDP spending and argued that productivity, export orientation, and youth engagement are more critical to sustained growth than merely increasing public investment. He recommended establishing village-level economic zones, leveraging idle public infrastructure, and simplifying business registration to boost local entrepreneurship. Dr Karim Khan emphasized that IMF programmes and growth are not inherently contradictory and that sustainable growth must be private sector-led. He urged leveraging CPEC Phase-II and capitalising on productive investment avenues. Dr Shujaat Farooq added that governance reform and performance-based budgeting are crucial. He highlighted a disconnect between planning and finance ministries and stressed the need to engage provinces, whose PSDPs now exceed the federal government's in size. Dr Muhammad Zeshan noted the inefficiencies within PSDP allocations and tariff structures that perpetuate rent-seeking and protect low-productivity sectors. He advocated enabling emerging industries such as halal meat exports, seafood, and IT, and preparing for the Fourth Industrial Revolution through digitization, cloud infrastructure, and robotics. Shaaf Najib questioned the long-term impact of PSDP spending, citing studies that showed limited sustainability. He called for improving PSDP efficiency, prioritizing completed projects, and redirecting funds toward sectors with higher fiscal multipliers. Dr Mehmood Khalid appreciated the absence of tax rhetoric in the presentation but criticised the lack of growth diagnostics and the absence of evidence from existing research. He emphasised grounding all strategies within the URAAN Pakistan 5Es and aligning projections with realistic economic modeling. Dr Iftikhar echoed these sentiments, warning against public investment that crowds out private sector liquidity and highlighting inconsistencies in SEZ policies, HEC funding, and NFC allocations. Copyright Business Recorder, 2025

European shares settle lower as investors gauge mixed earnings
European shares settle lower as investors gauge mixed earnings

Business Recorder

timean hour ago

  • Business Recorder

European shares settle lower as investors gauge mixed earnings

FRANKFURT: European shares closed lower on Friday, as investors assessed mixed corporate earnings while awaiting updates on a framework of an EU-US trade deal that officials said could be reached as early as this weekend. Investors navigated the peaks and troughs around a potential agreement between the two large economies after a busy week of trade discussions with the US culminated in deals with Japan, Indonesia, and the Philippines. The pan-European STOXX 600 index dropped 0.6% to session lows after US President Donald Trump said there was less chance of an agreement with the EU, but pared losses after EU diplomats reiterated that a deal of 15% duties on European goods was still in the works. The index last closed 0.2% lower with most regional bourses in red, but on a weekly basis, the STOXX index was on track for modest gains. 'It's hard to spin it as a good deal, but it would at least avoid much higher US tariffs and retaliation from the EU,' said Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics. 'The reported deal with the US would take a major downside risk off the table for now, weakening the case for further interest rate cuts.' Also weighing on stocks were elevated bond yields that got a lift after the European Central Bank's comments on Thursday tempered expectations of imminent interest rate cuts. Meanwhile, corporate earnings were in full swing. Puma was the biggest percentage loser on the benchmark index, falling 16%, its largest daily drop in more than four months. The sportswear brand cut its full-year outlook and reported weaker-than-expected quarterly results. London-listed sports retailer JD Sports slipped 0.7% after Puma's results. On the flip side, LVMH gained 3.9% after the French luxury group reported quarterly results, with analysts pointing to hopes on the horizon as the group said it saw signs of recovery in the Chinese market. The broader luxury index rose 1.8% and was the top sectoral performer. Automobile stocks gained 1.4%, boosted by Volkswagen's 4.6% rise after the CEO of Europe's biggest carmaker said cost cuts must be accelerated in response to tariffs. Earlier in the session, shares took a hit on the company's slashed full-year sales and profit margin forecasts.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store