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India interest rate impeding growth goals, says committee member

India interest rate impeding growth goals, says committee member

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India interest rate impeding growth goals, says committee member

A high real interest rate in India could prevent private investments from picking up and hold the country back from achieving its true growth potential, an external member of the monetary policy committee said on Friday.

Professor Jayant Varma, who was the sole dissenter at the February monetary policy meeting when the MPC held rates steady at 6.50 per cent, voted for the repo rate to be cut by 25 basis points.

“India’s growth is robust when compared to the rest of the world, but not when compared to our potential or to our aspirations,” Varma said in an interview.

“When 4.25pc average growth rate since the pandemic is touted as robust growth rate, that reflects a grave lack of confidence in India’s growth potential. I do not subscribe to this growth pessimism.”

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The Indian economy is expected to expand 7.3pc in the current fiscal year ending March and the central bank has projected growth of 7pc in 2024-25, in line with the government forecast.

Varma said the potential growth rate of the economy is at least 8pc – based on all the reforms and infrastructure investment in recent years and there is still some growth required to close the post-pandemic output gap.

The rationale cited by other MPC members for status quo on rates was to ensure inflation reaches the target of 4pc on a durable basis with supply chain disruptions and food price shocks still a risk amid the continued geopolitical tensions.

“I am somewhat more optimistic about disinflation than the rest of the MPC, but that is not the main point of my dissent,” Varma said.

“My point is that the MPC’s own projections of 4.5pc for 2024-25 (on inflation) with risks evenly balanced do not warrant a repo rate of 6.5pc.”

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India’s annual retail inflation rate touched a three-month low of 5.10pc in January versus December’s 5.69pc.

Separately, Varma said the overnight cash rate breaching the monetary policy corridor represents serious frictions, if not a failure in monetary policy transmission. “It is good that this failure is now being corrected.” 

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Georgieva to lead IMF for five more years, says Pakistan lining up for a new deal

Notes Islamabad successfully completing SBA, but very important issues needs to be solved

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Notes Islamabad successfully completing SBA, but very important issues needs to be solved

The International Monetary Fund (IMF) Executive Board confirmed Friday that it had reappointed Kristalina Georgieva to serve for a second five-year term at the helm of the international financial institution.

It means that Georgieva, who was the sole candidate in the running to lead the IMF, will continue in office when her current term ends on September 30, 2024.

The decision was taken by consensus, the IMF said in a statement confirming the board’s decision.

“I am deeply grateful for the trust and support of the Fund’s Executive Board, representing our 190 members, and honoured to continue to lead the IMF as Managing Director,” Georgieva said in a statement.

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“I look forward to continue serving our membership, together with the highly professional and committed staff of the IMF,” she added.

Georgieva, a 70-year-old Bulgarian, has run the IMF since 2019, and told AFP last month that she was making herself “available to serve, if people want me to serve.”

During her tenure, the IMF has helped countries facing financial difficulties during the coronavirus pandemic as well as the havoc wrought by Russia’s invasion of Ukraine, especially in Europe.

Under a controversial, decades-old agreement between Europe and the United States, the IMF has historically been led by a European, and the World Bank by a US citizen.

This arrangement was reaffirmed last year when the Biden administration nominated Ajay Banga, an Indian-born, naturalized US citizen, to run the World Bank, which sits just across the street from the IMF in Washington.

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Georgieva faced allegations in 2021 – which she strongly denied – that she had been involved in amending a popular World Bank business report in order to favour China when she worked at the development lender.

But after reviewing the World Bank report into the incident, the IMF Executive Board dismissed the allegations and reaffirmed its confidence in Georgieva, allowing her to remain in post.

The announcement means that next week’s IMF and World Bank meetings of the world’s financial leaders in Washington can proceed without a distracting battle over the future of the Fund running in the background.

POTENTIAL FOLLOW-UP LOAN PROGRAMME

Pakistan is in discussions with the IMF on a potential follow-up programme to its nine-month, $3 billion stand-by arrangement, Georgieva said, adding that it had important issues to solve.

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Georgieva told an event at the Atlantic Council think tank, that Pakistan was successfully completing its existing programme with the IMF and its economy was performing somewhat better, with reserves now being built up.

“There is a commitment to continue on this path, and the country is turning to the Fund for potentially having a follow-up program,” Georgieva said, flagging issues that the struggling South Asian nation still needed to address.

“There are very important issues to be solved in Pakistan: the tax base, how the richer part of society contributes to the economy, the way public spending is being directed and of course, creating … a more transparent environment.”

Pakistan and the IMF last month reached a staff-level agreement on the second and last review of the $3 billion stand-by arrangement (SBA), which, if cleared by the global lender’s board, will release about $1.1 billion to the struggling South Asian nation. The IMF’s board is expected to review the matter in late April, but no firm date has been set, a spokesperson said.

Both sides have also spoken about negotiating a longer-term bailout and continuing with necessary policy reforms to rein in deficits, build up reserves and manage soaring debt servicing.

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Canada housing crisis: Trudeau to lease govt land for adding millions of houses

Canada housing crisis: Trudeau to lease govt land for adding millions of houses

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Canada housing crisis: Trudeau to lease govt land for adding millions of houses

Canada plans to ease a housing shortage by leasing public land to developers for construction of affordable houses under a plan unveiled by Prime Minister Justin Trudeau on Friday that aims to build nearly 3.9 million houses by 2031.

The government said the land is underutilized. The property could potentially include abandoned industrial parks, sites of defunct government companies and schools with low enrolment.

The plan still falls 1.2 million units short of what is needed from 2023 to 2030, according to national housing agency Canada Mortgage and Housing Corp.

The Liberal government has announced a series of measures to address the housing crisis over the past two weeks, and the issue is expected to dominate next week’s federal budget.

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The flurry of activity follows a surge in housing and rental prices that has caused Trudeau’s Liberals to lag the Conservatives in opinion polls before an election that must be held by October 2025.

Read more: No more dreams as rich-poor divide widening at frightening pace

“It is a plan that is actually going to make a difference in the lives of Canadians,” Trudeau told reporters in Vaughan, Ontario.

Housing Minister Sean Fraser said other new measures include changes to a capital-cost tax structure that will encourage institutional builders to construct more homes, proposals to extend low-cost loans and combating on mortgage fraud that artificially inflates the cost of houses.

Mike Moffatt of the Task Force for Housing and Climate, an independent think tank, said builders and other stakeholders would need to invest close to C$2 trillion ($1.5 trillion) to achieve the government’s 3.9 million homes target.

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Read more: How to provide affordable housing? Here is one of the steps that all govts can take

“We are going to need to see more on the math, and we will need to see more on (the cost) in the budget. But I think overall we have seen some pretty significant reforms in today’s package,” he told the Canadian Broadcasting Corp.

Rapid growth in Canada’s immigrant population has driven the housing shortage along with inflation and high interest rates.

Housing in Canada is largely the responsibility of the 10 provinces and major municipalities. Ottawa, which has no direct role in construction, relies on policy measures and funding.

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Pakistan repays $1bn in Eurobonds, as Aurangzeb heads to US for IMF deal

Pakistan repays $1bn in Eurobonds, as Aurangzeb heads to US for IMF deal

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Pakistan repays $1bn in Eurobonds, as Aurangzeb heads to US for IMF deal

Pakistan’s central bank has repaid $1 billion in Eurobonds, it said on Saturday, a scheduled payment ahead of the South Asian nation seeking a long-term bailout from the International Monetary Fund (IMF).

The bond, launched in 2014 and repaid on Friday, was maturing this month.

“The payment was made to the agent bank for onward distribution to the bond holders,” the central bank said in a statement.
Islamabad has been struggling with a balance of payments crisis, record inflation and steep currency devaluation since an IMF standby arrangement averted a sovereign default.

Finance Minister Muhammad Aurangzeb is due to leave on Sunday for Washington to attend the IMF-World Bank spring meeting, where he will start negotiations for Pakistan’s 24th long-term IMF bailout.

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Read more: Georgieva to lead IMF for five more years, says Pakistan lining up for a new deal

Aurangzeb briefed Prime Minister Shehbaz Sharif about the new IMF programme on Friday, the government said in a statement.

The IMF stand-by arrangement of $3 billion Islamabad secured last summer expired on Thursday. Its final tranche of $1.1 billion is expected to be released after the multilateral lender’s board meets later this month.

The two sides have spoken in recent weeks about negotiating the longer-term bailout to continue with necessary policy reforms to rein in deficits, build up reserves and manage soaring debt servicing.

Pakistan is in discussions with the IMF for a potential follow-up programme, the IMF chief Kristalina Georgieva said on Thursday.

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