In next report IMF may report lower global growth

Policy makers in the world's biggest economies have failed to steer them out of the worst slow-growth rut they have experienced in almost three decades. The IMF warned leaders that the outlook could be for even slower global growth.

The G20 countries are to meet later this week in China. The IMF warns that urgent action is needed to help revive weak trade and investment levels. Protectionism is also rising resulting a trend that will result in less trade. The G20 or Group of Twenty, is an international forum where government officials and central bank governors, study, review, and discuss policy issues dealing with the promotion of international financial stability. It was founded in 1999.

Christine Lagarde, the managing director of the International Monetary Fund (IMF) said:“The political pendulum threatens to swing against economic openness, and without forceful policy actions, the world could suffer from disappointing growth for a long time. High frequency data points to softer growth this year.” If the IMF does downgrade economic growth again, it could make 2016 growth the lowest since the 2009 fiscal crisis.

Global markets were roiled by the Brexit vote to have the U.K. leave the EU. But the effect was not lasting. Rather, it is meager output, low inflation and slowing trade, that is indicating a slower global growth rate than the 3.1 percent growth forecast by the IMF for July.

U.S. growth, while positive, is not that high, weighed down by a strong dollar causing weak exports. The IMF said it would downgrade its next forecast of US growth from the 2.2. percent forecast this July. European economies are still struggling after the financial crisis. Japan has been unable to stimulate growth and is even flirting with recession. China's slowdown and the drop in commodity prices have hurt many emerging markets such as Brazil and Russia, both coping with contractions lasting two years. Nigeria is now in recession. Many commodity exporters are seeking assistance from the World Bank and the IMF as their debts and deficits rise.

Most central banks are keeping interest rates at near zero but this has not resulted in much increase in investment or growth. The IMF worried that the outlook for slower growth could result in further disincentives to investment and exports leading to even less demand. Flat income growth for many wage earners would also lead to less demand but also a movement against globalization and free trade.

The IMF said:“These developments threaten to open another negative dynamic, in which political action fails to deliver the structural reforms needed to lift growth and instead turns toward inward-looking assaults on free trade.” The IMF has already reduced its global growth forecast for this year from 4.6 percent to 3.1 percent. The IMF said a global stimulus program is necessary to stave off an even worse decline in production. Lagarde said:“Inaction risks reversing global economic integration, and therefore stalling an engine that, for decades, has created and spread wealth around the globe. This risk is, in my view, too large to take.” However, US Treasury Secretary Jacob Lew said: “We certainly are not seeing a global recession like we did in 2008, but I think that the macroeconomic policies have failed to take advantage of the opportunity to have a more robust period of growth.”

Commenting on the situation after the Brexit vote Lagarde said:"You could argue that Brexit is not really delivering the massive crisis that we had expected, you could argue that the Chinese transition is proceeding reasonably well, and you could argue that low commodity prices have gone up a little bit. So this is on the surface. However, when you look deep down at the economic growth prospects, at the growth potential, at the productivity, we are not getting very good signals, and we will probably be revising down our forecast for growth in 2016."Lagarde said that the full impact of the Brexit vote would not be known until next year. She noted, however, that the pound's value had already declined by 15 percent. The IMF is scheduled to issue a new forecast in early October just ahead of its annual meeting. If another decline is forecast, it would mark the sixth straight decline in the last 18 months.

Lagarde also pleaded for countries to contribute funds of $5 to $6 billion to support Egypt, which recently negotiated a $12 billion dollar loan from the IMF. Lagarde said that she was encouraged by Greece's recent privatization moves but still would not participate in the bailout: "We are not party to the program because I have said repeatedly that the program has to walk on two legs. One, there has to be significant reforms and second there has to be a debt that is sustainable by our standards and our measurements and this at this point in time is not the case."

Lagarde faces an upcoming trial in France regarding a $448 million payout to French businessman Bernard Tapie. She said the trial would not interfere with her management of the IMF. In July, France's highest appeal court ruled Lagarde must stand trial for negligence in the use of public funds for her role in seeking an out-of-court arbitration settlement for Tapie in 2008 when she was the French Minister of Finance. The IMF board has expressed confidence in Lagarde's ability to lead the IMF. Lagarde said: "I draw a lot of strength and determination from the very strong support from the board,. And I rely on good and solid lawyers who have to do their jobs, so it's not a distraction for me. I focus my energy and time on the mission of the IMF and what I have to do to serve that mission."

Greece made payment to IMF on time but cash shortage remains

The Managing Director of the International Monetary Fund(IMF), Christine Lagarde, has confirmed that the Greek government made a 459 million euro payment due on April 9.

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Lagarde was confirming a statement by a source in the Greek finance ministry that the payment had been ordered. The crucial payment will help Greece move closer to receiving more funds from an extended bailout loan that will help Greece stay in the euro zone. The Greek government had threatened not to make the payment on time if it would not be able to pay pensions and a government payroll a few days later. Greece will still need to make interest payments of 400 million euros and roll over 2.4 billion euros in short-term treasury bills on April 14 and 17. Even yesterday, Greece issued 1.14 billion euros in six month term treasury bills. The Greek unemployment rate declined marginally in January to 25.7 percent in January versus 25.9 percent the previous month. After a long recession, the Greek economy grew 0.7 percent last year.

In his recent meeting with Russian president Vladimir Putin, Greek Prime Minister Alexis Tsipras did not request any economic aid. Putin suggested Russia might provide credits for large scale joint projects in the future. He said:"The Greek side has not addressed us with any requests for aid, We discussed cooperation in various sectors of the economy, including the possibility of developing major energy projects."

The recent list of reforms presented by the Greek government to its creditors is not regarded as enough by Greece's creditors. Euro zone deputy finance ministers have given Greece six working days to come up with revised reform proposals in order to allow a deal to be reached on April 24 at a Eurogroup meeting in Riga, Latvia. The earlier reform list was regarded as too optimistic about revenue projection and did not deal adequately with pensions and labor market reform. On these latter issues the Eurogroup demands are at odds with the promises of Syriza during their election campaign.

While the IMF payment may provide a short term sense of relief, Greece's top banks including the National Bank of Greece are bracing for a continuing battle as more payments become due. Reports indicate that a default and Grexit or exit from the euro zone, could create even more hardships for the Greeks and problems for the Greek economy. Even if Greece does get the remainder of the funds in this bailout extension after the meeting on April 24, within two months it will need more funds to cover its debt. The Greek government says it does not want another bailout but it is not clear how this can be avoided.

Egypt seeks IMF loan

In 2011 Egypt rejected a loan from the IMF. The government is now asking for more than $3 billion U.S. from the International Monetary Fund. Egypt asked for a loan earlier this year but the deal fell through.

On Wednesday August 22nd Christine Lagarde, IMF head, met Egyptian Prime Minister Hisham Qandi and President Mohammed Mursi. Lagarde stressed the need for a reform program to solve the economic crisis in the country. Egypt is seeking a loan now from the IMF after claiming in June 2011 that it did not need one.

The prime minister Qandi said:

“The loan in general terms is worth 3.2 billion U.S. dollars. We talked about increasing it up to probably 4.8 and maybe more.”

Lagarde said the amount of the loan had not been settled. Qandi said that Egypt hoped to sign a deal by the end of 2012. The interest rate would be 1.1% and would be payable over five years with a 39 month grace period. Qandi continued:

“This high level visit by the IMF which comes very quickly after new government formation sends a positive message not only to Egypt but to the whole world that Egypt is stable and the Egyptian economy is headed for recovery. We will agree on a timeline and road map that will see a loan agreement signed by November or early December. The government has decided to seek foreign borrowing and the IMF conditions are acceptable to us,”

In spite of the fact that the Islamist Freedom and Justice Party had earlier rejected an economic program associated with an earlier loan of $3.2 billion it appears to welcome this loan. Quandi claims that Egypt will have final say as to how the money will be spent.

A presidential spokesperson praised the IMF and said that a democratic transition would need the support of international institutions such as the IMF. Yasser Ali the spokesperson said that the IMF was not just a funding institution but also encouraged investor confidence in the economy and foreign investment. The conditions for the loan will be discussed in later negotiations. Quite often the conditions are those promoting the global neoliberal agenda including selling off state assets, removal of state subsidies, and cutting back on entitlement programs.

Lagarde naturally put a positive spin on everything saying that the IMF would be Egypt's partner in a journey to restore stability, boost investor confidence, and create jobs. However she also warned that fiscal, monetary, and structural reforms would require determination and political courage. Many of these reforms will be politically unpopular and may help boost opposition parties in the polls.

Leftist protesters massed near the headquarters of the cabinet to protest Lagarde's visit. They condemned the IMF conditions for loans that the protesters claimed benefit only businessmen. They blame the IMF and the World Bank for privatization programs that were carried out under the Mubarak regime. No doubt there will be more of the same. Mursi's economic views are basically neo-liberal and for that reason he is supported by a number of U.S. officials and others in spite of his Islamist views and links to the Muslim Brotherhood.

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Top economist criticizes IMF as he submits resignation

     Peter Doyle a top economist who worked at the IMF (International Monetary Fund) for 20 years has resigned. His resignation letter is short and sour. He said that the leadership was "tainted" and that he was "ashamed" to have worked at the organization.
    Doyle speaks of  "incompetence", "failings" and "disastrous " appointments of directors stretching back over a decade. No one from the IMF has yet commented on Doyle's resignation or his criticism of the Fund.
   Doyle was adviser to the European Department. That department controls bailout programs for Greece, Portugal and Ireland. Doyle believes that the IMF failed to warn about the urgency of  Europe's financial problems and the global financial crisis.
   The IMF itself  had also made criticisms on this score but in much milder language! Doyle suggests that the warnings that were issued were not sustained and often suppressed.
    Doyle's view that the leadership was tainted is not a personal attack on any specific director but an attack on the agreement between Europe and the U.S. that the head of the IMF will be a European and of the World Bank an American.  There is really no open process in the selection of the leader. For a top employee of  the IMF Doyle's language is surprising.
   Doyle says:"Even the current incumbent [Christine Lagarde] is tainted, as neither her gender, integrity, or elan can make up for the fundamental illegitimacy of the selection process.": "There are good salty people here. But this one is moving on. You might want to take care not to lose the others." Although the IMF could not be reached for comment by the BBC, CNN in the U.S. reports that a spokesperson for the IMF claims that there is nothing to substantiate Doyle's allegations.
   The spokesperson mentioned that the IMF itself  had its own investigations into its work on the financial crisis. Of course Doyle noted this but claimed that the warnings were not sustained and often even suppressed. Doyle's criticism of the selection process can hardly be said to be baseless. The criticism is quite correct. Indeed in the latest selection of the World Bank president the process was opened somewhat due to the type of criticism Doyle made. However, the result was the same in that an American ended up as head of the Bank. For more see this article.  More on the IMF can be found here.

IMF to lower global growth forecast

   Christine Lagarde the International Monetary Fund (IMF) Managing Director said that the IMF would be lowering its global growth projection of 3.5 per cent. Lagarde said: ­“The global growth outlook will be somewhat less than we anticipated just three months ago,”. “Many indicators of economic activity – investment, employment, and manufacturing – have deteriorated. And not just in Europe or the United States.” 
   Brazil, China, Russia, and India are also witnessing slower economic growth. The IMF will issue a revised outlook by July 16. In January the IMF revised the growth rate upwards from 3.3. per cent to 3.5 per cent and from 3.9 to 4.1 for 2013.
   Shortly before Lagarde's announcement the ECB and Chinese Central Bank lowered interest rates to stimulate the economy. Lagarde also said that there should be a fiscal union in Europe. She said. “.. they’re heading in a new direction together and that’s a clear sign that things are changing.”  The EU leaders agreed that there could be direct lending to banks rather than going through the governments of each country. For more see this article.

IMF head Christine Lagarde pays no taxes while critical of tax evaders

Christine Largarde angered Greeks by suggesting they should pay their taxes. While Greeks are reputed to be skilled tax evaders Lagarde herself pays no taxes on her salary and benefits from the International Monetary Fund.

Lagarde's salary is 467,940 dollars per year as head of the IMF but she also receives 83,760 dollars additional in allowances. Lagarde receives more than Barack Obama's salary but he pays taxes on his.

Aricle 34 of the Vienna convention on diplomatic relations says:: "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal." Lagarde is also entitled to a pay raise every July 1st.

Employees of these international agencies also receive dependent allowances, rent subsidies, education grants for children, travel expenses and subsidized medical insurance. Some of the IMF benefits can be traced back to U.S. influence. The IMF was created in 1944 at Bretton Woods. U.S. officials won the argument for higher salaries over British delegates. The famous economist John Maynard Keynes opposed the higher salaries. However, Keynes was well enough off he would not need one! The justification of the higher salaries was to attract talent. For more see this article.