The Heat: IMF-World Bank Spring Meetings

Summary

The episode of "The Heat" discusses the impact of U.S. tariffs on global trade, featuring interviews with finance ministers from Pakistan and Malaysia. Pakistan's strategy focuses on economic reforms and regional trade opportunities, while Malaysia emphasizes diversifying its economy and strengthening multilateralism. Both countries are looking to reduce dependency on single markets and improve economic resilience through technology and trade diversification.

Highlights

• Pakistan's GDP growth forecast reduced by IMF to 2.6%. 📉
• Pakistan's focus on textile exports and mining opportunities with the US. 👗⛏️
• Malaysia ranks 17th among the largest exporters to the US. 🇲🇾
• Malaysia's focus on semiconductor industry amid global supply chain issues. 💾
• China's involvement in infrastructure development through CPEC is crucial for Pakistan's economic growth. 🚧

Key Takeaways

• Pakistan is focusing on economic reforms and regional trade to counter tariff impacts. 🌐
• Malaysia is enhancing its diversification strategy and pushing for multilateralism. 🏗️
• Both countries are engaging with China for economic growth and support. 🇨🇳
• Technological advancements are helping Pakistan increase tax revenues and economic stability. 📈
• Agricultural and energy reforms are key initiatives for both nations to improve self-reliance. 🌾⚡

Overview

The latest episode of 'The Heat' dives deep into how countries like Pakistan and Malaysia are navigating the choppy waters of global trade, especially amidst U.S. tariff challenges. With insights from finance ministers, the show unravels the layers of strategic reforms and economic shifts both nations are embarking on to build resilience.

Pakistan is sharply focused on fortifying its economy through reforms in taxation, energy, and privatization, aiming to decrease its reliance on the IMF while seeking robust trade partnerships beyond the looming shadow of U.S. tariffs. By engaging with regional markets and technological enhancements, it aspires to stabilize and elevate its economic standing.

Malaysia, on the other hand, is channeling efforts towards diversifying its economy, reducing over-reliance on single markets, and nurturing its competitive edge in the semiconductor industry. Through sustained dialogues and financial maneuvers, it aims to bolster economic resilience while fostering stronger multilateral ties, particularly with China and within the ASEAN region.

Chapters

• 00:00 - 00:30: Introduction and Overview Introduction and Overview: The chapter begins with a discussion on how countries are responding to US tariffs and challenges in global trade. Insight is provided by finance ministers from Pakistan and Malaysia. The conversation is moderated by Arnand Naido, setting the stage for a broader analysis of international trade dynamics.
• 00:30 - 05:00: Impact of US Tariffs and Pakistan's Response The chapter discusses the impact of US tariffs on the global economy, focusing on countries like Pakistan and Malaysia. It mentions the International Monetary Fund (IMF) and World Bank spring meetings, which are taking place amidst this tariff turmoil. The chapter highlights Pakistan's economic challenges, specifically the IMF's lowered GDP growth forecast for Pakistan, projecting a growth rate of 2.6% for the year. The chapter includes an interview with Pakistan's finance minister to delve deeper into these issues.
• 05:00 - 08:00: Pakistan's Economic Reforms and IMF Relationship The chapter starts with a discussion on the perception of tariffs affecting economic relations. It is noted that the average tariff on imports from the U.S. to Pakistan is slightly over 7%, while it's over 10% for exports from Pakistan to the U.S. Therefore, the issue is not seen as tariffs but rather a trade imbalance.
• 08:00 - 14:00: Pakistan's Informal Economy and Digital Solutions Pakistan exports over $5 billion and imports nearly $2 billion, with a trade gap of approximately $3.5 billion. The country's economy can enhance its performance by focusing on procuring high-quality raw materials, such as cotton from the US, for value-added products like garments and bed linens.
• 14:00 - 18:00: Inflation and Economic Outlook in Pakistan The chapter discusses the economic outlook in Pakistan with a focus on inflation and export opportunities. It mentions the value-added export potential in textiles and soybeans. The discussion highlights the need to close economic gaps and notes the Pakistani Prime Minister's intention to engage constructively with the US by sending a high-level delegation.
• 18:00 - 25:30: CPEC and Pakistan-China Relations The chapter explores Pakistan's economic relations, focusing on the trade deficit and Pakistan's standing as the 33rd largest contributor to the US trade deficit. Despite this, the bilateral engagement with the US extends beyond immediate trade concerns, as demonstrated by recent diplomatic visits, such as a US delegation's visit to Islamabad to discuss minerals.
• 25:30 - 30:30: Introduction to Malaysia's Economic Situation The chapter introduces Malaysia's economic situation, highlighting a major mining conference focusing on copper. The conference drew international participation, emphasizing copper's pivotal role in the energy transition. Additionally, it was noted that a major copper project named Ricochet has been declared, and its financial close was announced. The chapter underlines the anticipated global shortage of copper, pointing to its increasing importance.
• 30:30 - 40:30: Malaysia's Economic Diversification and Resilience The chapter discusses Malaysia's strategy for economic diversification and resilience, emphasizing the importance of robust trade relationships and investments. The conversation mentions the interest from the US in minerals and mining sectors, particularly in Pakistan, as part of a broader engagement strategy. This indicates a focus on creating a stable and diversified export market, and highlights the geopolitical considerations involved in international trade relations.
• 40:30 - 48:00: Malaysia-China Relations and Diplomacy The chapter discusses the complexities of Malaysia-China relations, focusing on the stability and opportunities within regional corridors and connectivity amidst global trade uncertainties. Pakistan's engagement with China is highlighted as an example of regional cooperation.

The Heat: IMF-World Bank Spring Meetings Transcription

• 00:00 - 00:30 how are countries dealing with the us tariffs and challenges to global trade we hear from the pakistani and malaysian finance ministers hello i'm arnand naido and this is the heat
• 00:30 - 01:00 this year's imf and world bank spring meetings happen amid the tariff turmoil and the impact it will have on the global economy how are nations which export to the united states like malaysia being affected we will discuss that later in the show with the country's finance minister second but first pakistan the international monetary fund lowered pakistan's gdp growth forecast to 2.6% this year i sat down with the pakistani finance minister
• 01:00 - 01:30 and started the interview by asking about the effect of the tariffs from where our perspective i i believe it's less about tariffs because if i look at the weighted average tariff of uh uh imports us imports into pakistan it's a little over 7% exports from pakistan into the us it's a little over 10% so i i don't think that's an issue but as you've looked at the formula it's really the imbalance on the on the trade
• 01:30 - 02:00 side so we export a little over $5 billion we import uh close to about $2 billion so the the gap is sort of uh three three half uh billion dollars or in that range now we can uh do more in terms of what we already doing so we do procure highquality cotton from the us because that goes into our garments and into uh you know value addition in terms of bed
• 02:00 - 02:30 linens and all of that value added exports uh on the textile side soybeans another one and we looked at other asset classes uh so to close that gap uh quite significantly i don't think is you know that big a an issue our prime minister has already uh mentioned that we will uh constructively engage with the us uh and uh we'll send a high level delegation but let's also put it in a little bit of
• 02:30 - 03:00 context the top 10 countries uh account for about roughly 80% of the deficit the us deficit pakistan is 33rd in that totem pole so from our side i think the engagement with the with the us uh you know is is quite frankly beyond the immediate trade and commerce tariffs uh so uh a case in point for example would be the us delegation which was in islamabad a couple of weeks back around the minerals
• 03:00 - 03:30 and mining conference and uh and that uh you know obviously there were people from all over the world uh especially around copper because the first project was declared which is ricochet and uh the financial close has already taken place that was also announced um but copper as you know is going to be a a key uh and critical element of the energy transition we also know it's going to go into global shortage the
• 03:30 - 04:00 tatian belt in pakistan is the supply side answer to that shortage and we find significant interest from the us uh in investing uh and and getting into into into that minerals and mining discussion with pakistan and therefore it's a wider canvas uh that we uh want to engage uh the us administration as we go forward but in terms of your broad exports uh you want a stable market would you be
• 04:00 - 04:30 looking at other markets to get that kind of stability i think that's a very uh interesting question that uh you know given what's going on maybe maybe uh the global trade uh might take uh a little bit of back seat for the time being but that is also an opportunity for everyone to look at regional corridors and regional connectivity so from pakistan's perspective we are already doing quite a bit obviously with china
• 04:30 - 05:00 uh with uh uh with gcc uh central asian republics where we now have a lot of focus uh and africa these are all examples of new markets where we do find that we can you know diversify and go into these regional corridors uh as we as we move forward and and that can be really a real engine of growth for uh a lot of countries including
• 05:00 - 05:30 pakistan now looking at your relationship with the imf you have emphasized the need um to for fundamental economic reforms to lessen dependence on the imf i mean could you elaborate on that what kind of reforms are you considering to become more self-reliant you know the macroeconomic stability across all indices um you know stable currency fx reserves inflation is a fantastic story our twin deficits have now turned into surpluses we probably
• 05:30 - 06:00 going to have first the first time after very very long time a current account surplus uh for uh for this fiscal year our primary account is in surplus uh on the fiscal side uh policy rate is down by thousand basis points so on the back of that we actually got a rating upgrade uh last week from fetch now the structured reforms which are now in execution on the taxation side you know we have been languishing as a country
• 06:00 - 06:30 between 9 to 10% in terms of tax to gdp this year at the end of june we will get to 10.6% 6% which is 1.8% improvement year on year what we've agreed with the fund is to move towards 13.5% during this uh duration of the 37-month program and that quite frankly would allow us to bring fiscal sustainability and also joint committee of nations around that the second is reforms around energy and what we're
• 06:30 - 07:00 doing on the power side on the transmission side in terms of our discourse which are being privatized uh private boards being appointed um bringing the the the the tariff structures down uh and then the the whole reform around stateowned enterprises and the privatization agenda now that's one thing which we haven't done well in the last year which is uh privatization we have a new um chairman of the privatization commission so we
• 07:00 - 07:30 are going to bring our national airline uh we hope to get three fis u going through the finishing line this year in terms of privatization three discos are on the privatization uh program uh so so we are going to really speed up that process as well and then ultimately you know you can't just uh look at uh the revenue imperative it's also the public finance so we are um uh going to uh rightsize the federal
• 07:30 - 08:00 government uh basic reforms on the pension side and also very active debt management uh that we're doing at this point in time to reduce the single biggest line item for us which is debt servicing just getting back to the tax issue for a moment tax receipts that is um pakistan is a very large informal economy and you've proposed some solutions digital solutions could you elaborate on that for us yeah so so
• 08:00 - 08:30 you're right in terms of your observation you know cash in circulation in pakistan is a little over 9 trillion rupees and you put it in the context of um the revenue receipts we're going to get this uh year which is about 12.3 trillion so we increased our tax revenues by 29% in the last fiscal year and this year will be anywhere between 28 to 30% to get to 12.3 and then you see it in the context of cash and circulation which is really the informal economy so we have to move that in the
• 08:30 - 09:00 towards uh the formal economy now what are what is sort of fueling that cash in circulation all sectors which have not been part of u uh contributing towards the excheer uh in the same way that they contribute to the gdp uh real estate agriculture uh retail and wholesale so the first time in the history of pakistan agriculture income tax has been legislated through the provincial
• 09:00 - 09:30 assemblies uh over uh over the over the last fiscal year now coming back to your point um around technology and the role of technology i think that is uh already playing in giving us huge dividends even in this fiscal year this end toend digitalization and we are using it in the form of um ai assisted audits we are uh doing digital enforcement whether
• 09:30 - 10:00 it's on the customs side whether it's our track and trace systems where we are digitally monitoring the entire uh supply chain in the largest sectors in cement in uh sugar in fertilizer in tobacco and we have stopped a lot of tax evasion and and uh and sales tax uh have have gone up uh in a in a in a in a in a very big way so it's already paying the dividends uh but we are going to continue on this journey because it's really technology and end-to-end
• 10:00 - 10:30 digitalization which is going to help us with the leakage and therefore the enforcement and compliance function and in terms of your economic challenges i mean you know just a few minutes ago you mentioned um inflation for instance i mean that's a big success story for pakistan isn't it at one time inflation was running at what about 38% yeah so in march uh we clocked 7 so uh so this is um uh you know and and it's the core
• 10:30 - 11:00 inflation is down um uh the the average inflation for for the year is about 5 to 6% um and on the back of that food inflation is down and uh that has helped us in in in a very big way in terms of the revival uh because when you when you bring this down as i said thousand basis point uh reduction in the policy rate so the financing rates have come down in turn they are helping us with both on
• 11:00 - 11:30 the consumption side of things and on the on the industry side of things in terms of more competitive financing costs uh more competitive energy costs um clearly uh the the import bill and the oil prices are helping us uh at this point in time as well because that quite frankly is part of the imported inflation uh and that uh uh so but we you know where we do we go from here i think is is a very very important point because we don't want to squander this
• 11:30 - 12:00 opportunity and this time around we just want to make sure that we go towards inclusive and sustainable growth for the country so i want to talk about your relationship with uh china uh china has been deeply involved in pakistan in infrastructure development through cpec the china pakistan economic corridor what are the sort of measurable impacts that you see from cpec on china yeah as i think i've i've said previously as well this there was phase
• 12:00 - 12:30 one and now we are in phase two phase one was all about infrastructure right which was the the power infrastructure the road infrastructure the port infrastructure um and phase two is all about monetization of that infrastructure uh and that's where uh the first phase was largely g2g right a lot of stateowned enterprises a lot of
• 12:30 - 13:00 um uh financings from the stateowned banks etc the second phase is really b2b where we see a lot of uh uh you know china is obviously moved up the value chain in a very big way uh right in terms of value addition on the technology side on the electronic side so we are hoping that pakistan can be a good destination for some of the industries which uh can be held by low
• 13:00 - 13:30 wages in pakistan through our special economic zones uh and and we can sort of take that forward and there are some very good examples of that where this is already beginning to happen so for example um uh there's a company called service uh long march so they uh uh long march is a is a is a tire a truck tire manufacturing company they've gone into a joint venture with a large conglomerate in pakistan and 80% of
• 13:30 - 14:00 their uh truck tires are now being exported uh another um example very quick example of that would be byd vyd has now come in uh with again a very large conglomerate they've joined the joint venture we they've launched the joint venture they are importing the cbus at this point in time and we're hoping at some point in time they will start the assembly and start exporting from pakistan as well one of the point is what is your broad assessment of the
• 14:00 - 14:30 relationship between pakistan and china right now i mean beyond just the economic relationship the political relationship how has it evolved i was there very recently as i mentioned for the w forum um which um is the first time in my current capacity that is there and uh you know both the content the quality of participants just absolutely uh amazing and uh um but i've been also on the visits along with the
• 14:30 - 15:00 prime minister uh last year where we were you know hosted by president xi and premier lee uh more recently recently this year as you know uh president ab zardari uh went with the delegation and he was again hosted by president xi so i think these are ironclad relationships long-standing relationships and uh you know it it as i said goes across asset classes across uh businesses uh very
• 15:00 - 15:30 very strong relationship minister thanks so much real pleasure thank you sir thank you now let's turn to malaysia it's a small country but ranks 17 on the list of largest exporters to the united states i interviewed the country's finance minister second and the first question had to be about the tariffs i think it's important to note this tariffs has been applied on a global scale right i think the whole world is digesting how to address these issues
• 15:30 - 16:00 malaysia is no different we are an open trading uh nation and we've always depended on a very good system of multilateralism uh rulebased mechanisms so we are concerned however uh what we need to focus on is what do we do about this yeah so malaysia's approach is in twofold one we want to continue engagement engagement to reiterate back multilateralism and rule-based uh principles are important uh discussions ongoing with uh our us counterparts to
• 16:00 - 16:30 see where we can address gaps and and so on and where it is commonly beneficial we can look at how we address those are areas but second is actually looking at how do we create resilience in the economy and in this instance i think malaysia is a little bit better suited and balanced than others because over the years we've been focusing about diversification of the economy diversification in industry diversification in markets markets and so on so we're not overly dependent on
• 16:30 - 17:00 any single market yes while as you see the imf for latest uh estimate for global trade has been adjusted downwards gdp has been dusted downwards so everybody will move downwards in line with that but it's important to note that uh even for malaysia we're still uh on positive growth trajectory well we we are targeted according to imf at 4.1% growth that's still reasonable and what we'll do is continue to work on plans
• 17:00 - 17:30 that we actually have to diversify still the economy to deepen the economy and to continue to have domestic direct investments that will cushion blows right when you talk about resilience uh i just want i was looking at a post that you uh made on social media you said brace for impact but don't be overly worried you also wrote that malaysia as you just pointed out is better place than most due to our diversified economy and export markets as well as our competitive advantage in certain sectors such as manufacturing um it's very
• 17:30 - 18:00 reassuring statement now in terms of the steps that you will be taking immediately would you be seeking some kind of exemption on certain products coming to the united states i think it's important that uh let's let's understand that headlines always look very dramatic uh and understanding the industries that you're in uh facilitates uh better conversation along that and hopefully that will lead to as you suggest some sort of exemption that actually come in and in this instance i think the
• 18:00 - 18:30 semiconductor uh supply chain globally is quite narrow malaysia plays a very important role in the semiconductor space uh and i think there will be ways uh that we can manage uh to figure out how to navigate this space the reality is as global growth comes down yeah uh we cannot say that there will be no impact there will be but the key thing is to make sure that you have a better chance to turn out better than others along this way and i think the resiliency of what we structured the
• 18:30 - 19:00 economy the ability to take shocks the fiscal space creation that we've been doing and during our economic transformation gives us better levels to be able to build right you talk about the technology sector what about things like agriculture agriculture i think uh is a globally traded good uh malaysia has not reached self-sufficiency in agriculture uh but we are giving priority in terms of some selected areas say for example rice production rice production is very
• 19:00 - 19:30 fundamental because it's a staple food uh in the country so what we're trying to do is actually to induce uh larger uh fields along the way we're trying to get better crop management along the way and the government is providing support uh to actually allow that to actually occur providing growth in infrastructure in order to make sure there's enough water to address the needs of the farmers and so on will facilitate better more stable supply in the long term so i think that's that's what's important right if
• 19:30 - 20:00 you have the means and if you have fiscal space you can do things that are no regret moves so improving infrastructure is a no regret move right um you know we're looking at some of the short-term solutions that you've been outlining there uh but looking longer term i mean would it be of a greater advantage to malaysia to transition its economy to something like high-tech services um you know that which would drive the economy i think when the the
• 20:00 - 20:30 current government came into power about two and a half years ago it took a step back and it said look uh we need to relook again at the economy and say what are the key areas that we really want to do so highgrading the economy was an important element in our new in national industry master plan we're laying out sectors that we believe are important for malaysia to embrace of course we want to start with uh areas that we have competitive advantages so we start with e and e we start with semiconductors we
• 20:30 - 21:00 go to agencies like data centers ai and so on but we also look at things that are naturally being driven by trends that are important say for example energy transition is an important element so how do we shore up uh that that transition along the way and make that build up at the same time we recognize that if you look at the azan region this year malaysia ch aean one of our big initiative among azan is to get the aan economic block to work much stronger together interan trade is only
• 21:00 - 21:30 at about 22% of the whole base our gdp is 3.98 trillion uh we have nearly 700 million peoples living in this base so surely if we are able to cooperate and work in a better form we can create better opportunities along the way so a lot of initiatives have been done among countries is to facilitate that in terms of trade agreements in terms of uh instant payment mechanisms and so on to
• 21:30 - 22:00 facilitate that trade create resilience the second thing that malaysia is doing is actually understanding that if you look at azan aean has a wide range of uh the levels of economic growth yeah from the most advanced economies to the some basic economies however what we can do is look at how we try not to compete as much with each other and complement each other so for example between malaysia and singapore we established this jo special economic zone the two countries have decided to get together to
• 22:00 - 22:30 facilitate uh the ability of the zone to support each other yeah ease of movement of goods ease of movement of people will attract certain things creating more incentives to attract the right type of industries into that area provides a catalyst to that growth so i think you will see within the azen region more interreional cooperation in order to grow in the aen trade but also positioning that each are helping each other to make it better so better
• 22:30 - 23:00 prosper thy neighbor sort of philosophy uh in terms of how you respond uh to the tariffs uh would there possibly be a better outcome if azan negotiates as a block rather than individual countries negotiating bilateral deals i think the reality is uh the us is receiving bilateral discussions so that's that's reality however within azan we have all embraced a common philosophy we go principleled mechanism right in a
• 23:00 - 23:30 principle-led mechanism we we do three things that are important firstly embracing multilateralism embracing rule-based mechanisms so in all the conversations what we want we all reiterate the same thing that this is important if you want a stable sustainable environment you got to go back to these sort of principles second do things that you can control yeah and work together in that manner so that you remove or you reduce dependencies as far
• 23:30 - 24:00 as you can create more interreional connection so that makes the asa blog even stronger working together and i think third uh if you look at the the whole aean arrangement the the partnership within aean partners are strong so every time everybody has a conversation and stuff like that there's a lot of sharing that goes on so we try to build on each other we have to recognize that every nation state is sovereign state every uh development has got slightly different elements compared
• 24:00 - 24:30 to somebody else so they must have the freedom to address their own particular elements but find a common harmonizing element and work towards that to actually guide how azan positions would malaysia be looking at diversifying its market uh in the future to ensure that there is stability i think all countries are looking at diversifying markets right so again as i said uh one of the reasons why malaysia uh is a bit more confident in going through this crisis
• 24:30 - 25:00 is the fact that our markets are already diversified but we will continue to push intra asian trade is one area opening up better conversations with china better conversation with eu better conversations with latin america and africa can only help trade be a lot stronger between each regions yeah so pushing new fda element riding on the current trade agreements that already exist ctp for example rcap for example in order to make trade work and move in
• 25:00 - 25:30 a better form is a response in order to derisk a little bit some amount of that but the reality is we have to understand whenever the the tide is coming up all ships will go down whenever the tide is going up all ships will go up we just want to make sure that you are in the middle of the ocean and not by the beach you mentioned china uh china's been very steadfast some may say very tough in its response to these uh tariffs imposed by
• 25:30 - 26:00 the united states in fact it's gone almost toe-to-toe with the united states uh the other thing about china is that it's been a champion over the last few decades of globalization of multilateralism what kind of stability does that bring to the region i i think every country in the world we're looking at how do we continue trajectory forward uh so uh countries that promote multilateralism rule-based mechanisms i think azan will will be very appreciative and want to continue to
• 26:00 - 26:30 push along the way but each sovereign state must take its decision what is good for it its own balance so we'll find that alignment so we're hopeful uh that uh continued push to work as a block continued uh work in order to connect multiple blocks will create a bit more stable ground and maybe newer markets in order to stabilize uh things along the way it's not going to be smooth sailing yeah uh but there is a
• 26:30 - 27:00 path that can allow you to have stability as you move along president xi was recently in malaysia as part of his three nation visit um how would you assess the visit uh and the relationship with china i i think the the the china relationship with me has gone back quite a long time yeah it's more than 50 years since our first uh uh trade deals that have been working along the way and over the years i think we've all built a greater understanding of each other but
• 27:00 - 27:30 at the same time malaysia is a open trading nation we appreciate our trades with the us we appreciate our trades with the eu and actually that trade is actually quite balanced so if you look at uh president xi's visit i think it reaffirms uh alignment of wanting to work on where there are common interests uh i think there are uhus that were entered into that offers newer opportunities that we can bothly jointly explore and there are commitments to
• 27:30 - 28:00 actually simplify things along the way so for example if i take uh an important supporter to to to the economy at the moment is tourism uh malaysia uh is grateful that actually we're now promoting uh where we have longerterm visas between china and malaysia so people can easily transit uh each each other way and that helps our domestic economy and refreshes now i think this year total uh tourism receipts are already higher than what we were pre-con
• 28:00 - 28:30 pandemic and total visitations will also be wider than what we were before pandemic so i think again what we want is clarity what we want is joint cooperations what we want is the ability to work cross borders multilateral rule-based mechanisms and anybody who offers along that line we should embrace because the world has always progressed well against that frame minister thank you so much thank you and we need to
• 28:30 - 29:00 leave it there i'm arnold naidu in washington dc thanks for watching