Bussiness Economics IMF, World Bank and Pakistan

IMF, World Bank and Pakistan

Introduction to IMF
The IMF provides policy advice and financing to members in economic difficulties
and also works with developing nations to help them achieve macroeconomic
stability and reduce poverty.

With its near-global membership of 186 countries, the IMF is uniquely placed to help
member governments take advantage of the opportunities—and manage the
challenges—posed by globalization and economic development more generally. The
IMF tracks global economic trends and performance, alerts its member countries
when it sees problems on the horizon, provides a forum for policy dialogue, and
passes on know-how to governments on how to tackle economic difficulties.

Key IMF activities

The IMF supports its membership by providing

• Policy advice to governments and central banks based on analysis of

economic trends and cross-country experiences;
• Research, statistics, forecasts, and analysis based on tracking of
global, regional, and individual economies and markets;
• Loans to help countries overcome economic difficulties;
• Concessional loans to help fight poverty in developing countries; and
• Technical assistance and training to help countries improve the
management of their economies.

Although IMF has been working since 1944 but there has been many structural
changes and policies according to the changing economic environment. As
nowadays we are working in Globalized World and because of the recent financial
Crises of 2007 and 2008 which have hit hard not only the developed world but most
severely developing nations.

LOAN INSTRUMENTS : briefly

1. Stand-By Arrangements (SBA):

o Countries address short-term BOP problems

o Provided greatest amount of IMF resources
o The length is typically 12-24 months
o Repayment within 2¼-4 years
o Surcharges apply to high access levels

2. Poverty Reduction and Growth Facility (PRGF) & Exogenous Shocks

Facility (ESF):

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o Low-income countries
o Largest number of IMF loans in recent years.
o Interest rate 0.5 percent
o Repaid over a period of 5½-10 years.
3. Extended Fund Facility (EFF):

o Countries with longer-term BOP problems

o Arrangements under usually 3 years.
o Repayment within 4½-7 years
o Surcharges apply to high levels of access.
4. Supplemental Reserve Facility (SRF):

o Short-term financing on a large scale

o Repayment within 1-1½ years.
o Surcharge of 3-5 percent
5. Short-Term Liquidity Facility (SLF):

o Countries with pure liquidity shocks

o Short duration
o Access limit of 500 % of quota
o Maturity of 3 months
o Renewal up to two times within a year
6. Compensatory Financing Facility (CFF):

o Countries experiencing a sudden shortfall in export earnings

o Increase in the cost of cereal imports
o Carry no surcharge
7. Emergency assistance:

o Countries that have experienced a natural disaster

o Emerging from conflict
o Subject to the basic rate of charge
o Interest subsidies are available
o Must be repaid within 3¼-5 years.

Thus these are the policies under which IMF works today:

• Enhancing IMF lending facilities. The IMF has upgraded its lending
facilities to enable it to better serve its members. It has created a
new Short-Term Liquidity Facility designed to help emerging market
countries with a track record of sound policies address fallout from
the current financial crisis. To make its financial support more
flexible and tailored to the diversity of low-income countries, it has
established a new Poverty Reduction and Growth Trust, which has
three new lending windows. As part of a wide-ranging reform of its
lending practices, the IMF has also redefined the way it engages
with countries on issues related to structural reform of the economy.

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• Strengthening the monitoring of global, regional, and country

economies. The IMF has taken several steps to improve economic
and financial surveillance, which is its framework for providing
advice to member countries on macroeconomic policies. It is
emphasizing research into the links between the financial sector and
the real economy and the sharing of cross-country experiences. It
has published new guidance on how to analyze and advice on
exchange rates, and is paying more attention to the impact of the
world's most important economies on other countries' economies.
And it is improving its ability to warn member countries of risks and
vulnerabilities in their economies.

• Helping resolve global economic imbalances. The IMF's analysis of

global economic developments, contained in its World Economic
Outlook, provide finance ministers and central bank governors with
a common framework for discussing the global economy. The IMF
now also has the ability to call for multilateral consultations to
discuss specific problems facing the global economy with a select
group of countries—an innovative way of facilitating collective action
among key players in the global economy. The first such
consultation took place in 2006. It sought to reduce global payments
imbalances and involved China, the euro area, Japan, Saudi Arabia,
and the United States.

• Analyzing capital market developments. The IMF is devoting more

resources to the analysis of global financial markets and their
linkages with macroeconomic policy. Twice a year, it publishes the
Global Financial Stability Report, which provides up-to-date analysis
of developments in global financial markets. IMF staff also work with
member countries to help them identify potential risks to financial
stability, including through the Financial Sector Assessment
Program (described in more detail below). The IMF also offers
training to country officials on how to manage their financial
systems, monetary and exchange regimes, and capital markets. The
IMF is currently facilitating the drafting of voluntary guidelines for
Sovereign Wealth Funds and works closely with the Financial
Stability Board to promote international financial stability.

• Assessing financial sector vulnerabilities. Resilient, well-regulated

financial systems are essential for macroeconomic stability in a
world of ever-growing capital flows. The IMF and the World Bank

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jointly run the Financial Sector Assessment Program, aimed at

alerting countries to vulnerabilities and risks in their financial
sectors. IMF and World Bank staff also advises on how to strengthen
oversight and supervision of banks and other financial institutions.

• Working to cut poverty. At present, more than a billion people are

living on less than $1 a day, and more than three-quarters of a
billion people are malnourished. The IMF's role in low-income
countries is changing as these countries grow and mature. But its
central goal remains the same: to help promote economic stability
and growth, laying the ground work for deep and lasting poverty
reduction. Its current main priority is to help low- and middle-income
countries cope with the adverse effects of the global economic
crisis. To that effect, it is stepping up lending to low-income
countries to combat the impact of the global recession.

• Improving IMF governance. In May 2008, the IMF's membership

approved a two-year package of reforms to improve representation
of members at the Fund. For the IMF to be fully effective in its role,
it must be perceived as representing all countries in a fair manner.
With that in mind, governance reform is being accelerated to ensure
a decision-making structure that reflects current global realities.
The IMF is also becoming leaner and more efficient. It is trimming
expenditures and reorganizing the way it earns revenue to pay for
its operations.

Source of Funding
Where does IMF get it’s money? The IMF gets the funding for the loans from the
following sources:

1. The Quota system

Most of the funding comes from the quota subscriptions.

“It is the money each member contributes when joining the IMF.”

2. Gold holdings
Total gold holdings 103.4 million ounces (3,217 metric tons). IMF is the third largest
official holder of gold in the world.

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The IMF’s total gold holdings are valued on its balance sheet at SDR 5.9 billion
(about $8.7 billion) on the basis of historical cost. As of March 31, 2009, the IMF's
holdings amounted to $94.8 billion (at then current market prices).

IMF is prohibited from buying gold or engaging in other gold transactions.85%

majority (of total voting power) needed for sale and purchase of gold.

3. Borrowing arrangements
If necessary, the IMF may borrow from a number of its financially strongest member
countries to supplement the resources available from its quotas. It has done so on
several occasions when borrowing countries needed large amounts of financing and
a failure to help them might have put the international monetary system at risk.

The IMF maintains two standing multilateral borrowing arrangements

1. the New Arrangement to Borrow (NAB)

2. the General Arrangements to Borrow (GABs)

4. Interest charges and Fees

The IMF also earns income from the interest charges and fees levied on its loans. It
uses this income to meet funding costs, pay for administrative expenses, and
maintain precautionary balances.

Criticism on IMF

"The interests of the IMF represent the big international interests that seem to be
established and concentrated in Wall Street." (Che Guevara, Marxist revolutionary,
1959)

Criticism on Conditions placed by the IMF

Two criticisms from economists have been that financial aid is always bound to so-
called "Conditionalities", including Structural Adjustment Programs (SAP). It is
claimed that conditionalities (economic performance targets established as a
precondition for IMF loans) retard social stability and hence inhibit the stated goals
of the IMF, while Structural Adjustment Programs lead to an increase in poverty in
recipient countries.

Condition to increase Privatization

One of the main SAP conditions placed on troubled countries is that the
governments sell up as much of their national assets as they can, normally to
western corporations at heavily discounted prices. These privatization policies hurts
severely the economies of developing nation and through this Western Multinational
Organizations earn huge profits by investing very less amount.

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Conditions to increase Taxes

It is said, that IMF sometimes advocates "austerity programs,"
increasing taxes even when the economy is weak, in order to generate government
revenue and balance budget deficits. Countries are often advised to lower their
corporate tax rate. These policies were criticized by Joseph E. Stieglitz, former
chief economist and Senior Vice President at the World Bank, in his
book Globalization and Its Discontents. He argued that by converting to a
more Monetarist approach, the fund no longer had a valid purpose, as it was
designed to provide funds for countries to carry out Keynesian reflations, and that
the IMF "was not participating in a conspiracy, but it was reflecting the interests and
ideology of the Western financial community".

Conditions to remove Subsidies

IMF forces the government to remove the subsidies which are very essential for the
developing economies. By removing these subsidies cost of inputs increases and
business remains no longer profitable as exports orders are not met as competitors
are having subsidies and government help.
Thus business is closed and unemployment generates at an increasing rate.

Devaluation of the Currency

IMF stresses on governments to devalue their currencies. This creates inflation in
the economy as many countries were facing double digit inflation mostly in food
and consumer items since 2007 like Pakistan. This high Inflation hurts the economy
as demand is less and mostly in developing countries people are poor and through
inflation and devaluation of the currency they are forced to live below the poverty
line and thus poverty is increased.

Condition to increase interest rates

IMF has a condition that forces the government to increase interest rates in the
country. Through this policy cheaper loans are no more available to the customers
especially to industries or to businesses. Thus business organizations start
restructuring and downsizing policies this further increase unemployment in the
economy. As cost of Business has increased so investors usually don’t invest in this
kind of situation and rather starts investing in banks to get further benefits from
high markups.

Following are some Examples of countries which took loans from IMF and
followed their stated policies and in the end they were in crisis more
severe than before taking IMF loans.

Argentina, which had been considered by the IMF to be a model country in its
compliance to policy proposals by the Bretton Woods institutions, experienced a
catastrophic economic crisis in 2001, which some believe to have been caused by
IMF-induced budget restrictions — which undercut the government's ability to

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sustain national infrastructure even in crucial areas such as health, education, and
security — and privatization of strategically vital national resources Others attribute
the crisis to Argentina's misdesigned fiscal federalism, which caused sub national
spending to increase rapidly. The crisis added to widespread hatred of this
institution in Argentina and other South American countries, with many blaming the
IMF for the region's economic problems.
The current — as of early 2006 — trend towards moderate left-wing governments
in the region and a growing concern with the development of a regional economic
policy largely independent of big business pressures has been ascribed to this crisis.

Kenya, Before the IMF got involved in the country, the Kenyan central bank
oversaw all currency movements in and out of the country. The IMF mandated that
the Kenyan central bank had to allow easier currency movement. However, the
adjustment resulted in very little foreign investment, but allowed Kamlesh
Manusuklal Damji Pattni, with the help of corrupt government officials, to siphon off
billions of Kenyan shillings in what came to be known as the Goldenberg scandal,
leaving the country worse off than it was before the IMF reforms were implemented.

In an interview, the former Romanian Prime Minister Tăriceanu stated that "Since
2005, IMF is constantly making mistakes when it appreciates the country's
economic performances"

Ireland can be seen as a next example as in September 2007 the IMF said "given
the Irish economy's strong fundamentals and the authorities' commitment to sound
policies, the Directors expected economic growth to remain robust over the medium
term". Seventeen months later in April 2009 the New York Times quoted Nobel
prize-winning economist, Paul Krugman, who identified Ireland as a model for the
worst-case scenario for the global economy.

Overall the IMF success record is perceived as limited. While it was created to help
stabilize the global economy, since 1980 critics claim over 100 countries (or
reputedly most of the Fund's membership) have experienced a banking collapse
that they claim have reduced GDP by four percent or more, far more than at any
time in Post-Depression history. The considerable delay in the IMF's response to any
crisis, and the fact that it tends to only respond to them (or even create them)
rather than prevent them, has led many economists to argue for reform.

Impact on public health

In 2008, a study by analysts from Cambridge and Yale universities published on the
open-access Public Library of Science concluded that strict conditions on the
international loans by the IMF resulted in thousands of deaths in Eastern
Europe by tuberculosis as public health care had to be weakened. In the 21
countries to which the IMF had given loans, tuberculosis deaths rose by 16.6 %.

Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such,
adherents of supply-side economics generally find themselves in open

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disagreement with the IMF. The IMF frequently advocates currency devaluation,
criticized by proponents of supply-side economics as inflationary. Secondly they link
higher taxes under "austerity programs" with economic contraction.

Currency devaluation is recommended by the IMF to the governments of poor

nations with struggling economies. Some economists claim these IMF policies are
destructive to economic prosperity.

Current IMF rules prohibit members from linking their currencies to gold.

Response to Criticism
Here is what IMF and it’s supporters say in response to all the critics:

1. Crisis always leads to some Difficulties.

Because the IMF deal with economic crisis, whatever policy they offer, there is likely
to be difficulties. It is not possible to deal with a balance of payments without some
painful readjustment.

2. IMF has had Some Successes.

The Failures of the IMF tend to be widely publicized. But, its successes less so. Also
criticism tends to focus on short term problems and ignores longer term view

3. Confidence

The fact there is a lender of last resort provides an important confidence boost for
investors. This is important during current financial turmoil

4. Countries are not obliged to take an IMF loan

It is countries who approach the IMF for a loan. The fact so many take loans
suggests there must be at least some benefits of the IMF.

5. IMF Easy target.

Sometimes countries may want to undertake painful short term adjustment but
there is a lack of political will. An IMF intervention enables the government to
secure a loan and then pass the blame on to the IMF for the difficulties.

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Today, IMF lending serves three main purposes.

1. First, it can smooth adjustment to various shocks, helping a member country avoid disruptive
economic adjustment or sovereign default, something that would be extremely costly, both for
the country itself and possibly for other countries through economic and financial ripple effects
(known as contagion).

2. Second, IMF programs can help unlock other financing, acting as a catalyst for other lenders.
This is because the program can serve as a signal that the country has adopted sound policies,
reinforcing policy credibility and increasing investors' confidence.

3. Third, IMF lending can help prevent crisis. The experience is clear: capital account crises
typically inflict substantial costs on countries themselves and on other countries through
contagion. Today, IMF lending serves three main purposes.

Pakistan and IMF

History of IMF and Pakistan Relations:

Relationship between Pakistan and IMF started from 1988 after the death of former
Dictator Zia-ul-Haq the then Prime Minister Benazir Bhutto started the relations with
IMF by taking loans. Since then Pakistan has taken many loans under many
governments in different situations, following are number of loans taken from IMF.

To determine the effects of IMF loans on Pakistani economy, it is important to

analyze the history of IMF loans to Pakistan briefly.

 Almost six loan arrangements were made during the regime of

Benazir Bhutto including standby arrangement, Structural
Adjustment Programs (SAP), Poverty reduction and Growth Facility
(PRGF) and Extended SAP.

 Two IMF loan arrangements were made during Nawaz Sharif regime.

 Two standby agreement and PRGF under Musharraf regime to

stabilize the economy.

 Current IMF loan which includes $ 7.6 Billion in 2008 by Pakistani

government.

It is important to note that in the tenure of last two decades, on average almost
44% of the total lending amount has been drawn from the original 100% agreed
upon lending amount because of the failure of the government to act upon the strict
measures determined by IMF. For the first time in the year 2000, this tradition was
broken in Musharraf regime when Musharraf’s government successfully

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implemented the conditions proposed by IMF and successfully drew the whole
lending amount of $1.3 billion.

It is also very interesting to note that only two loan arrangements were made during
the military regime whereas nine IMF agreements (including the recent IMF loan)
were made during the civilian regime.

Some of the conditions being imposed by the IMF on Pakistan

were:

1- Close monitoring.
2- Reduction of government spending.
3- Revision in tax collection policies
4- Change in policy/discount rate

To make sure that funds granted to the borrower country are utilized in optimal
manner.

Impact of IMF Loans on the Economy of Pakistan from 1988-

2001

The IMF loans greatly impact the economic indicators and bring change in the regulatory
framework which has both positive and negative impacts on the country. In year 2000 when
Pakistan has a negative effect on the economy which includes a decline in GDP growth rate
and other economic indicators right after infusion of IMF funds in the economy except in the
second last lending arrangement in Musharraf’s regime when full amount of loan was drawn
from IMF. The economic indicators after IMF loans in the last two decades followed a typical
cycle. Usually the trend after IMF loans show immediate decline in GDP growth rate,
increased tax revenues to GDP ratio, increased CPI, increased debt on the country and then
restoration of the conditions back to their previous states because of the cancellation of
loans in the later years.

The cancellation of IMF loan agreements in the previous regimes along with the initial IMF
loan effects created quite negative impacts on the economy as a whole which shows that
there were very few times when IMF loans were fully optimized.

Current Economic crisis and need for IMF Loans

In 2008 there was a new democratic government but unfortunately as soon they
took over Pakistan was facing different challenges on economic front, which are
stated under:-

a. In 2007/08, the sharp rise in international oil and food (specifically

wheat) prices, in combination with policy inaction and internal
political turmoil, had led to rapidly expanding macroeconomic
imbalances in Pakistan. In the absence of adequate remedial policy

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measures to address the imbalances—in particular not passing on

the international price increases to domestic consumers, but
covering prices increases through rising subsidies—the economy slid
to a balance of payments crisis. By mid-October 2008 the foreign
exchange reserves of the State Bank of Pakistan (SBP) had dropped
to about three weeks of imports (US$3.3 billion), nominal exchange
rate had significantly depreciated, monetization of government debt
was in full swing and led to a rapid rise in inflation, and the EMBI
Global Bond spread of Pakistani sovereign bonds had climbed to
above 2,000 bp. In response, the stabilization program envisaged
fiscal and monetary tightening to bring down inflation and reduce
the external current account deficit to sustainable levels.

b. The volatile political and security environment has complicated

policy-making and made the Implementation of the stabilization
program challenging since its launch. Political tensions between the
two leading parties PPP and PML-N intensified in the second half of
2008/09 and culminated in the “long march of lawyers” in March
2009. Since then political volatility has somewhat subsided. Terrorist
attacks have, however, continued. The attack on the Sri Lankan
cricket team and bombing of a five star hotel in Peshawar were
among them. Furthermore, Pakistan engaged in a full-fledged war
with militants in the Federally Administered Tribal Areas (FATA) and
portions of the Northwest Frontier Province (NWFP) in May 2009, as
an agreement to allow Sharia law (Nizam-e-Adal regulation) in Swat
in April 2009 quickly fell apart. Full scale military operations have
led to about 2.7 million internally displaced persons (IDPs). Taking
care of IDPs as well as reconstructing the conflict-damaged areas
will be a challenge moving forward, and adding to the fiscal burden.

c. Frequent changes in the country’s economic management have also

continued, adding instability to policy-making. While the Finance
Minister has remained unchanged since November 2008, a new
Governor took over SBP in early 2009, the Finance Secretary was
replaced in March 2009, and the Chairman of the Bureau of Revenue
of Revenue (FBR) in May 2009.

Thus In November 2008, to avoid a default on foreign debt payments, the

authorities developed a homegrown stabilization program, which was supported by
the IMF through a Stand-By Arrangement (SBA). IMF decided to provide short term

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loans but with certain conditions which were around 16 and out of these 16
conditions 11 were accepted by the government of Pakistan and the rest were
rejected.

These 11 IMF Conditions are as following:

After minor changes in the 11-point agenda of the International Monetary Fund
(IMF), the Pakistan government has agreed to gradually impose the Central Excise
Duty (CED) on services and agriculture sectors at the rate of eight to 18 per cent in
place of the General Sales Tax (GST).

The official said that major conditions accepted by the Pakistan government
included

I. Changes in the Islamic Development Bank loans.

II. Differentiation between loans and grants.

III. Devaluation of rupee,

IV. Freezing of non-development expenditure under the defense budget

for the last three quarters of the financial year 2008-2009.

V. Non-provision of supplementary grants to government departments.

VI. Ending subsidy on gas and electricity.

VII. 20 per cent reduction in non-development expenditure of civil

departments and federal ministries.

VIII. Increase in markup rate of banks and on inter-bank transactions.

IX. Uniformity in the inter-bank and open market dollar exchange rate

X. Stoppage of government financial intervention in stock markets.

XI. The IMF will be informed at the time of the issuance of credit line by
any international financial institution, including the World Bank or
immediately after it

The matters on which the government and its financial managers have differed with
the IMF include release of $1.5 billion to$2 billion for the year 2008-2009 financial
years under the annual assistance package.

Thus IMF provided the requested loans in different tranche systems and from
November 2008 till today Pakistan has received $ 7.6 Billion in different Tranche.
Overall total debt of IMF on Pakistan with all these tranches total loan on Pakistan is
about 11.7 billion US $ and this new loan will be payable from 2011.

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ECONOMIC PERFORMANCE UNDER THE STABILIZATION

PROGRAM SO FAR
The stabilization program has remained broadly on track, though at times with
substantial difficulty. Although government has tried to come out of crisis and it has
been successful also by implementing structural changes and eliminating subsidies
and increasing oil and gas prices with increasing taxes and imposing petroleum
development levy and increasing electricity charges on domestic and commercial
consumers. Following is the performance of the economy after IMF loans

a. The rapid decline in international commodity and oil prices during

2008/09 has reduced the risks, facilitated improvement in the
external position and the achievement of program targets. Some of
them were met, some missed in 2008/09.

b. The economy started stabilizing towards the end of the fiscal year;
overall economic performance has remained mixed.

c. Even though economic activity significantly slowed down owing to

reduced domestic and global demand, preliminary estimates
suggest that the economy still grew by 2.0 percent in 2008/09. This
was 0.5 percent below the program target.

d. Agriculture, which contributes about one-fifth of GDP, grew robustly

by 4.7 percent (in particular wheat, maize and rice) as a result of
favorable weather conditions.

e. The services sector, which has provided over half of the growth
impulse over the past three years, also continued to grow by 3.6
percent.

f. Industry, which contributes about one-quarter of GDP, continued its

contraction by 3.6 percent in 2008/09.

g. Large-scale manufacturing, which makes up about half of the

industrial value-added, registered negative growth. The contraction

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was particularly pronounced in electronics, food, automobile, and

petroleum industries.

h. In addition to declined demand, these industries were adversely

affected by rising power shortages and deteriorated law and order
situation.

i. The current account deficit narrowed beyond the set target of 5.9
percent of GDP to 5.1 percent of GDP in 2008/09 driven by
deceleration in imports which exceeded that of exports, and
growing workers’ remittances.

j. Exports contracted by 6 percent as external demand declined owing

to the global recession.

k. Imports in turn declined by over 10 percent as international oil and

commodity prices sharply fell, rupee depreciated and aggregate
domestic demand contracted.

l. Workers’ remittances continued growing for the fifth consecutive

year in 2008/09, and registered 21 percent growth during 2008/09.
Given global economic recession, this strong growth was somewhat
surprising. One option is that these inflows reflected past savings of
migrants which they brought back as they returned to Pakistan. If
true, going forward the sustainability of the current account would
be at risk.

Introduction to World Bank

The World Bank is an international financial institution that provides leveraged
loans to poorer countries for capital programs. The World Bank has a stated goal of
reducing poverty.
The World Bank is one of the world’s largest sources of funding and knowledge to
support governments of member countries in their efforts to invest in schools and
health centers, provide water and electricity, fight disease and protect the
environment.

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The World Bank is not a ‘bank’ in the common sense. The World Bank is an
international organization owned by the 184 countriesboth developed and
developingthat are its members.

Since it was set up in 1944 as the International Bank for Reconstruction and
Development. The number of member countries increased sharply in the 1950s and
1960s, when many countries became independent nations. As membership grew
and their needs changed, the World Bank expanded and is currently made up of five
different agencies.

All support to a borrowing country is guided by a single strategy that the country
itself designs with help from the World Bank and many other donors, aid groups,
and civil society organizations.

Departments:
The World Bank differs from the World Bank Group, in that the World Bank
comprises only two institutions:

1- International Bank for Reconstruction and Development (IBRD)

2- International Development Association (IDA)

i. International Finance Corporation (IFC),

ii. Multilateral Investment Guarantee Agency (MIGA)

iii. International Centre for the Settlement of Investment Disputes (ICSID).

The IBRD aims to reduce poverty in middle-income and credit worthy poorer
countries, while IDA focuses on the world's poorest countries. Their work is
complemented by that of the International Finance Corporation (IFC), Multilateral
Investment Guarantee Agency (MIGA) and the International Centre for the
Settlement of Investment Disputes (ICSID).

All these departments are working together to provide low-interest loans, interest-
free credits and grants to developing countries for a wide array of purposes that
include investments in education, health, public administration, infrastructure,
financial and private sector development, agriculture, and environmental and
natural resource management.

The World Bank, established in 1944, is headquartered in Washington, D.C. It has

more than 10,000 employees in more than 100 offices worldwide.

Activities of World Bank

Although World Bank has been working since 1944 but there has been many
structural changes and policies according to the changing economic environment
and strong criticism from Developing world, human rights groups and NGO’s
working for poverty reduction. There have been many structural changes and from

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2000 onward World Bank is working on Millennium Development Goals (MDG). As

nowadays priorities are changed very rapidly because of Globalization and recent
World financial crisis in developed and developing world.

Purposes of World Bank

World Bank background and objectives have expanded and evolved over the years.
The original purpose and objectives as the International Bank for Reconstruction
and Development was a facilitator role in post-war reconstruction. Since 1944, this
role has expanded and World Bank's objectives have grown to develop its current
mandate to alleviate worldwide poverty. They work closely with their affiliate,
the International Development Association.

With all this expansion and growth, World Bank's original focus has not changed.
Today, reconstruction remains a top priority in such situations as:

• Natural disasters
• Needs affecting developing economies
• Post conflict rehabilitation
• Needs affecting a transitioning economy

Millennium Development Goals (MDGs)

In light of the enormous challenge facing the global community to eradicate poverty
-- which affects nearly half of the world’s population living on less than $2 dollars a
day -- the international development community in 2000 adopted specific targets
for poverty reduction, now known as the Millennium Development Goals (MDGs).
The MDGs constitute 8 basic poverty reduction goals ranging from access to social
services and gender equity to environmental sustainability. The overarching goal is
to halve income poverty worldwide by 2015.

Goal 1: Eradicate extreme poverty and hunger

Goal 2: Achieve universal primary education

Goal 3: Promote gender equality and empower women

Goal 4: Reduce child mortality

Goal 5: Improve maternal health

Goal 6: Combat HIV/AIDS, malaria, and other diseases

Goal 7: Ensure environmental sustainability

Goal 8: Develop a global partnership for development

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Loans
The World Bank offers two basic types of loans:

1- Investment loans for goods, work and services to support economic

and social development projects in a broad range of sectors;

2- Adjustment loans to support policy and institutional reforms.

During loan negotiations, the World Bank agrees with the borrowing country on the
development objective of the project or program, outputs, performance indicators
(to measure the impact and success of the project) and a plan to put it all into
practice. Once a loan is approved and becomes effective, the borrower puts the
project or program into practice according to the terms agreed with the World Bank.

The World Bank supervises how each loan is used and evaluates the results. All
loans are governed by operational policies, which make sure that operations are
economically, financially, socially and environmentally sound.

Main Focuses of World Bank

Poverty Reduction Strategies
For the poorest developing countries in the world the bank’s assistance plans are
based on poverty reduction strategies; by combining a cross-section of local groups
with an extensive analysis of the country’s financial and economical situation the
World Bank develops a strategy pertaining uniquely to the country in question. The
government then identifies the country’s priorities and targets for the reduction of
poverty, and the World Bank aligns its aid efforts correspondingly.
The bank supports certain kinds of poor people's organizations such as the Self-
Employed Women's Union and Shack/Slum Dwellers International.

Forty-five countries pledged US$25.1 billion in "aid for the world's poorest
countries", aid that goes to the World Bank International Development
Association (IDA) which distributes the gifts to eighty poorer countries. While
wealthier nations sometimes fund their own aid projects, including those for
diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the
president of the World Bank, said when the gifts were announced on December 15,
2007, that IDA money "is the core funding that the poorest developing countries
rely on".

Clean Technology Fund Management

The World Bank has been assigned temporary management responsibility of
the Clean Technology Fund (CTF), focused on making renewable energy cost-
competitive with coal-fired power as quickly as possible, but this may not continue
after UN's Copenhagen climate change conference in December, 2009, because of
the Bank's continued investment in coal-fired power plants.

Country Assistance Strategies

As a guideline to the World Bank's operations in any particular country, a Country
Assistance Strategy is produced, in cooperation with the local government and any

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interested stakeholders and may rely on analytical work performed by the Bank or
other parties.

World Bank’s Areas of operation

The World Bank is active in the following areas:

• Agricultural and Rural Development

• Conflict and Development
• Development Operations and Activities
• Economic Policy
• Education
• Energy
• Environment
• Financial Sector
• Gender
• Governance
• Health, Nutrition and Population
• Industry
• Information and Communication Technologies
• Information, Computing and Telecommunications
• International Economics and Trade
• Labor and social protection
• Law and Justice
• Macroeconomic and Economic Growth
• Mining
• Poverty Reduction
• Poverty
• Private Sector
• Public Sector Governance
• Rural Development
• Social Development
• Social Protection
• Trade
• Transport
• Urban Development
• Water Resources
• Water Supply and Sanitation

Criticism on World Bank:

Criticism by NGO’s
The World Bank has long been criticized by a range of non-governmental
organizations and academics, including its former Chief Economist Joseph Stieglitz,
who is equally critical of the International Monetary Fund, the US Treasury
Department, US and other developed country trade negotiators, and indigenous

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rights groups, such as Survival International. Critics argue that the so-called free
market reform policies—which the Bank advocates in many cases—in practice are
often harmful to economic development if implemented badly, too quickly ("shock
therapy"), in the wrong sequence, or in very weak, uncompetitive economies.

Criticism by Economist
In Masters of Illusion: The World Bank and the Poverty of Nations (1996),
Catherine Caulfield argues that the assumptions and structure of the World Bank
operation in the end harms southern nations rather than promoting them. Caulfield
first criticizes the highly homogenized and Western recipes of "development" held
by the Bank. To the World Bank, different nations and regions are indistinguishable,
and ready to receive the "uniform remedy of development". She argues that to
attain even small portions of success, Western approaches to life are adopted and
traditional economic structures and values are abandoned. A second assumption is
that poor countries cannot modernize without money and advice from abroad.

Criticism on NGO driven Imperialism

A number of intellectuals in developing countries have argued that the World Bank
is deeply implicated in contemporary modes of donor and NGO-
driven imperialism and that its intellectual contribution functions, primarily, to
seek to blame the poor for their condition.

Criticism on World Bank Governor’s

One of the strongest criticisms of the World Bank has been the way in which it is
governed. While the World Bank represents 184 countries, it is run by a small
number of economically powerful countries. These countries choose the leadership
and senior management of the World Bank and as such, their interests are
dominant within the bank.

Criticism on World Bank’s Dual Role

The World Bank has dual roles that are often contradictory: that of a political
organization and that of an action-oriented organization. As a political organization,
the World Bank must meet the demands of donor and borrowing governments,
private capital markets as well as other international organizations. As an action-
oriented organization, it must fulfill the role of a neutral organization specialized in
delivering development aid, technical assistance, and loans. These dual roles are
often inconsistent with one another.

Criticism on World Bank on Imposing Market-Oriented Policies

The World Bank’s obligations to donor countries and private capital markets have
caused it to adopt policies and programs that endorse liberal economic theory
which dictates that poverty is best alleviated by the implementation of market-
oriented policies.

Criticism on World Bank’s Policies of Privatization and Washington

Consensus
In the 1990s the World Bank and the IMF forged the Washington Consensus, a set of
policies which included deregulation and liberalization of markets, privatization and
the downscaling of government. Though the Washington Consensus was conceived
as a policy that would best promote development, it was criticized for ignoring

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issues such as equity, employment and how reforms, such as privatization, were
carried out. Many now agree that the Washington Consensus placed too much
emphasis on the growth of GDP and not enough on the sustainability of that growth;
economically, socially, politically and environmentally, or on questioning whether or
not this growth actually contributed to increased living standards.

Criticism on World Bank’s Developing Policies

Some analysis shows that the World Bank has increased poverty and been
detrimental to the environment, public health, and cultural diversity. Some critics
also claim that the World Bank has consistently pushed a neoliberal agenda,
imposing policies on developing countries which have been damaging, destructive
and anti-developmental.

World Bank Promoting US and Western Interests

It has also been suggested that the World Bank is an instrument for the promotion
of US or Western interests in certain regions of the world. Consequently, seven
South American nations have established the Bank of the South in order to minimize
US influence in the region.

Criticisms on the structure of the World Bank

Criticisms of the structure of the World Bank refer to the fact that the President of
the Bank is always a citizen of the United States, nominated by the President of the
United States (though subject to the approval of the other member countries).
There have been accusations that the decision-making structure is undemocratic, as
the US effectively has a veto on some constitutional decisions with just over 16% of
the shares in the bank; moreover, decisions can only be passed with votes from
countries whose shares total more than 85% of the bank's shares. A further
criticism concerns internal governance and the manner in which the World Bank is
alleged to lack transparency to external publics.

Criticism on World Bank for keeping reports confidential:

In 2008, a World Bank report which found that biofuels had driven food prices up
75% was not published. Officials confided that they believed it was withheld from
publication to avoid embarrassing the President of the United States, George W.
Bush.

Criticism on world bank often form protest all along the world
including US
Criticism of the World Bank often takes the form of protesting as seen in recent
events such as the World Bank Oslo 2002 Protests, the October Rebellion and
the Battle of Seattle. Such demonstrations have occurred all over the world, even
amongst the Brazilian Kayapo people.

Knowledge Production
The World Bank has been criticized for the manner in which it engages in “the
production, accumulation, circulation, and functioning” of knowledge. The Bank’s
process in the production of knowledge has become integral to the funding and
justification of large capital projects. The Bank relies on “a growing network of
trans-local scientists, technocrats, NGOs, and empowered citizens to help generate
data and construct discursive strategies”.

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Its capacity to produce authoritative knowledge is a response to intense scrutiny of

Bank projects resulting from the successes of growing anti-Bank and alternative-
development movements.
“Development has relied exclusively on one knowledge system, namely, the
modern Western one. The dominance of this knowledge system has dictated the
marginalization and disqualification of non-Western knowledge systems”.

It has been remarked, that in these alternative knowledge systems researchers and
activists might find alternative rationales to guide interventionist action away from
Western (Bank) produced ways of thinking. Knowledge production has become an
asset to the Bank and “it is generated and used in highly strategic ways to provide
justifications for development.

Structural Adjustment since 1970’s

The impact of structural adjustment policies on developing countries has been one
of the most significant criticisms of the World Bank. The oil crisis in the late 1970s,
the second in a decade, plunged many developing countries into economic crisis.

The World Bank responded with structural adjustment loans which distributed aid to
ailing countries while enforcing policy changes meant to mitigate domestic inflation
and fiscal imbalance. Some of these policies included encouraging production,
investment and labor-intensive manufacturing, changing real exchange rates and
altering the distribution of government resources.

Structural adjustment policies were most effective in countries with an institutional

framework already in place that allowed for these policies to be implemented more
easily. For some countries, particularly in Sub-Saharan Africa, with or without the
implementation of structural adjustment policies, economic growth regressed and
inflation worsened. The alleviation of poverty was not a goal of structural
adjustment loans and in fact, the circumstances of the poor often worsened due to
a reduction in social spending and an increase in the price of food as subsidies were
lifted.

Era of 1980’s
By the late 1980s, international organizations began to recognize that structural
adjustment policies were exacerbating the circumstances of the world’s poor. The
World Bank responded by restructuring structural adjustment loans allowing for
social spending to be maintained and encouraging a more gradual implementation
of policies such as subsidy reductions and price changes.

From the Year 1999

In 1999 the World Bank and the IMF introduced the Poverty Reduction Strategy
Paper approach to replace structural adjustment loans. The Poverty Reduction
Strategy Paper approach has been interpreted as an extension of structural
adjustment policies as it continues to reinforce and legitimize global inequities.
Neither approach has addressed the inherent flaws within the global economy that
contribute to economic and social inequities within developing countries. By

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reinforcing the relationship between lending and client states, many believe that
the World Bank has prevented indebted countries from implementing autonomous
national economic policy.

Water Privatization
Sociologist Michael Goldman has argued that “Industry analysts predict that private
water will soon be a capitalized market as precious, and as war-provoking, as oil”.
Goldman continues to argue “These days, an indebted country cannot borrow
capital from the World Bank or IMF without a domestic water-privatization policy as
a precondition”. The Bank is utilizing “the 'Washington Consensus' model of
development to promote water privatization. Following this model, the World Bank
is forcing many countries to commodify their water resources, rather than using
their expertise in the public sector to acknowledge water as a universal human right
and an essential public service”. The push for water privatization development plays
upon “the shocking tragedy that much of the world lacks access to affordable and
clean water

Business and political interests of main stakeholders

Although controversial and far from being proven, there is criticism that World Bank
and IMF are used as a legitimized mean to fulfill business (interests of large
corporations to enter the natural resource markets of the country and obtain the
legal guarantees that it can stay there) or political needs of the main IMF donors
(mostly USA), that were previously historically obtained by more direct activity -
war, economic blockade, espionage. See for example Confessions of an Economic
Hit Man.

Sovereign immunity
Despite claiming goals of “good governance and anti-corruption the World Bank
requires sovereign immunity out of countries it deals with. Sovereign immunity
waives a holder from all legal liability for their actions. It is proposed that this
immunity from responsibility is a “shield to which [The World Bank] wants resort to
for escaping accountability and security by the people.” As the United States has
veto power, it can prevent the World Bank from taking any actions against its
interests.

Pakistan and World Bank

Current World bank Projects in Pakistan
During the past four years from FY 2006 - 2009, the Bank has approved 30 projects
of total US$3.7 billion for Pakistan.
The World Bank is currently working with the Government of Pakistan to prepare a
new Country Assistance Strategy (CAS) for the period FY2010-2013. The new CAS
will take into consideration Pakistan's development priorities as articulated in the
country's own Poverty Reduction Strategy Paper.
Over the last few years, Pakistan’s human development indicators have generally
improved, but largely lag behind other countries in the region.

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Continuing challenges facing Pakistan include insufficiently targeted social safety

net, an infrastructure deficit – particularly in energy, transport, and irrigation, and
poor delivery of social services. However, stringent implementation of the economic
program will be critical to success, and timely responses of fiscal and monetary
authorities to emerging risks will be essential to ensure it remains on track.
The Bank is deepening its engagement on social protection, community-led
development, water management, energy, and infrastructure, while maintaining
strong programs in education, and irrigation.

World Bank supporting reforms at both federal and provincial level.

The Federal and Provincial Governments have been implementing various reform
programs aimed at encouraging growth, investment, and employment generation.
Reforms at the provincial level are specifically aimed at improving delivery of social
services like education, health, clean drinking water, and sanitation.
In June 2007, the World Bank approved a US$350 million credit to support ongoing
implementation of the Government's Poverty Reduction Strategy.
At the provincial level, the Bank approved operations worth US$430 million for
Punjab, Sindh and the North West Frontier Province to help improve irrigation,
education and human development indicators through improvements in public
finance, governance and financial regulatory frameworks. These interventions have
been successful in bringing about concrete changes in delivery of provincial
services and thus are social and economic indicators in these provinces.

2. World Bank working with Pakistan Poverty Alleviation Fund

The World Bank funded Pakistan Poverty Alleviation Fund Project (PPAF) is designed
to reduce poverty and empower the rural and urban poor in Pakistan through the
provision of resources and services to the poor, especially women.
This is being achieved through an integrated approach that includes building
institutions of the poor and then providing them with micro-credit loans; grants for
small scale infrastructure projects; training and skill development and social sector
interventions. The program is impacting over 10 million people and has mobilized
over 66,000 community organizations (COs) in 27,000 localities across 111 districts
in the country. More than 13,000 small scale village-based projects have been
identified, constructed and maintained by communities’ right across the country
benefiting nearly 6 million people. PPAF has issued 1.5 million micro-credit loans,
(average loan-size US$ 150), benefiting nearly 9 million people. Over the last 7
years PPAF has driven the microfinance sector growth from 60,000 borrowers to
more than 1.25 million active borrowers in the sector.

3. World Bank helping the victims of the Earthquake.

The October 2005 earthquake in Pakistan destroyed or damaged around 575,000
rural houses, leaving more than 73,000 dead, and rendering over 3 million people
without shelter in North West Frontier Province (NWFP) and Azad Jammu and
Kashmir (AJ&K).
In response, the government created the Earthquake Relief and Reconstruction
Authority (ERRA) and launched an ambitious US$1.5 billion owner-driven rebuilding
program - largely suited to the mainly rural affected population.

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Under ERRA’s Rural Housing and Reconstruction Program (RHRP), partially funded
by the World Bank, homeowners are given around US$3,000 in installments to build
quake-resistant homes - with routine visits by inspection teams to ensure
compliance to agreed seismic-resistant standards. Owner driven reconstruction and
rehabilitation of an estimated 463,000 houses have begun and is at various stages
of completion. The RHRP has disbursed over $1.1 billion to program beneficiaries or
75 percent of the overall $1.5 billion estimated cost.

4. World Bank working with the government to improve education

outcomes.
The World Bank is providing assistance to the Government of Pakistan in education
reforms, at both the national and the provincial level. This support is provided
through development policy operations with a strong focus on primary and
secondary education.
These programs target increasing participation of girls and children from poorer
household through interventions such as student stipends and conditional grant
systems. World Bank has a strong focus on improving the quality of education
through initiatives such as the National Education Assessment System (NEAS),
which measures student achievement and uses the findings to address gaps in
student learning. NEAS has established, piloted and improved assessment
mechanisms and instruments, which are now being regularly administered.
Already, three rounds of assessments have been completed in the four key subjects
in Grade IV (Mathematics, Language, Science and Social Studies), and two subjects
in Grade VIII (Math, Language), while a fourth round will be undertaken this year,
providing baselines of student achievement in all four subjects.
The World Bank is also assisting the government in improving the quality and
relevance of its higher education and technical and vocational training system.

5. World Bank joining with international partners to help Pakistan fight polio.
As part of World Bank to help eradicate polio globally, World Bank has approved
two projects US$42.71 million in 2003 and US $ 74.27 million in 2006 for Pakistan to
purchase the oral polio vaccine. The money is part of an innovative financing
partnership (IDA Buy-down) between the World Bank, the Bill & Melinda Gates
Foundation, Rotary International, and the United Nations Foundation. These
organizations have formed the Investment Partnership for Polio, an initiative to help
eradicate polio worldwide. The loan to Pakistan will help the country’s Polio
Eradication Initiative which aims to make Pakistan a Polio free country. Since 1997
the number of polio cases has decreased from 1147 to 31 in 2007.

The first project has been successfully completed. Based on an independent third
party assessment, the first credit (US$ 42 million) has been converted into a grant
and written off for the Government of Pakistan.

6. World Bank focusing on un-served and underserved low-income communities.

In NWFP and AJK, Bank projects are supporting delivery of cost effective and
sustainable community development schemes, and basic infrastructure and

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services, using participatory community-based approaches. To achieve this, the

role and capabilities of local governments at the district and lower levels have been
strengthened to extend technical, financial, and management support to
Community-Based Organizations (CBOs).

CBO are being mobilized and their capacity is being enhanced to increase their
participation in development activities. Governance, transparency, and
accountability are being more effective through improvements in operational,
monitoring and evaluation, and financial and budgetary procedures for project
implementation. In AJK, the project has already reached a population of 893,000
against the original target of 830,000, through 320 CBOs. Out of the 54 Tehsil
Municipal Authorities (TMA) in NWFP, 50 are now participating in the Project.

7. World Bank helping Pakistan prevent the spread of HIV/AIDS.

The HIV-AIDS situation is changing rapidly in Pakistan; the latest data indicate a
concentrated epidemic among injecting drug users in several cities. The key
challenge facing the country is to expand and improve quality of HIV preventive
services to vulnerable groups that are most at risk of contracting and transmitting
the disease. The World Bank is also organizing a region wide Development Market
place in South Asia Region on “Tackling HIV AND AIDS Stigma and Discrimination:
From Insights to Action” in 2008.

8. World Bank helping to ‘improve trade flows’ and ‘lower transit costs and times.

In 2005, the Government of Pakistan (GOP) launched major initiatives around the
National Trade Corridor Improvement Program (NTCIP) to reduce the cost of
trade and transport logistics and bring services' quality to international
standards in order to reduce the cost of doing business in Pakistan and
ultimately enhance competitiveness and industrialization. NTCIP has evolved
into a national program to improve (overall cost and efficiency) all links in the
chain (infrastructure and services) that support trade logistics. The NTCIP also
aims to meet increased demand through both improved infrastructure and
more efficient services, while keeping costs under control—and is a medium
term program that eventually links to the GOP’s Vision 2030. NTCIP's main
challenges are:

 Modernize and streamline trade and transport logistics practices and

customs.
 Improve port efficiency, reduce the costs for port users and enhance port
management Accountability.
 Create a commercial and accountable environment in Pakistan Railways and
increase private sector.
 Participation in operation of rail services.
 Modernize the trucking industry and reduce the cost of externalities for the
country.

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 Sustain delivery of an efficient, safe and reliable National Highways system.

 Promote and ensure safe, secure, economical and efficient civil aviation
operations and boost air trade.

Since the launch of the NTCIP, some early gains of the program are:

I. Reduction of port entry charges by 15 percent at Karachi and Port Qasim.

II. Reduction of port dwell times from eleven to five day and reduction of
storage times from seven to five.
III. Port Qasim drafted their business plan towards corporatization.
IV. Increase in daily freight express trains on the main north-south corridor from
1 to 5 reducing up-country container travel times by 10-20 percent.
V. Track access policy drafted by Railways.
VI. Trucking sector formally notified as 'Industry' and policy implementation in
process.
VII. Customs automation software rolled out by FBR for one-custom environment
at all ports/dry ports.
VIII. Draft National Transport Policy reviewed for approval by June 2008.
IX. Civil aviation business plan approved and draft aviation policy in preparation.

9. World Bank as “Knowledge Bank.”

With operations in more than 180 member countries, World Bank has uniquely
positioned to share international best practice and provide world class
analytical and research services to their clients. All research work is publicly
available with World Bank. A revised policy on disclosure of information since
2002 has helped us reaffirm the importance of transparency and
accountability in the development process. It is the policy to be open about
World Bank’s activities and to welcome and seek out opportunities to explain
about work to the widest possible audience. World Bank’s advisory work
includes a number of Pakistan specific reports e.g. Pakistan’s Country Water
Resource Assistance Strategy, Pakistan Higher Education Policy Note.

1- Pakistan Promoting Rural Growth and Poverty Reduction

2- Growth and Export Competitiveness,
3- Pakistan Strategic Country Environment Assessment
4- Provincial Economic report.

These reports are made public as soon as they are finalized. All the project
documents are also available on our Pakistan’s external website.

10. World Bank relies on local expertise.

Around 90 percent of the staff in Islamabad office, plus additional staff in World
Bank’s Washington office are Pakistanis.

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While a large part of World Bank’s value is it’s global experience and expertise,
local knowledge is indispensable to effective development.

World Bank also works closely with the Pakistan government, civil society and
communities in designing our support for the country.

Most importantly World Bank’s overall assistance to the country is specifically

designed to support its own development goals.

World Bank’s have periodic client satisfaction surveys through which they assess
how their services are perceived by a cross section of society including the
government, private sector, civil society, academia, and media etc. These polls are
carried out globally by reputed international firms.

Conclusion:
If we look our current situation we come to conclusion that IMF and World Bank
loans have both negative and positive effects on the economy of Pakistan. If we see
some positive impacts that in 2008 Pakistan faced economic problems and Pakistan
was not having any other option than to take loans from IMF to overcome it deficit
and economic problems.

Now as the situation is getting better Pakistan should focus on proper implementing
these loans and should make those policies which help to promote economic
activities and generate employment. Rather than eliminating development projects.
Exports will be badly hurt as Pakistan is an agricultural country and most of its
exports are of textiles.
There are many competitors of Pakistan like China, India, Bangladesh, than Egypt
and many developing countries. Thus these policies hurts the economy as cost of
inputs are increasing because of high inflation and bad law and order situation and
high rate of corruption and markup. Under these circumstances doing business in
Pakistan is very tough and so organizations are working on plans of downsizing
cutting their expenses and they are reluctant to invest in new projects. Then on the
global level there is recession in the global market. Thus they are unable to get the
new orders for their products. Whereas imports are increasing with the shut down
of local businesses and investors moving out of Pakistan with their credit and
moving to countries like China and Vietnam, turkey and Egypt where they can get
cheap labor and can avail government incentives and have lower cost of business.

Suggestions

1. Government should focus on providing business opportunities and

planning effective plans to invite investors in Pakistan. Especially in
power sector and should promote alternate energy sources like solar
power, wind and bio gas which has a great potential in the country.

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2. Government should also focus on long term debts and should focus
on long term projects which help stabilize the economy as making
big dams to overcome shortage of energy crisis and mega projects
of making ports, railways and roads. Making tax free zones and
promoting exports than imports.

3. Special emphasis should be made on human resource development

so Pakistani young generation can be effectively used by skill and
technical education.

4. Government should take measures so inflation can be controlled

through effective monetary and fiscal policies.

5. Pakistan should focus on maintaining law and order situation in the

country and should follow strict laws to prohibit corruption in the
economy.

6. Government should focus on the education and health sectors of the

economy and should work on those projects like poverty elimination
program of IMF and World Bank.

7. Government should focus and continue the policies so that funds

can’t be misutilized.

8. Government should focus on creating economic activities rather

than fighting war on terror in which Pakistan is spending more than
$ 8.5 Billion annually.

9. As the prices of power, oil and gas and markup have increased as
well as devaluating rupee and imposing new taxes will hurt the
economy badly.

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Thus government can overcome these problems by taking medium and long term
loans with low cost and thus can eliminate these short expensive loans which bring
with them lot of complexities. Whereas government should cut its own lavish
expenditures on ministers and beaurocrates and on foreign tours and thus avoid
these kind of situations in which it has to borrow from IMF.

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