Pakistan's Relationship with IMF and World Bank

Pakistan's Relationship with IMF and World Bank

My topic deals with Pakistan, its relationship with the IMF and World Bank, and its internal problems that are causing unemployment, poverty, economic crisis and hunger. I shall be analyzing the situation using the neo-classical theory, as it is what the economists of the Pakistan government and the IMF are using to alleviate the economic instability of the country.

Situated in the sub-continent, Pakistan is a low-income country, with great promise for growth. Unfortunately, it is held back from reaching middle-income status by chronic problems like a rapidly growing population, sizable government deficits, a heavy dependence on foreign aid, recurrent governmental instability and large military expenditures. It is to address these fundamental faults in Pakistan’s economy that the IMF has initiated the Structural Adjustment Programs (SAPs) in the country. This is discussed in further detail later in the paper.

Like all developing countries, Pakistan’s population is largely employed in the agricultural sector, which accounts for about 48 percent of the labor force. In today’s world the Industrial and Service sectors are the largest growing areas of a developed county’s economy. Yet Pakistan only employs 39 percent of its population in Service, and a minute 13 percent in Industry. This is a paltry figure, compared to the employment statistics of a developed country.

Pakistan is also heavily dependent on a single export crop, cotton. Hence the country’s fortunes rise and fall with the cotton market. It is no wonder that there are so many poverty stricken people in Pakistan. When almost half the population is involved in a very volatile market, a lot of the time, a lot of people will be burnt by price fluctuations.

The country is also subject to the mercy of the weather. Focussing on a major cash crop means very little diversification. This translates to mass hunger and hard times for the agricultural sector whenever the agrarian lands are ravaged by floods, or conversely, by droughts.

Even more importantly, Pakistan’s agricultural sector is marked by large landowners, controlling most of the production. Hence, only a minimal amount of the profit from exports goes to the poor people working for the large farmers. It is these people who constitute a large portion of P...

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... what appears to be an inevitable crash of its economy. The situation of the poor and under privileged could also be alleviated eventually as long as the government decides to start spending money on developing an infrastructure that can help feed the hungry by providing them with jobs. Nevertheless, there are no easy options left. Only the painful ones remain. It is, however, important that the pain of reform be distributed equitably, and not born largely by the poorer classes, as is very often the case. There are tough times ahead. Unfortunately, there is little evidence that the Pakistani ruling elite is aware of the gravity of the situation; or that it has what it will take to steer the country out of its mess.

Bibliography:

Bibliography:

Andleeb Abbas, ‘Pakistan: A Puppet on the IMF Chain’

M Sharif, ‘IMF tranche $280 mn: Prof. M Rashid, ‘Fracturing Social Change’

IMF online resources World Bank online resources Pakistan Budget Report, 98-99

Dialogue between IMF and Pakistan, ’99

Lappe, Collins, Rosset, Esparza, ‘World Hunger’

Prof. Dr. M.A. Hussein Mullick, ‘Pulling the country out of its present financial crisis: the challenge for the present regime’