IMF AND THE WORLD BANK

The World Bank and the International Monetary Fund were created in 1944 by leaders of the 44
nations at the Bretton Woods Conference. After World War II a critical requirement was raised for
a new international monetary system to assuage the fears of the Western leaders of an unregulated
world market leading to a return to depression, poverty and another world war.
There has been the question about the overlap of the IMF and World Banks respective roles.
Both are committed to raising living standards in their member countries, but the IMF is
financial in nature, concentrating on short and medium-term loans to help countries meet balance
of payment needs, while the World Bank is fundamentally a development institution, focusing on
technical and financial support for specific projects or sectorial reforms.
Basically, the Bank was responsible for financing long-term productive investment in member
countries while the IMF was to provide loans to overcome short-term balance of payments
deficits.
The IMF's stated goal was to assist in the reconstruction of the world's international payment
system postWorld War II. Now, it has evolved into international organization of 188 countries.
Its objectives are to foster global monetary cooperation, secure financial stability, facilitate
international trade, promote high employment and sustainable economic growth, and reduce
poverty around the world.
While the World Bank - initially known as the International Bank for Reconstruction and
Development - was concerned primarily with post-war reconstruction of Europe. After the
implementation of the Marshall Plan in 1947, its focus shifted to the non-European world where
it provided development loans targeted at helping developing countries create income-generating
infrastructure (power plants, seaports, highways, etc.).
It concentrates its lending on creditworthy governments of developing nations, and splits its
lending activities between the International Bank for Reconstruction and Development (IBRD)
and the International Development Association (IDA).
The IMF has member countries contribute funds to a pool through a quota system from which
countries with payment imbalances temporarily can borrow money and other resources. Through
this fund, and other activities such as statistics keeping and analysis, surveillance of its members'
economies and economic policies; and the demand for self-correcting policies, the IMF works to
improve the economies of its member countries.
On the other hand, the World Bank finances its lending by borrowing on the international bond
market. For the first decades of its existence, the World Bank built up its reputation as a lender
and established its own creditworthiness.
The IMF negotiates conditions on lending and loans under their policy of conditionality,
established in the 1950s. On that front, in the 1980s the World Bank began to press so-called
Structural Adjustment Policies on loan recipients, including mandates to devalue currencies or

reduce government spending in various areas, as pre-conditions for lending. The Bank also began
providing lending to help governments service the debts they had racked up in previous rounds of
lending.

REALITY
While the World Bank and the IMF are often seen as these benevolent entities that keep on
giving in the name of global infrastructure development and poverty reduction; what lies
underneath all this is not that simple, or pretty.
The conditions that the Bank and IMF impose on countries receiving the loans are a lot of the
times, debilitating for their economies. Only certain companies or parties benefit from these
arrangements. Not only are developing countries incurring major debt, they also lose control
over major decisions of said country. It is then the IMF and World Bank that dictate what
happens in certain spheres of the countries policies and areas. It hasnt gone entirely
unnoticed, though.
Due to increased scrutiny and protest in the early 2000s, the Bank did adjust its policies and
practices. It now touts environmental responsibility in the infrastructure projects it provides
loans for and places greater emphasis on the goal of promoting economic engagement by the
poorest people in its target countries.
More on the condition front; for two decades the World Bank and the IMF have forced
developing countries to create conditions that benefit Western corporations and governments.
These conditions are known as Structural Adjustment Programs (SAPs). SAPs require
governments to: cut public spending, raise interest rates, thus reducing access to credit;
privatize state enterprises; increase exports; and reduce barriers to trade and foreign
investment such as tariffs and import duties. These measures are supposed to generate exportled growth that will attract foreign direct investment and can be used to reduce debt and
poverty. However, according to various studies, they end up promoting quite the opposite;
expanding poverty, inequality and insecurity around the world, tearing at the heart of
economies and the social fabric, fuelling extremist movements and delegitimizing democratic
political systems.
A report published today by the World Development Movement shows that the International
Monetary Funds (IMF) new Poverty Reduction Strategies are acting as barriers to policies
benefiting the Many developing countries suffered increases in prosperity, accompanied by
dramatic increases in inequality and child poverty under the auspices of IMF and World
Bank adjustment programmes. In country after country, structural adjustment programs
(SAPs) have reversed the development successes of the 1960s and 1970s, with millions
sliding into poverty every year. Even the World Bank has had to accept that SAPs have failed
the poor, with a special burden falling on women and children. Yet together with the IMF it
still demands that developing countries persist with SAPs.
Moreover, the IMF and World Bank have been criticised for using a one size fits all approach
on all such developing countries, which then fall deeper into the crises, and negotiate on more
loans. Ensuing loans bring with them more conditions serving the West. The cycle continues.

Basically, these two entities are seen as a way for the Western powers to retain their
hegemony of sorts over the economic system and have a conglomerate of third world
countries always dependent on them.
Pakistans case is somewhat like that, too. The pattern is as follows; more IMF and World
Bank loans equal less progress, and lesser involvement of the two equals progress. Thats the
premise of this report. Although, it is to be noted, that in some cases that is not necessarily
true. While the IMF and World Bank are mostly bad for the economy, thats not all that there
is to it. The leaderships own policies and external factors do play a role in what the country
ultimately suffers or celebrates.
This report aims to see what effect the IMF and World Bank have had on Pakistan over the
years by analysing certain key eras. Namely that of: Zulfiqar Ali Bhutto, Zia Ul Haq, Pervez
Musharraf, Asif Ali Zardari, and the current leadership of PML-N.
Before that; example of a few countries are as follows:
Argentina
The 19982002 Argentine Great Depression was an economic depression which began in the
third quarter of 1998 and lasted until the second quarter of 2002.The depression, which began
due to the Russian and Brazilian financial crises, caused widespread unemployment, riots, the
fall of the government, a default on the country's foreign debt, the rise of alternative
currencies and the end of the peso's fixed exchange rate to the US dollar. The economy
shrank by 28 percent from 1998 to 2002. In terms of income, over 50 percent of Argentines
were poor and 25 percent, indigent; seven out of ten Argentine children were poor at the
depth of the crisis in 2002. By the first half of 2003 GDP growth had returned, surprising
economists and the business media, and the economy began to grow at an average 9% per
year. In 2005, Argentina's GDP exceeded pre-crisis level. As of 2014, the default had not been
completely resolved. Argentina was plunged into a devastating economic crisis in December
2001/January 2002, when a partial deposit freeze, a partial default on public debt, and an
abandonment of the fixed exchange rate led to a collapse in output, high levels of
unemployment, and political and social turmoil. These events have raised questions regarding
the country's relationship with the IMF because they happened while its economic policies
were under the close scrutiny of an IMF-supported program. Furthermore, the IMF had been
almost continuously engaged in Argentina since 1991, when the "Convertibility Plan" fixed
the Argentine peso at parity with the U.S. dollar in a currency board-like arrangement. While
Argentina experienced strong growth and very low inflation for much of the 1990s, it fell into
a deep recession in 1998 and, partly because of the strictures of the convertibility regime,
became increasingly constrained in its ability to use standard macroeconomic policy tools to
engineer a recovery. As the economy slowed and international investors became nervous, the
country's already high external debt service burden grew to a point where the debt became
unsustainable.

Source: IMF database

Ghana
Seen as a star pupil by the World Bank and the IMF, Ghana privatized more than 130 state
enterprises 63 including the mining sector (its main source of revenue), removed tariff
barriers and exchange regulations and ended subsidies for health and education. As a result
20% of Ghanaians are unemployed and the cost of food and services has gone beyond the
reach of the poor. GDP per capita was lower in 1998 ($390) than it was in 1975 ($411);
78.4% of Ghanaians live on$1 a day and 40% live below the poverty line; 75%have no access
to health services and 68% none tosanitation.65 As with Zimbabwe, the World Banks
emphasis on export expansion to reduce debt has only increased Ghanas external debt from
$1.4billion in 1980 to $7 billion in 1999. This has made Ghana subject to the World Banks
Highly Indebted Poor Countries initiative. In agriculture, Ghana used to be self-sufficient in
rice but the World Bank insisted that subsidies had to stop and markets had to open. As a
result, the Katanga valley, once Ghanas rice bowl now lays fallow and U.S. rice has become
the staple for Ghanaians since U.S. rice is subsidized; therefore cheaper than that grown in
Ghana. Due to the tax breaks and incentives given to foreign companies, minings net foreign
exchange contribution to Ghanas economy has been minimal. The sectors contribution to
government revenue has also been small at 14.4% in 1995. The sector employs about
20,000people but privatization and the decline in commodity prices has led to cost-cutting
which has meant massive layoffs; many mines substantially reduced their labor force
particularly during1997-2000. The SAP has denied Ghanaians not only their most lucrative
resource but also their most basic and necessary one: water. The World Bank has decreed the
privatization of Ghanas water supply for the purpose of increased cost recovery arguing
that a debt laden government should not subsidize water and sanitation. Instead, consumers
will have to cover the costs of operating, maintaining and expanding water services. This will
mean higher water rates for people who have already been made amongst the poorest in the
world by the World Banks SAP.
Clearly, the World Banks structural adjustment of Ghana is a textbook example of how to
ruin a country.

THE IMF, WORLDBANK AND PAKISTAN THROUGH THE

YEARS
World Bank assistance for Pakistan traces back to 1971, when the country received $25
million IDA assistance for cyclone-devastated East Pakistan. World Banks resident mission
started in 1979. Pakistan became a member of the International Monetary Fund in 1950. The
first time the Government of Pakistan opted for a loan from the IMF was in 1958. IMFs
restructuring agreement for Pakistan was introduced in 1991 when the privatisation
commission was formally established.
As of January 31, 2014, the World Bank's portfolio in Pakistan consisted of 24 active projects
with a total commitment of $4.4 billion. The Bank manages a Multi-Donor Trust Fund for
conflict affected areas of about $175.6 million, which provides grants to KP, FATA and
Baluchistan. In addition, the Bank maintains an extensive and ongoing analytic work program
on a wide range of economic and sector specific topics.
World Bank Operations in Pakistan: 1952-2016

Source: World Bank

The Indus Water Treaty and the Banks involvement

The dispute over the distribution of water erupted into crisis soon after the partition of East
and West Punjab. The partition of Punjab cut down the rivers and canals that made Pakistan
the lower riparian and India the upper riparian. India interfered with the water supply on April
1948 by cutting across Ravi and Sutlej. Pakistan was facing the possibility of acute shortage
of water and agriculture ruin. A Pakistani delegation was sent to India to quell the problem,
but the situation aggravated day by day.
On September 1950 the Indian government agreed to resolve the issue through adjudication,
but demanded that there should be a court in which two members should be from each side
and there would be one neutral chairman. These proposals were accepted by Pakistan.
Chairman World Bank, Eugene Black took the responsibility and made a committee of both
sides to overcome this problem.
Critical disputes resolution was the intervention of the World Bank. Both countries had
applied to W.B for development loans. W.B decided not to give loans to both the countries.
W.B would approve loans if three conditions were met: Indus basin had enough water for
both countries; the basin was treated as a single unit implying all the rivers were to be
discussed, past grievances put aside and technical rather than a political focus retained.
Divide Indus river basin into 2 parts. In India there will be three eastern rivers i.e. Sutlej,
Beas and Ravi. In Pakistan there will be three western rivers i.e. Chenab, Jhelum, and the
Indus.
Pakistan was not fully convinced by it therefore refused to sign until 1958. The treaty was
formalized in 1960. Thus on September 19 , 1960 an agreement was sign between two
countries in Karachi that is known as Indus Water Treaty.
th

Meanwhile, as far as the current Pakistan-IMF relationship is concerned, it continues to play

an important role in our economy. As of 17th December 2014, the IMF board approved the 4th
and 5th program reviews; with a total of USD 1.1 billion to be disbursed.
Despite external debt being one of Pakistans biggest problems, and various other issues in
the countrys economy, the IMF still provides loans to Pakistan. External debt is often
responsible for negatively effecting economic growth which creates uncertainty and
discourages the private sector from investing in the economy.

Pakistans External Debt

Source: State Bank of Pakistan

It is vital to consider that in spite of the trouble linked with excessive debts, Pakistan has the
obligation to accomplish the contractual terms it committed to when taking loans from the
IMF. It is argued in Pakistan that the vast quantities of loans that are provided to Pakistan are
misused by corrupt governments and the loans are used in bad and mostly non-developmental
projects that fail to turn out the required amount of profits necessary to service their loans.
Even though IMF has many policies which have caused problems for Pakistans economy,
IMF continues to play an important role in our economy. It can be seen as lender of last
resort. When Pakistan was on the edge of becoming bankrupt, the IMF provided crucial loans
to stabilise the economy. While the potential benefits of having a monetary fund which can
provide an effective counter to financial crisis are aplenty, the role of the IMF has proved
very controversial.

PAKISTAN PEOPLES PARTY

ZULFIQAR ALI BHUTTO 1971-77
Zulfikar Ali Bhutto took advantage of the resentment against Ayubs economic policies and
promised to restore the principles of distributive justice and equity to the forefront of
Pakistans development strategy under the slogan of Islamic socialism.
Under Bhutto, Pakistan underwent the socialist seventies. His years in power saw Pakistan
strengthening its ties with China, Russia, and Saudi Arabia; much to the chagrin of the US.
This obviously translated into the World Bank and IMF having much less to do with Pakistan
than in the previous years.
World Bank Operations in Pakistan: 1972-1978:

Source: World Bank

Bhuttos fight was one against the policies of the International Monetary Fund and World
Bank, which serve to perpetuate the backwardness of the developing nations. He was in the
forefront of the struggle for a New World Economic Order for the entire developing sector.
Pakistan World Bank relations/events
Year
1970

Date
November

Event
President McNamara sends telegram to Yahya Khan, President of

18
1971
1979

January 13

Pakistan, pledging World Bank assistance to help areas of East

Pakistan devastated by the recent cyclone
McNamara announces $25 million IDA assistance for cyclonedevastated East Pakistan
World Banks resident mission in Pakistan started

Then how was Pakistans foreign policy established during Bhuttos time, and what benefits
did it reap for the country?
Bhutto aimed to diversify Pakistan's relations away from the United States and, soon Pakistan
left CENTO and SEATO. Bhutto developed close and strengthened the Arab relations, and
Sino-Pak relations.
Bhutto also sought to develop Soviet-Pak Relations, and thus, with the assistance of the
Soviet Union, established Pakistan Steel Mills in 1972. The foundation stone for this gigantic
project was laid on 30 December 1973 by Bhutto. The Soviet Union sent dozens of advisors
and experts who supervised the construction of this integrated Steel Mills.
His policy largely followed a tight and closer relations with China, normalised relationships
with Soviet Union, built an Islamic bloc, and advocated a creation of new economic alliance
largely benefiting the third and second world countries. He signed a number of bilateral
agreements with the gulf countries for facilitating Pakistani workers to seek overseas
employment. Millions of skilled and non-skilled workers obtained jobs in the Middle East.
Hence, there was significant rise in foreign exchange for Pakistan, even without a foreign
policy dominated by US involvement.
Pakistan soon gained prominence as a leader of the Muslim world. China helped Pakistan in
all fields and especially in defence. The construction of the Karakorum opened up a trade
route with the PRC. The construction of the Karakorum opened up a trade route with the
PRC, which with increased in importance with the gradual liberalization of the Chinese
economy. Normalisation with India meant the freedom of thousands of prisoners of war and
the return of captured territories. Economically, even today, overseas Pakistanis are sending
in billions of dollars in remittances from Middle Eastern countries which are helping the
economy to sustain and grow.
Bhutto also initiated the nationalization of key industries. Banks were nationalized in 1974
followed by nationalization of flour, rice and cotton mills.
Most importantly, Zulfiqar Ali Bhutto is the chief architect behind Pakistans nuclear
program.
Development expenditure was substantially increased in the health and education sectors both
in rural and urban areas. Rural Health Centres and Basic Health Units in urban areas were
established. Training colleges for doctors and nurses were also established. A large number of
elementary schools, middle schools, high schools, intermediate colleges and junior colleges
were established. Thus, it can be seen that even in the absence of US intervention, a
significant amount of development took place during Zulfiqar Ali Bhuttos tenure as the
Prime Minister of Pakistan.
Bhuttos nationalization derailed Pakistans journey towards faster economic development.
This setback hit Pakistan so badly that the countries that were lagging behind Pakistan in

growth and economic indicators in the late 1960s not only overtook it but also became huge
success stories. The oil price shock of the 1970s as well as droughts, floods and the
withdrawal of external assistance did not help the situation, either. The growth rate in the
1970s fell to 3.7 percent per annum from the 6 percent recorded in the 1960s. Income
inequalities rose compared to the previous period while inflation accelerated, averaging 16
percent from 1971-77; hurting the poor. The large-scale manufacturing sector performed very
sluggishly, netting a growth rate of only 3 percent, only due to public sector investment.

While Bhutto had no grand design for the economy and a poor grasp of economic realities
and principles, he felt he had a popular mandate for curbing the power of industrialists and
bureaucrats and improving the lot of the poor. He also had a vague faith in socialism. The
economy that showed 7 per cent per annum growth in first two years slowed down to just
over 3 per cent annual growth during 1974-7.
Bhuttos policies have had extremely negative and lasting consequences for the Pakistan
economy and have gravely hindered progress towards self- sustained and balanced economic
growth in the country. Bhuttos economic policies virtually halted the growth of industrial
sector and reinforced the anti-export bias of the industrial strategy. Large public investments
in industry focused on import substitution and the reform of the exchange rate system failed
to remove the large wedge between the average effective exchange rates for imports and
exports. Labour and other regulations provided strong disincentives to the growth of largescale industry.
Pakistan GDP Growth rates 1971-1977l
A countrys economic progress can be gauged by a number of indicators, with GDP at the
forefront of the said indicators. To see whether the assistance, or lack thereof from IMF/WB
had a positive impact on the economy of Pakistan, we will look at the GDP growth rates
during Zulfiqar Ali Bhuttos tenure in Pakistan
Year

GDP Growth Rate

1971
1972
1973
1974
1975
1976

1.2
2.3
6.8
7.5
3.9
3.3

1977

2.8
Source: Handbook on Pakistan Economy 2010 (SBP)

It is safe to say that merely saying no to the apparent evil of the World Bank and IMF is not
enough. A viable and pragmatic economic policy is the way to go. While Bhutto took a stand
against the Word Bank and the International Monetary Fund, his vision of modernizing
Pakistan's economy by state interference and planning failed to meet the expectations of
Bhutto, his fellow PPP members and the populace.
GDP growth rate, inflation, the manufacturing and private sector, all suffered a downfall.
While some of it could be due to his predecessor not handling the economy well enough, or
external factors, some of it does boil down to Bhutto not being competent enough where the
economy was concerned. A leader of the masses he did not exactly benefit them.
Everything did not go downhill, though. The betterment of ties with a lot of countries, an
independent foreign policy, the nuclear program, allude to something being done right.

ZIA UL HAQ 1978-88

While Bhutto demolished both social and monetary states of the nation, Zia wrecked the
social fabric of the nation. The inversion of a large number of Bhutto's approaches, prompted
genuine macroeconomic uneven characters, which required resort to outer aid, despite the
expanded inflow of settlements and military support for Pakistan's part in the first afghan war
1979-88. Pakistan alongside different nations ended up in profound financial emergency.

S
ource: Pakistan bureau of statistics
Zia-ul-Haq took generally minimal enthusiasm toward the economy, part of the way on the
grounds that it performed well through the majority of his period as a consequence of various
exogenous elements. Rural development recouped to about 4 percent every annum amid

197788 from a troubling 2 percent amid 197277. In the meantime, outside help for the
Afghan Mujahedin, assessed to be USD 57 billion in the first a large portion of the 1980s
and directed through Pakistan likewise helped the economy.
Calmed by high financial development and an agreeable outside trade position, Zia-ul-Haq's
administration, with Ghulam Ishaq Khan as fund clergyman, settled on monetary choices and
arrangement decisions that were to have genuine long haul outcomes.. In the meantime,
improvement costs were pressed, climbing just 3 percent every annum in excess of 197788
in genuine terms: by 1987/88, protection using had surpassed advancement using. Remote
help dipped directly after 1965 and 1971, as the global group set endorses on both Pakistan
and India for the wars. Remote support additionally diminished after Zia ul Haq's overthrow,
a move barely mainstream with majority rules system supporting nations. However after the
Soviet attack of Afghanistan, the help began streaming once more.
Net External Transfers Received by Pakistan
(all Official Grants and Loans included
Bhutto Period
FY 1971 77 2942
Zia Period
FY 1977-88
6118

$ in Million
Annual Average
490
556

Democratic Regimes
Musharraf Period

755
-202

FY 1988-99
FY2000-04

8307
1008

Source: Economic Survey of Pakistan - SBP Annual Reports

General Zia was a genuine worker of US. In the wake of holding the force, he began an
intermediary war on the requests from his US aces against Soviet Union. He substantiated
himself as the most solid instrument for his radical bosses. In his period, Pakistan was
overwhelmed with military helps from US. Zia was executing as an agent in the middle of US
and tribesman of Afghanistan who were battling against Soviet Union. General Zia did
everything to serve his Washington-based bosses from preparing of Afghan contenders to
sending Pakistanis to Afghan war. In his period, religious schools got to be preparing camps
for aggressors. Entire nation was overwhelmed with arms and ammo and it brought about a
nonstop condition of roughness in the nation that is available to date.
Under the requests from Washington, Zia gave logistic backing to Afghan Mujahedeen and
opened Pakistani outskirts for Afghanistan. An incredible number of evacuees fled into
Pakistan and the nation confronted an immense trouble on its economy. Zia's time is
additionally recognized as the brilliant age for medication trafficking. This period was
additionally brilliant for lawbreakers as different kinds of arms and ammo got to be
effortlessly accessible all through the nation.
Around the end of 1988, Pakistan's weakening asset circumstance created a monetary
emergency. The government's funding shortage arrived at 8.5 every penny of Gross Domestic
Product (GDP), expansion quickened, the current record deficiency multiplied to 4.3 every
penny of Gross National Product (GNP), the outside obligation administration degree arrived
at 28 every penny of fare profit, and remote trade stores fell into equal parts, to $438 million,
equivalent to short of what three weeks of imports.'
Basically, Zia had a lot of help from the US since it was during his time that the Afghan
Invasion gained momentum. It was not his or the World Bank and IMFs ideas that helped or
ruined the situation. The US aid was enough to keep the economy afloat. However, Pakistan

was not at its best during Zias rule, obviously. His Islamisation was a tough pill to swallow
for many; his era gave rise to this Mujahideen culture, and increased US involvement in our
affairs. While the economy was fine during Zias time; Pakistan wasnt.

PERVEZ MUSHARRAF 2001-08

Pervez Musharraf led Pakistan from 1999 to 2008. A World Bank survey has revealed that
poverty in Pakistan was reduced by 50 percent; from 34.5 percent in 2001/2 to 17.2 percent in
2007/8, on consumption-led growth of the economy under the rule of the former president,
Pervez Musharraf.
To elaborate: poverty in urban areas fell from 22.7 percent in 2001/02 to 10.1 percent in
2007/08. In rural areas, it declined from 39.3 percent in 2001 to 20.6 percent in 2007/08.

The government had brought down fiscal deficit from 7 percent to 5.2 percent, the exchange
reserves had increased from $ 500 million to $ 5.3 billion and foreign debt had slightly
decreased from $ 38 billion.
Literacy rate in Pakistan had increased from 45% in 2002 to 53% in 2005. Education received
4% of GDP. In total, 99,319 educational institutions increased in Musharrafs era.

Major Industrial estates were being developed under Musharrafs vision: M3 industrial,
Sundar industrial estate, Chakri industrial, etc
In 2006, what we earned as GDP: we gave only 28.3% as foreign debt and liabilities. A sharp
contrast to 1999 when, what we earned as GDP: we used to give away 64.1% as foreign debt
and liabilities. We were saving 35% of our GDP for economic growth, basically.
According to an IMF report, Pakistan was 3rd in banking profitability in the world. On the
same IMF chart, India was on the 36th position and China was on the 40th position.
According to the Economic Survey 2005, poverty in Pakistan in 2001 was 34.46%. And after
7-8 years of Musharraf, poverty in 2005 was 23.9%; down by 10.56%. Overall, 12.7 million
people had been pushed out of Poverty in 2001 2005, and Rs. 1,441 billion had been spent
on poverty reduction and employment generation.
The Compressed Natural Gas (CNG) sector of Pakistan had attracted over Rs 70 billion
investments during the five years (2001-2006) as a result of liberal and encouraging policies
of the government. 1,765 CNG stations were operating in the country, in 85 cities and towns.
It provided employment for 30,000 people in the country.12. Five dams were built: Mirani,
Subakzai, Gomalzam, Khurram and Tangi. Seven motorways were completed or were under
construction.Gwadar sea port was developed.
"Pakistan's economy witnessed a major economic transformation in the last decade. The
country's real GDP increased from $60 billion to $170 billion, with per capita income
rising from under $500 to over $1000 during 2000-07. The improved macroeconomic
performance enabled Pakistan to re-enter the international capital markets in the mid2000s. Large capital inflows financed the current account deficit and contributed to an
increase in gross official reserves to $14.3 billion at end- June 2007.

Source: Pakistan bureau of statistics

The industrial sector registered 26 percent growth. A historic 100% increase in tax collection
(amounting to Rs. 1 trillion) was observed. Revenue collection in 2007/08 was Rs. 1.002
billion. Exports in 2007 were worth $18.5 billion where Textile exports in 2007 were worth
$11.2 billion. Pakistan Development programs in 2007 were valued at Rs. 520 billion.

With the help of Pakistans private sector, under the Musharraf era, investment in Pakistan
rose from 17.4 to 22.9% of the GDP an increase of 5.5percent of GDP in seven/eight years
is unparalleled in recent times in Pakistan.
Foreign Investment surged from $0.5 billion to $8.5 billion a 17 fold increase in 8 years
which reflected the growing confidence of foreign investors in Pakistan.
Overall, budget deficit as percentage of GDP reduced to almost one half. Budget deficit
averaged over 7.0 percent of GDP during the 1980s and 1990s but was reduced to an average
of 4.0 percent of GDP. The countrys debt burden reduced to one half. Public debt was over
100 percent of GDP by end of the 1990s but reduced to 55 percent. In the words of the IMF
The large and sustained decline in the external debt to GDP ratio was one of Pakistans
most remarkable macroeconomic achievements of recent years. Debt servicing used to
consume 64 percent total revenue in 1998-99. By maintaining financial discipline and
reducing budget deficit, it was brought down to 25 percent only. In other words, the resources
saved from debt servicing were diverted towards development program.
The IMF has acknowledged that Pakistan became one of the four fastest growing economies
in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most
of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty
by one- half, creating almost 13 million jobs, halving the country's debt burden, raising
foreign exchange reserves to a comfortable position and propping the country's exchange
rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF
Program.

Overall, Musharrafs era was the best era of 64 year history of Pakistan with respect to
progress and prosperity in every field of life. Progress was on its peak at that time. He started
a plenty of new projects for the development of the Pakistan. He started tax free
industrialization to urge the foreign investors. His plan worked and a number of multinational companies launched in his era. The impact of that was the increasing number of jobs
in his era. It was very difficult to find out skilled labourer for small level construction. In long
and short, Musharrafs era was not an ideal but still better than all the other eras of ether
democratic or dictatorship eras in Pakistan.
This is where it gets pretty evident that lack of an IMF and World Bank involvement can still
lead to progress and prosperity in a country. Everything aforementioned points to the fact that
Pakistan has done pretty well without any help from the two entities in question.

PAKISTAN PEOPLES PARTY

ASIF ALI ZARDARI 2008-13
In the May 11 general elections, Nawaz Sharif became Pakistans newest elected prime
minister. Sadly, the countrys economy remains in a state of confusion, with expanding
budget, energy, education, employment, fiscal development, and public deficit problems. The
former government did not have a clear direction to overcome these financial challenges, and
they will now become a top concern for the new government.
Many economists believe that in the last 5 years, government economic policies were a
complete failure. Industrial growth has been hanging near zero percent, the investment rate
has declined, inflation is high (double digits for the last 5 years), industrial growth is badly
affected due to the energy crisis, causing companies to struggle, foreign exchange reserves
are declining, budget deficits average seven percent of GDP, and public debt has doubled.
The table below shows some comparisons of the Pakistani economy over the last decade
Pakistan Economic Overview
Economic growth
People living below the poverty line
Fiscal deficit
Public debt
Rupee Value (against the US dollar)

Year (2002-2007)
6%
30 %
4% of GDP
Rs. 4.5 Trillion
Rs. 60

Year (2008-2013)
3%
40 %
7% of GDP
Rs. 15 Trillion
Rs. 100

Pakistan International Airlines, Pakistan Steel Mills, and Pakistan Railways, the major public
sector enterprises, have also not performed well over the last five years.
The fragile Pakistans economy remains tottering during the five years constitutional tenure
of the PPP-led coalition government, as the financial managers futilely attempted to bridge
the yawning budget deficit year-after-year. However, they remained successful in doubling
the countrys public debt.
The government changed its economic team several times to overcome the financial
challenges during its five-year tenure, as it replaced five finance ministers, four governors of
the State Bank of Pakistan, five finance secretaries, and six heads of the Federal Board of
Revenue. None of the economic team performed well, as public debt surged to a record level
and other macroeconomic indicators remained on the lowest ebb.
The last five years have seen economic growth slowing to an average of three percent per
annum, industrial growth stagnating at near zero percent, investment rate declining to a 50year low at 12.5 percent of GDP, budget deficit averaging seven percent of GDP and public
debt doubling.
The economic experts termed the government policies as complete failure in last five years.
Sartaj Aziz, a recognised economist and former finance minister said that key factors that
affected all sectors of the economy are poor governance and corruption in the country. He
noted that the most serious issue persisted was the lower economic growth that remained at
three percent on average in last five years (2008-2013) as compare to six percent of the
preceding five years (2002-2007). The level of people living below poverty line has increased
to 40 percent during previous five year from 30 percent of its preceding five years.
The fiscal deficit remained at above seven percent of the GDP at average in last five years
compared to four percent of the GDP agreed with the IMF in 2008. He further said that
consequent of the higher fiscal deficit combined with lower growth is the high inflation rate,
which has been in double digits from last five to six years.

Source: Pakistan Economic Survey 2012-2013

Another most significant failure of the government is energy crisis that has not only affected
the rate of industrial growth but also brought the miseries of the common people, he
informed. Sartaj Aziz further said that balance of the payment situation is also getting under

stress, as the foreign exchange reserves have declined to $8 billion i.e. two months of
imports. Only remittances have shown growth in last five years.
Terming the economic policies of the government as total failure, former State Minister for
Finance and Economic Affairs Umer Ayub Khan said that government has shown lack of
interest in resolving economic issues of the country. The public debt has surged to Rs 15
trillion in 2013 as compare to Rs 4.5 trillion of 2007.
Khan further said that debt has increased by Rs two trillion only due to the rupee depreciation
against the US dollar, as its value went down to Rs100 in 2013 as compare to Rs 60 of 2007.
Similarly, the foreign direct investment remained at lowest ebb during the five years of the
incumbent government. Former State Minister for Finance and Economic Affairs noted that
food inflation increases manifold, budget deficit has gone up, economic growth remained at
the lowest side during the five years tenure of PPP-led coalition government.
Dr Usman Mustafa, economist from Pakistan Institute of Development Economics, said that
government took huge foreign loans in its five years tenure but it was not appropriately
utilised. The government spent huge amount on Benazir Income Support Programme (BISP),
which should be spent on creating new jobs.
Dr Usman noted that unemployment, inflation and poverty increased in last five years.
However, he termed the announcement of National Finance Commission (NFC) award a
biggest achievement of the government.
Just goes to show why increased IMF and World Bank do not always bring the perks the
country envisions.
THE PAKISTAN MUSLIM LEAGUE (N)
NAWAZ SHARIF 2013-PRESENT
Ever since it came into power, the PML-N government has had a tumultuous ride. Owing to
the previous governments economic policies that were dubbed a failure by many, the
countrys economy remains in a state of confusion, with expanding budget, energy, education,
employment, fiscal development, and public deficit problems. The former government did
not have a clear direction to overcome these financial challenges, and they will now become a
top concern for the new government.
Due to this situation, apparently, the current government has had a very friendly relationship
with the IMF and the World Bank, if the loan seeking situation is anything to go by.
Year
2013
2014
Source: Pakistan bureau of statistics

GDP Growth Rate

3.7
4.14

But its not just the IMF and World Bank; the Chinese government is one of our lenders as
well, since former finance minister Dr Hafiz A Pasha claimed that the Chinese governments
investment in Pakistan amounting to $32 billion was actually a loan as the PML-N
government.

Moreover, Finance Minister Ishaq Dar had signed loan agreements amounting to $52 billion
with foreign countries for next decade within one-year time which may prove detrimental for
Pakistans economy and people would have to payback these costly loans and the external
loans might be doubled in next 10 years or so. Other than $32 billion loan from China, $11
billion loan had been approved by the World Bank, $6.64 billion by the IMF.

On the subject of loans, September 04, 2013 saw the IMF's Executive Board has approving a
$6.6 billion loan for Pakistan to support its program to stabilize the economy and boost
growth while expanding its social safety net to protect the poor. The new loan will arrive just
in time. As of August, the central bank had only about $5 billion left in foreign currency
reserves, enough to cover less than five weeks of imports.

Basically, as soon as the current government came into power, the tone was set for a very
close working relationship with the IMF and World Bank.

Source: State Bank of Pakistan

According to the IMF, the program is expected to help the Pakistani economy rebound,
forestall a balance of payments crisis and rebuild reserves, reduce the fiscal deficit, and
undertake comprehensive structural reforms to boost investment and growth. Pakistans
foreign currency reserves have been severely depleted over the past two years. To secure the
loan, it had to commit to changes in the economy designed to increase growth and improve
financial stability. The measures aim to bring down the deficit, reduce pervasive electricity
shortages and increase the countrys poor rate of tax collection.

The Asian Development Bank, one of Pakistans major lenders, estimates that Pakistan needs
$6 billion to $9 billion to meet its obligations, including about $5 billion in outstanding debt
on an earlier $11 billion IMF loan package.

In an agreement with the IMF, the government was required to undertake a diagnostic study
of the power sectors regulatory framework and prepare an interim report by the end of April.
The two sides would discuss the report in the fourth review meetings.
As of 11th june, 2014, Nawaz Sharif termed the approval for a loan of $700 million for
Pakistan by the World Bank as a historic achievement. The prime minister, said that about
$600 million will be utilized for the 4500 megawatt (MW) Dasu hydropower project and
$100 million for the Sindh Irrigation project.

Finance Minister Ishaq Dar said, the WB is supporting the transformational energy initiative
in Pakistan, and it was in the prime ministers vision to work on two projects simultaneously,
and that the completion of both projects would ease the countrys energy crisis.

A member of the opposition said provinces other than Punjab have been neglected in the
2014-15 budgets, to which Dar said that the people residing in Khyber-Pakhtunkhwa (K-P)
would benefit the most from this project as the Dasu hydropower project was in K-P.
This is the first attempt by the WB to finance a large infrastructure project on a sequential
basis through a combination of credits and guarantees to mobilize the full financing over the
construction period.

To a question regarding the direction of the economy set by the incumbent government, the
WBs country director said they were much encouraged with the set of reforms as the
government was committed to enhancing regional cooperation, privatization plan by
conducting well-thought-out diagnosis of ills being faced by the country. What the
government has already done is appreciable and now right direction has been set for the
economy, he added.
THE CURRENT SITUATION
In July, nations known as the BRICS, Brazil, Russia, India, China and South Africa,
announced the creation of a new, $100 billion development bank. The project is aimed at
lending money to developing nations for investments, much like how the American and
European-backed International Monetary Fund (IMF) and World Bank operate. However,
there wont be any conditionalitys, providing developing countries with more options for
financing. It is very symbolic in terms of political meaning; it means the whole world order is

not unipolar. It is not a west centred world. It is a multipolar world. African countries trying
to get funding do not have to only follow the rules of the developed world.