GROUP MEMBERS:  

WAQAR YOUNIS 0100 

TOUQEER ALI ABBASI 0020 TAHIR RASHEED 0152

OUTLINE: i. Introduction

II. Role of IMF

III. Impact of Foreign Aid on National Economic Policy,

IV. Current state of the Economic Policy.

What is IMF ? IMF is UNO recognized international

monetary fund or reserve which helps its members.

It established in 1946 after bretton wood meeting. It has 185 members across the all nations but soviet Russia and its member are not linked with IMF. 

Introduction:

The IMF was established in 1945 to promote international monetary co-operation.

balanced growth in international trade.

promote exchange rate stability.

The Fund provides financial resources to its members to overcome temporary balance of payments.

OVERVIEW OF IMF1.SURVEILLANCE: the institution adopted a Decision on Bilateral and

Multilateral Surveillance with the objective of better integrating IMF monitoring of the global economy with its oversight over individual countries.

It also adopted a strategy for financial surveillance aimed at improving risk identification,

Developing better instruments to support integrated policy response to risks, and increasing engagement with stakeholders to improve impact

2.THE GLOBAL ECONOMY: Although economic activity showed signs of stabilizing in

advanced economies during the year and even accelerated somewhat in emerging market economies.

3. FINANCING: With the ongoing crisis, financing remained an

important mode of IMF support for its members. The IMF continued its support to low-income member

countries under the Poverty Reduction and Growth Trust (PRGT).

A review of the IMF’s framework for assessing debt sustainability recommended changes to promote more uniform outcomes.

POLICY AGENDA: The institution’s policy work for the year

reflected the priority areas identified in the Managing Director’s Global Policy Agenda.

In addition to short-term policy actions required to move the global economy from stabilization to growth,

The focus of policy priorities needed over the

medium term was on four areas. In the area of jobs and growth, analytical and operational considerations for the IMF

CAPACITY DEVELOPMENT: Capacity Development, as part of a

strategic approach to this core area of IMF activity.

The majority of technical assistance continued to be provided to the IMF’s low- and middle-income members.

Demand for IMF training programs, supported by external donors and training partners, remained robust, with the IMF’s middle-income members the primary beneficiaries

LOW-INCOME COUNTRIES: The global crisis, the IMF has remained

committed to meeting the changing needs of low-income countries.

Increasing the financial support available to these low income countries, other reforms have included overhauling the institution’s lending framework, streamlining loan conditionality, and reducing to zero the interest charges on concessional IMF loans for low-income countries through the end of 2014.

SMALL STATES: The IMF’s smallest member countries share a number of

intrinsic characteristics that translate into a common set of development challenges. Because of their small size, they have higher fixed and variable costs, with little scope to exploit economies of scale.

In the public sector, this results in higher costs and reduced volumes of services provided; in the private sector, in concentrated market structure and a lack of diversification.

Small size also influences the financial sector and how small states manage their exposure to natural disasters.

Supporting jobs and growth:

The Articles of Agreement commit the IMF to “the promotion and maintenance of high levels of employment and real income.”

In the wake of the global crisis, unemployment has reached unprecedented levels in many countries, heightening the need to generate conditions for job creation and inclusive growth.

Debt sustainability: Public debt has been on the rise since 2008,

particularly in advanced economies, where it has reached very high levels.

The resulting debt overhang presents challenges for financial stability and economic growth.

Issues associated with assessing debt sustainability and reducing vulnerabilities associated with high debt were a major focus of the IMF’s work during the year.

IMF and its Conditions • The primary objective of conditions in an IMF

program is to reserve money growth to address the macroeconomic imbalances faced by a country.

Adopting policies of fiscal. Exchange rate devaluation; "getting the

prices right", Investment. Cuts in real wages, Cuts in public expenditure.

continue.. One of the major reasons was that the

successive governments used foreign resources to fix the external payment imbalances but they did not adopt complementary policy reform.

high external debts and debt servicing

problems.

IMF Advantages If a country has a balance of payments deficit

, the IMF can step in to fill the gap.

 It serves as a council and adviser to countries attempting a new economic policy.

balanced growth in international trade.

promote exchange rate stability.

IMF Disadvantages The IMF has been criticized for not doing much

and for overreaching.

It has been criticized for being too slow or too eager to assist failing national policies.

it has been accused of being a tool for free-market countries only

Return on interest.

CHALLENGES FOR THE FUTURE:

(i) Higher trade deficit.(ii)Increase in imports of machinery. The

higher oil import bill due to higher international oil prices is a source of concern but is beyond our control.

(III)The higher machinery import, on the other hand, is still welcome as it is a reflection of the growing capacity of the economy.

Other Long Term Challenges Include:

Investment in infrastructure: Higher growth rates for an extended period of time in the range of 7 to 8 percent

Annually are possible only if energy, water resources and infrastructure needs are fully met.

IMF and Pakistan

Why Pakistan become the loan Receiver of IMF ??

1987 and PPP govt Record Deficit Budget Dialog on structural adjustment facility

1988-1999 Darkest ERA Lack of implementation Undrawn amount Back to back Nine Agreements

2000-2007 The best regime Fulfillment of polices

Era of Recession 2008 to 20009 Deficit of record time

2010 and onward Implementation of policy New grants Easy pay back procedures

Special Drawing Rights Easy way to return money Facilitation to its members

Conditions of IMF Imposition of central excise duty (CED)

on services Increase in interest rate. Changes in the Islamic Development

Bank loans The devaluation of Pakistani Rupee. Non-provision of supplementary grants

to government departments. Removal of subsidies.

What actually researcher think about IMF ????