IMF, World Bank and Pakistan

8/9/2019 IMF, World Bank and Pakistan

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Bussiness Economics IMF, World Bank and Pakistan

IMF, World Bank and Pakistan

Introduction to IMFThe IMF provides policy advice and financing to members in economic difficultiesand also works with developing nations to help them achieve macroeconomicstability and reduce poverty.

With its near-global membership of 186 countries, the IMF is uniquely placed to helpmember governments take advantage of the opportunitiesand manage thechallengesposed by globalization and economic development more generally. TheIMF tracks global economic trends and performance, alerts its member countrieswhen it sees problems on the horizon, provides a forum for policy dialogue, andpasses 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 ofeconomic trends and cross-country experiences;

Research, statistics, forecasts, and analysis based on tracking ofglobal, 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 structuralchanges and policies according to the changing economic environment. Asnowadays we are working in Globalized World and because of the recent financialCrises of 2007 and 2008 which have hit hard not only the developed world but mostseverely developing nations.

LOAN INSTRUMENTS : briefly

1. Stand-By Arrangements (SBA):

o

Countries address short-term BOP problemso Provided greatest amount of IMF resources

o The length is typically 12-24 months

o Repayment within 2-4 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 5-10 years.

3. Extended Fund Facility (EFF):

o Countries with longer-term BOP problemso Arrangements under usually 3 years.

o Repayment within 4-7 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 1-1 years.

o Surcharge of 3-5 percent

5. Short-Term Liquidity Facility (SLF):

o

Countries with pure liquidity shockso 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 disastero Emerging from conflict

o Subject to the basic rate of charge

o Interest subsidies are available

o Must be repaid within 3-5 years.

Thus these are the policies under which IMF works today:

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

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Strengthening the monitoring of global, regional, and countryeconomies. The IMF has taken several steps to improve economicand financial surveillance, which is its framework for providingadvice to member countries on macroeconomic policies. It is

emphasizing research into the links between the financial sector andthe real economy and the sharing of cross-country experiences. Ithas published new guidance on how to analyze and advice onexchange rates, and is paying more attention to the impact of theworld's most important economies on other countries' economies.And it is improving its ability to warn member countries of risks andvulnerabilities in their economies.

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

global economic developments, contained in its World EconomicOutlook, provide finance ministers and central bank governors witha common framework for discussing the global economy. The IMFnow also has the ability to call for multilateral consultations todiscuss specific problems facing the global economy with a selectgroup of countriesan innovative way of facilitating collective actionamong key players in the global economy. The first suchconsultation took place in 2006. It sought to reduce global paymentsimbalances and involved China, the euro area, Japan, Saudi Arabia,and the United States.

Analyzing capital market developments. The IMF is devoting moreresources to the analysis of global financial markets and theirlinkages with macroeconomic policy. Twice a year, it publishes theGlobal Financial Stability Report, which provides up-to-date analysisof developments in global financial markets. IMF staff also work withmember countries to help them identify potential risks to financialstability, including through the Financial Sector AssessmentProgram (described in more detail below). The IMF also offerstraining to country officials on how to manage their financialsystems, monetary and exchange regimes, and capital markets. TheIMF is currently facilitating the drafting of voluntary guidelines for

Sovereign Wealth Funds and works closely with the FinancialStability Board to promote international financial stability.

Assessing financial sector vulnerabilities. Resilient, well-regulatedfinancial systems are essential for macroeconomic stability in aworld of ever-growing capital flows. The IMF and the World Bank

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jointly run the Financial Sector Assessment Program, aimed atalerting countries to vulnerabilities and risks in their financialsectors. IMF and World Bank staff also advises on how to strengthenoversight and supervision of banks and other financial institutions.

Working to cut poverty. At present, more than a billion people areliving on less than $1 a day, and more than three-quarters of abillion people are malnourished. The IMF's role in low-incomecountries is changing as these countries grow and mature. But itscentral goal remains the same: to help promote economic stabilityand growth, laying the ground work for deep and lasting povertyreduction. Its current main priority is to help low- and middle-incomecountries cope with the adverse effects of the global economiccrisis. To that effect, it is stepping up lending to low-incomecountries to combat the impact of the global recession.

Improving IMF governance. In May 2008, the IMF's membershipapproved a two-year package of reforms to improve representationof 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 ensurea decision-making structure that reflects current global realities.The IMF is also becoming leaner and more efficient. It is trimmingexpenditures and reorganizing the way it earns revenue to pay forits operations.

Source of FundingWhere does IMF get its 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 IMFs 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 inWall Street." (Che Guevara, Marxist revolutionary,1959)

Criticism on Conditions placed by the IMFTwo criticisms from economists have been that financial aid is always bound to so-called "Conditionalities", including Structural Adjustment Programs (SAP). It isclaimed that conditionalities (economic performance targets established as aprecondition for IMF loans) retard social stability and hence inhibit the stated goalsof the IMF, while Structural Adjustment Programs lead to an increase in poverty inrecipient countries.

Condition to increase PrivatizationOne of the main SAP conditions placed on troubled countries is that thegovernments sell up as much of their national assets as they can, normally towestern corporations at heavily discounted prices. These privatization policies hurtsseverely the economies of developing nation and through this Western MultinationalOrganizations earn huge profits by investing very less amount.

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Conditions to increase TaxesIt is said, that IMF sometimes advocates "austerity programs,"increasing taxes even when the economy is weak, in order to generate governmentrevenue and balance budget deficits. Countries are often advised to lower theircorporate tax rate. These policies were criticized byJoseph E. Stieglitz, formerchief economist and Senior Vice President at the World Bank, in hisbook Globalization and Its Discontents. He argued that by converting to amore Monetarist approach, the fund no longer had a valid purpose, as it wasdesigned to provide funds for countries to carry out Keynesian reflations, and thatthe IMF "was not participating in a conspiracy, but it was reflecting the interests andideology of the Western financial community".

Conditions to remove SubsidiesIMF forces the government to remove the subsidies which are very essential for thedeveloping economies. By removing these subsidies cost of inputs increases and

business remains no longer profitable as exports orders are not met as competitorsare having subsidies and government help.Thus business is closed and unemployment generates at an increasing rate.

Devaluation of the CurrencyIMF 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 ratesIMF 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 dont 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 andfollowed 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 itscompliance to policy proposals by the Bretton Woods institutions, experienced acatastrophic economic crisis in 2001, which some believe to have been caused byIMF-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, andsecurity and privatization of strategically vital national resources Others attributethe crisis to Argentina's misdesigned fiscal federalism, which caused sub nationalspending to increase rapidly. The crisis added to widespread hatred of thisinstitution in Argentina and other South American countries, with many blaming theIMF for the region's economic problems.

The current as of early 2006 trend towards moderate left-wing governmentsin the region and a growing concern with the development of a regional economicpolicy largely independent of big business pressures has been ascribed to this crisis.

Kenya, Before the IMF got involved in the country, the Kenyan central bankoversaw all currency movements in and out of the country. The IMF mandated thatthe Kenyan central bank had to allow easier currency movement. However, theadjustment resulted in very little foreign investment, but allowed KamleshManusuklal Damji Pattni, with the help of corrupt government officials, to siphon offbillions ofKenyan 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 Triceanu stated that "Since2005, IMF is constantly making mistakes when it appreciates the country'seconomic performances"

Irelandcan be seen as a next example as in September 2007 the IMF said "giventhe Irish economy's strong fundamentals and the authorities' commitment to soundpolicies, the Directors expected economic growth to remain robust over the mediumterm". Seventeen months later in April 2009 the New York Times quoted Nobelprize-winning economist, Paul Krugman, who identified Ireland as a model for theworst-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 (orreputedly most of the Fund's membership) have experienced a banking collapsethat they claim have reduced GDP by four percent or more, far more than at anytime in Post-Depression history. The considerable delay in the IMF's response to anycrisis, 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 healthIn 2008, a study by analysts from Cambridge and Yale universities published on theopen-access Public Library of Science concluded that strict conditions on theinternational loans by the IMF resulted in thousands of deaths in EasternEurope by tuberculosis as public health care had to be weakened. In the 21countries 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 linkhigher taxes under "austerity programs" with economic contraction.

Currency devaluation is recommended by the IMF to the governments of poornations 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 CriticismHere is what IMF and its 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 forthe 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 toanalyze 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 Pakistanigovernment.

It is important to note that in the tenure of last two decades, on average almost44% of the total lending amount has been drawn from the original 100% agreedupon lending amount because of the failure of the government to act upon the strictmeasures determined by IMF. For the first time in the year 2000, this tradition wasbroken in Musharraf regime when Musharrafs government successfully

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

It is also very interesting to note that only two loan arrangements were made duringthe 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 regulatoryframework 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 rateand other economic indicators right after infusion of IMF funds in the economy except in the

second last lending arrangement in Musharrafs regime when full amount of loan was drawnfrom 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 thenrestoration 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 IMFloan 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 imbalancesin particular not passing on

the international price increases to domestic consumers, but

covering prices increases through rising subsidiesthe 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 exchangerate 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 stabilizationprogram 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 countrys 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 withthe 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 FARThe 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 consecutiveyear 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

TheWorld Bankis aninternational financial institutionthat provides leveragedloanstopoorer countriesforcapital programs. The World Bank has a stated goal ofreducingpoverty.

The World Bank is one of the worlds largest sources of funding and knowledge tosupport governments of member countries in their efforts to invest in schools andhealth centers, provide water and electricity, fight disease and protect theenvironment.

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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 countriesboth developed and

developingthat are its members.

Since it was set up in 1944 as the International Bank for Reconstruction andDevelopment. The number of member countries increased sharply in the 1950s and1960s, when many countries became independent nations. As membership grewand their needs changed, the World Bank expanded and is currently made up of fivedifferent agencies.All support to a borrowing country is guided by a single strategy that the countryitself designs with help from the World Bank and many other donors, aid groups,and civil society organizations.

Departments:

The World Bank differs from theWorld Bank Group, in that the World Bankcomprises 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 poorercountries, while IDA focuses on the world's poorest countries. Their work iscomplemented by that of the International Finance Corporation (IFC), MultilateralInvestment Guarantee Agency (MIGA) and the International Centre for theSettlement 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 thatinclude investments in education, health, public administration, infrastructure,financial and private sector development, agriculture, and environmental andnatural resource management.

The World Bank, established in 1944, is headquartered in Washington, D.C. It hasmore than 10,000 employees in more than 100 offices worldwide.

Activities of World BankAlthough World Bank has been working since 1944 but there has been manystructural changes and policies according to the changing economic environmentand strong criticism from Developing world, human rights groups and NGOsworking 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). Asnowadays priorities are changed very rapidly because of Globalization and recentWorld financial crisis in developed and developing world.

Purposes of World BankWorld 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 worlds 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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LoansThe World Bank offers two basic types of loans:

1- Investment loans for goods, work and services to support economicand 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 thedevelopment 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 intopractice. Once a loan is approved and becomes effective, the borrower puts theproject 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. Allloans are governed by operational policies, which make sure that operations areeconomically, financially, socially and environmentally sound.

Main Focuses of World Bank

Poverty Reduction Strategies

For the poorest developing countries in the world the banks assistance plans arebased on poverty reduction strategies; by combining a cross-section of local groupswith an extensive analysis of the countrys financial and economical situation theWorld Bank develops a strategy pertaining uniquely to the country in question. Thegovernment then identifies the countrys priorities and targets for the reduction ofpoverty, 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 pledgedUS$25.1 billion in "aid for the world's poorestcountries", aid that goes to the World BankInternational DevelopmentAssociation(IDA) which distributes the gifts to eighty poorer countries. Whilewealthier nations sometimes fund their own aid projects, including those fordiseases, and although IDA is the recipient of criticism, Robert B. Zoellick, thepresident 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 countriesrely on".

Clean Technology Fund Management

The World Bank has been assigned temporary management responsibility oftheClean Technology Fund (CTF), focused on makingrenewable energycost-competitive with coal-fired power as quickly as possible, but this may not continueafter UN's Copenhagen climate change conference in December, 2009, because ofthe Bank's continued investment incoal-fired power plants.

Country Assistance Strategies

As a guideline to the World Bank's operations in any particular country, a CountryAssistance 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 orother parties.

World Banks Areas of operationThe 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 NGOs The World Bank has long been criticized by a range of non-governmentalorganizations and academics, including its former Chief Economist Joseph Stieglitz,who is equally critical of the International Monetary Fund, the US TreasuryDepartment, 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 freemarket reform policieswhich the Bank advocates in many casesin practice areoften harmful to economic development if implemented badly, too quickly ("shocktherapy"), in the wrong sequence, or in very weak, uncompetitive economies.

Criticism by Economist

InMasters of Illusion: The World Bank and the Poverty of Nations (1996),Catherine Caulfield argues that the assumptions and structure of the World Bankoperation in the end harms southern nations rather than promoting them. Caulfieldfirst criticizes the highly homogenized and Western recipes of "development" heldby the Bank. To the World Bank, different nations and regions are indistinguishable,and ready to receive the "uniform remedy of development". She argues that toattain even small portions of success, Western approaches to life are adopted andtraditional economic structures and values are abandoned. A second assumption isthat 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 andNGO-drivenimperialismand that its intellectual contribution functions, primarily, toseek to blame the poor for their condition.

Criticism on World Bank Governors

One of the strongest criticisms of the World Bank has been the way in which it isgoverned. While the World Bank represents 184 countries, it is run by a smallnumber of economically powerful countries. These countries choose the leadershipand senior management of the World Bank and as such, their interests aredominant within the bank.

Criticism on World Banks Dual Role

The World Bank has dual roles that are often contradictory: that of a politicalorganization 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 indelivering development aid, technical assistance, and loans. These dual roles areoften inconsistent with one another.

Criticism on World Bank on Imposing Market-Oriented Policies

The World Banks obligations to donor countries and private capital markets havecaused it to adopt policies and programs that endorse liberal economic theorywhich dictates that poverty is best alleviated by the implementation of market-

oriented policies.

Criticism on World Banks Policies of Privatization and Washington

Consensus

In the 1990s the World Bank and the IMF forged the Washington Consensus, a set ofpolicies which includedderegulationand liberalization of markets,privatizationandthedownscaling of government. Though the Washington Consensus was conceivedas 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, werecarried out. Many now agree that the Washington Consensus placed too muchemphasis on the growth of GDP and not enough on the sustainability of that growth;economically, socially, politically and environmentally, or on questioning whether ornot this growth actually contributed to increased living standards.

Criticism on World Banks Developing PoliciesSome analysis shows that the World Bank has increased poverty and beendetrimental tothe environment,public health, andcultural diversity. Some criticsalso claim that the World Bank has consistently pushed aneoliberalagenda,imposing policies on developing countries which have been damaging, destructiveand anti-developmental.

World Bank Promoting US and Western Interests

It has also been suggested that the World Bank is an instrument for the promotionof US or Western interests in certain regions of the world. Consequently, sevenSouth American nations have established theBank of the Southin order to minimizeUS 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 ofthe Bank is always a citizen of the United States, nominated by the President of theUnited States (though subject to the approval of the other member countries).

There have been accusations that the decision-making structure is undemocratic, asthe US effectively has a veto on some constitutional decisions with just over 16% ofthe shares in the bank; moreover, decisions can only be passed with votes fromcountries whose shares total more than 85% of the bank's shares. A furthercriticism concerns internal governance and the manner in which the World Bank isalleged 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 up75% was not published. Officials confided that they believed it was withheld frompublication to avoid embarrassing the President of the United States, George W.Bush.

Criticism on world bank often form protest all along the world

including USCriticism of the World Bank often takes the form ofprotestingas seen in recentevents such as the World Bank Oslo 2002 Protests, theOctober Rebellion andtheBattle of Seattle. Such demonstrations have occurred all over the world, even

amongst theBrazilianKayapo people.

Knowledge ProductionThe World Bank has been criticized for the manner in which it engages in theproduction, accumulation, circulation, and functioning of knowledge. The Banksprocess in the production of knowledge has become integral to the funding and

justification of large capital projects. The Bank relies on a growing network oftrans-local scientists, technocrats, NGOs, and empowered citizens to help generatedata and construct discursive strategies.

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Its capacity to produce authoritative knowledge is a response to intense scrutiny ofBank projects resulting from the successes of growing anti-Bank and alternative-development movements.Development has relied exclusively on one knowledge system, namely, themodern 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 andactivists might find alternative rationales to guide interventionist action away fromWestern (Bank) produced ways of thinking. Knowledge production has become anasset to the Bank and it is generated and used in highly strategic waysto provide

justifications for development.

Structural Adjustment since 1970sThe impact ofstructural adjustmentpolicies on developing countries has been oneof 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 toailing countries while enforcing policy changes meant to mitigate domestic inflationand fiscal imbalance. Some of these policies included encouraging production,investment and labor-intensive manufacturing, changing realexchange ratesandaltering the distribution of government resources.

Structural adjustment policies were most effective in countries with an institutionalframework already in place that allowed for these policies to be implemented moreeasily. For some countries, particularly in Sub-Saharan Africa, with or without theimplementation of structural adjustment policies, economic growth regressed andinflation worsened. The alleviation of poverty was not a goal of structuraladjustment loans and in fact, the circumstances of the poor often worsened due toa reduction in social spending and an increase in the price of food as subsidies werelifted.

Era of 1980s

By the late 1980s, international organizations began to recognize that structuraladjustment policies were exacerbating the circumstances of the worlds poor. TheWorld Bank responded by restructuring structural adjustment loans allowing forsocial spending to be maintained and encouraging a more gradual implementationof policies such as subsidy reductions and price changes.

From the Year 1999

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

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reinforcing the relationship between lending and client states, many believe thatthe World Bank has prevented indebted countries from implementing autonomousnational 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 borrowcapital from the World Bank or IMF without a domestic water-privatization policy asa precondition. The Bank is utilizing the 'Washington Consensus' model ofdevelopment to promote water privatization. Following this model, the World Bankis forcing many countries to commodify their water resources, rather than usingtheir expertise in the public sector to acknowledge water as a universal human rightand an essential public service.The push for water privatization development playsupon the shocking tragedy that much of the world lacks access to affordable andclean water

Business and political interests of main stakeholders

Although controversial and far from being proven, there is criticism that World Bankand IMF are used as a legitimized mean to fulfill business (interests of largecorporations to enter the natural resource markets of the country and obtain thelegal 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 exampleConfessions of an EconomicHit Man.

Sovereign immunityDespite claiming goals of good governance and anti-corruption the World Bankrequiressovereign immunityout of countries it deals with. Sovereign immunitywaives a holder from all legal liability for their actions. It is proposed that thisimmunity from responsibility is a shield to which [The World Bank] wants resort tofor escaping accountability and security by the people.As theUnited Stateshasveto power, it can prevent the World Bank from taking any actions against itsinterests.

Pakistan and World Bank

Current World bank Projects in Pakistan

During the past four years from FY 2006 - 2009, the Bank has approved 30 projectsof total US$3.7 billion for Pakistan.The World Bank is currently working with the Government of Pakistan to prepare anew Country Assistance Strategy (CAS) for the period FY2010-2013. The new CASwill take into consideration Pakistan's development priorities as articulated in thecountry's own Poverty Reduction Strategy Paper.Over the last few years, Pakistans 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 safetynet, an infrastructure deficit particularly in energy, transport, and irrigation, andpoor delivery of social services. However, stringent implementation of the economicprogram will be critical to success, and timely responses of fiscal and monetaryauthorities 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 maintainingstrong programs in education, and irrigation.

World Bank supporting reforms at both federal and provincial level.

The Federal and Provincial Governments have been implementing various reformprograms aimed at encouraging growth, investment, and employment generation.Reforms at the provincial level are specifically aimed at improving delivery of socialservices like education, health, clean drinking water, and sanitation.In June 2007, the World Bank approved a US$350 million credit to support ongoingimplementation 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 publicfinance, governance and financial regulatory frameworks. These interventions havebeen successful in bringing about concrete changes in delivery of provincialservices 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 designedto reduce poverty and empower the rural and urban poor in Pakistan through theprovision 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 forsmall scale infrastructure projects; training and skill development and social sectorinterventions. The program is impacting over 10 million people and has mobilizedover 66,000 community organizations (COs) in 27,000 localities across 111 districtsin the country. More than 13,000 small scale village-based projects have beenidentified, constructed and maintained by communities right across the countrybenefiting 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 7years PPAF has driven the microfinance sector growth from 60,000 borrowers tomore 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 peoplewithout shelter in North West Frontier Province (NWFP) and Azad Jammu andKashmir (AJ&K).In response, the government created the Earthquake Relief and ReconstructionAuthority (ERRA) and launched an ambitious US$1.5 billion owner-driven rebuildingprogram - largely suited to the mainly rural affected population.

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Under ERRAs Rural Housing and Reconstruction Program (RHRP), partially fundedby the World Bank, homeowners are given around US$3,000 in installments to buildquake-resistant homes - with routine visits by inspection teams to ensurecompliance to agreed seismic-resistant standards. Owner driven reconstruction andrehabilitation of an estimated 463,000 houses have begun and is at various stagesof 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 educationoutcomes.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 providedthrough development policy operations with a strong focus on primary andsecondary education.These programs target increasing participation of girls and children from poorer

household through interventions such as student stipends and conditional grantsystems. 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 instudent learning. NEAS has established, piloted and improved assessmentmechanisms and instruments, which are now being regularly administered.Already, three rounds of assessments have been completed in the four key subjectsin Grade IV (Mathematics, Language, Science and Social Studies), and two subjectsin 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 andrelevance 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 topurchase the oral polio vaccine. The money is part of an innovative financingpartnership (IDA Buy-down) between the World Bank, the Bill & Melinda GatesFoundation, Rotary International, and the United Nations Foundation. Theseorganizations have formed the Investment Partnership for Polio, an initiative to helperadicate polio worldwide. The loan to Pakistan will help the countrys PolioEradication Initiative which aims to make Pakistan a Polio free country. Since 1997the 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 grantand 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 andsustainable community development schemes, and basic infrastructure and

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services, using participatory community-based approaches. To achieve this, therole and capabilities of local governments at the district and lower levels have beenstrengthened to extend technical, financial, and management support toCommunity-Based Organizations (CBOs).

CBO are being mobilized and their capacity is being enhanced to increase their

participation in development activities. Governance, transparency, andaccountability are being more effective through improvements in operational,monitoring and evaluation, and financial and budgetary procedures for projectimplementation. In AJK, the project has already reached a population of 893,000against the original target of 830,000, through 320 CBOs. Out of the 54 TehsilMunicipal 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 aconcentrated epidemic among injecting drug users in several cities. The key

challenge facing the country is to expand and improve quality of HIV preventiveservices to vulnerable groups that are most at risk of contracting and transmittingthe disease. The World Bank is also organizing a region wide Development Marketplace 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 controland is a medium

term program that eventually links to the GOPs 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 andincrease private sector.

Participation in operation of rail services.

Modernize the trucking industry and reduce the cost of externalities for thecountry.

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

Promote and ensure safe, secure, economical and efficient civil aviationoperations 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 aboutWorld Banks activities and to welcome and seek out opportunities to explain

about work to the widest possible audience. World Banks advisory work

includes a number of Pakistan specific reports e.g. Pakistans Country Water

Resource Assistance Strategy, Pakistan Higher Education Policy Note.

1- Pakistan Promoting Rural Growth and Poverty Reduction2- Growth and Export Competitiveness,3- Pakistan Strategic Country Environment Assessment4- Provincial Economic report.

These reports are made public as soon as they are finalized. All the projectdocuments are also available on our Pakistans external website.

10. World Bank relies on local expertise.

Around 90 percent of the staff in Islamabad office, plus additional staff in World

Banks Washington office are Pakistanis.

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While a large part of World Banks value is its global experience and expertise,local knowledge is indispensable to effective development.

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

Most importantly World Banks overall assistance to the country is specificallydesigned to support its own development goals.

World Banks have periodic client satisfaction surveys through which they assesshow their services are perceived by a cross section of society including thegovernment, private sector, civil society, academia, and media etc. These polls arecarried 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 seesome positive impacts that in 2008 Pakistan faced economic problems and Pakistanwas not having any other option than to take loans from IMF to overcome it deficitand economic problems.

Now as the situation is getting better Pakistan should focus on proper implementingthese loans and should make those policies which help to promote economicactivities and generate employment. Rather than eliminating development projects.Exports will be badly hurt as Pakistan is an agricultural country and most of itsexports are of textiles.

There are many competitors of Pakistan like China, India, Bangladesh, than Egyptand 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 andhigh rate of corruption and markup. Under these circumstances doing business inPakistan is very tough and so organizations are working on plans of downsizingcutting their expenses and they are reluctant to invest in new projects. Then on theglobal level there is recession in the global market. Thus they are unable to get thenew orders for their products. Whereas imports are increasing with the shut downof local businesses and investors moving out of Pakistan with their credit andmoving to countries like China and Vietnam, turkey and Egypt where they can getcheap 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

cant 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.

IMF, World Bank and Pakistan

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