Prepared for SIR RIAZ AHMED (Lecturer

)

Prepared by S.M.ADIL RAZA BM-25264 TAUQEER IQBAL NIAZ AHMED UMER SAYEED SHAZIA BASHIR BM-25301 BM-25077 BM-25303 BM-25069

November 11,2010

I.M.F (international monetary fund) 2 TH 11 NOVEMBER 2010

TABLE OF CONTENT

ACKNOWLEDGMENT. GLOSSARY. ABSTRACT. INTRODUCTION. EXECUTIVE SUMMARY. LITERATURE REVIEW. RESEARCH METHODOLOGY FOR DATA. SUGGESTIONS. CONCLUSION. REFERENCES. APPENDIX

I.M.F (international monetary fund) 3 TH 11 NOVEMBER 2010

LETTER OF ACKNOWLEDGEMENT:
First of all, we would like to say Alhamdulillah, for giving us the strength and health to do this project work until it done not forgotten to our family for providing everything, such as money, to buy anything that are related to this project work and their advise, which is the most needed for this project. Internet, books, computers and all that as our source to complete this project. They also supported me and encouraged me to complete this task so that we will not procrastinate in doing it. Then we would like to thank our teacher, Sir Riaz Daar for guiding us and our friends throughout this project. We had some difficulties in doing this task, but he taught us patiently until we knew what to do. He tried and tried to teach us until we understand what we supposed to do with the project work. Last but not least, me and my group members and friends who were doing this project with us and sharing our ideas. They were helpful that when we combined and discussed together, we had this task done and the way we research about our project it is very hard but our university and friends helped me a lot therefore now we are in a position to represent the most authentic and up to date knowledge about the project report and it will also help us to know the most rare facts and figures about the topic

Sincerely with regards S.M.ADIL RAZA NIAZ AHMED UMER SAYEED SHAZIA BASHIR ( BM-25264) ( BM-25077) ( BM-25303) ( BM-25069)

TAUQEER IQBAL ( BM-25301)

I.M.F (international monetary fund) 4 TH 11 NOVEMBER 2010

GLOSSARY

• • • • • • • • • • • • • • • • • • •

I.M.F SDR WB EF lDC SFF BSFF T.F CF FC WTO UNO GDP SRF SCA IMFC QFRG PIN NPV

(international monetary fund) (special drawings rights ) ( world bank ) ( extended facility ) ( less developed countries ) ( supplementary financing facility) ( buffer stock financing facility ) ( trust fund ) ( common Fund ) ( fund conditionality ) ( World Trade organization ) ( united nation organization ) ( Gross National Product ) ( supplemental reserve facility ) ( special contingent account ) ( international monetary and fiscal committee ) ( quota formula review group ) ( public information notice ) ( net present value )

I.M.F (international monetary fund) 5 TH 11 NOVEMBER 2010

ABSTRACT.

Crises on external sovereign debt are typically defined as defaults. Such a definition adequately captures debt-servicing difficulties in the 1980s, a period of numerous defaults on bank loans. However, defining defaults as debt crises is problematic for the 1990s, when sovereign bond markets emerged. Not only were there very few defaults in the 1990s, but liquidity indicators do not play any role in explaining defaults in this period. In order to overcome the resulting dearth of data on defaults and capture the evolution of debt markets in the 1990s, we define debt crises as events occurring when either a country defaults or its bond spreads are above a critical threshold. We find that, when information from bond markets is included, standard indicators—solvency and liquidity measures, as well as macroeconomic control variables—are significant.

and serves as a forum where they can discuss the national. in the northeastern United States. agreed on a framework for international economic cooperation. regional. and raise living standards. when representatives of 45 governments meeting in the town of Bretton Woods. This is essential for sustainable economic growth and rising living standards.F (international monetary fund) 6 TH 11 NOVEMBER 2010 INTRODUCTION: What does the International Monetary Fund do? The IMF is the world's central organization for international monetary cooperation. encouraging them to adopt policies that foster economic stability. regional. It provides advice to its 184 member countries. . They believed that such a framework was necessary to avoid a repetition of the disastrous economic policies that had contributed to the Great Depression of the 1930s. reduce their vulnerability to economic and financial crises. It is an organization in which almost all countries in the world work together to promote the common good. The IMF also makes financing temporarily available to member countries to help them address balance of payments problems—that is. To maintain stability and prevent crises in the international monetary system. and global economic and financial developments. The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to buy goods and services from each other. the IMF reviews national. New Hampshire. And it provides technical assistance and training to help countries build the expertise and institutions they need for economic stability and growth.M. Why was it created? The IMF was conceived in July 1944. when they find themselves short of foreign exchange because their payments to other countries exceed their foreign exchange earnings. and global consequences of their policies.I.

I. D.M. assisting in the establishment of a multilateral system of payments. promoting exchange stability. of which US$146 billion have not been drawn (see table) Biggest borrowers (credit outstanding as of 8/31/10): Romania. Hungary Surveillance consultations: Concluded in FY2010—120 countries in FY2010. Executive Board: 24 Directors representing countries or groups of countries Staff: Approximately 2. and making resources available (with adequate safeguards) to members experiencing balance of payments difficulties .F (international monetary fund) 7 TH 11 NOVEMBER 2010 Executive Summary FAST FACTS ON THE IMF • • • • • • • Membership: 187 countries Headquarters: Washington.500 from 158 countries Total quotas: US$328 billion (as of 8/31/10) Additional pledged or committed resources: $600 billion Loans committed (as of 8/31/10): US$200 billion. Ukraine.C. facilitating the expansion and balanced growth of international trade. of which 111 voluntarily published information on their consultation (as of 05/31/10) • • • • Technical assistance: Field delivery in FY2009—181 person years Original aims: Article I of the Articles of Agreement sets out the IMF’s main goals: o o o o o promoting international monetary cooperation.

• To strengthen the economies of member countries by making fund's resources available to them. It implements lending operations for helping the countries for overcoming economic crisis. but would also be able to sustain it. • To promote co-operation among economies of world. Another important purpose of IMF is the expansion of global trade. It aims at establishing exchange rate stability. IMF also acts as an institution for ensuring international monetary cooperation. IMF also provides technical assistance to the member countries for promoting their economic growth and stability. Besides. IMF provides assistance to its member countries for correcting BOP or balance of payment disequilibrium. . For ensuring exchange rate stability. and elimination of the shortage of international liquidity.I. it discourages the practice of competitive depreciation of exchange rates. It aims at maintaining balanced growth of the world economy.M. especially to the less developed countries to overcome BOP difficulties. It provides liberal assistance to the countries.F (international monetary fund) 8 TH 11 NOVEMBER 2010 LITERATURE REVIEW PURPOSE AND OBJECTIVES The main purpose of International Monetary Fund is to create an economic system that can instill stability and growth in the world economy by economic cooperation among the nations. IMF also intends to promote international trade by removing foreign exchange restrictions. which in turn will not only promote high level of employment and income.

the current and new participants in the New Arrangements to Borrow (NAB) agreed to expand the NAB to about US$550 billion. 2010. resources from about US$250 billion to US$750 billion. which broadly reflect each country’s economic size. primarily Resources: through payment of quotas. GOVERNANCE AND ORGANIZATION Resources: The IMF’s resources are provided by its member countries. To deliver on this pledge. • To reduce the poverty in member countries and to promote high employment by facilitating sustainable economic growth. RESOURCES. April 2009 G-20 Summit. Members are currently considering the appropriate scale .F (international monetary fund) 9 TH 11 NOVEMBER 2010 • To promote exchange stability and to facilitate the expansion and balanced growth of International trade.M. At the quotas.I. which was approved by the Executive Board of the IMF on April 12. world leaders pledged to support a tripling of the IMF's lending Summit. • To lesson the chances of disequilibrium in the international BOP of member countries.

which consists of one Governor and one Alternate Governor from each member country. Committee (IMFC) and meet at least twice each year. in the 14th General Review of Quotas to be concluded by January 2011. The Managing Director is Head of IMF staff and Chairman of the Executive Board. but the membership recently agreed to adopt a new income model based on a range of revenue sources better suited to the diverse activities of the Fund. and is assisted by three Deputy Managing Directors . Governors. Twenty-four of the Governors sit on the International Monetary and Finance Meetings. At the top of its organizational structure is the Board of Governors. The Board of Governors meets once each year at the IMF-World Bank Annual Meetings. Historically. this work is Board.M. guided by the IMFC and supported by the IMF’s professional staff. The day-to-day work of the IMF is conducted by its 24-member Executive Board. Governance and organization: The IMF is accountable to the governments of its organization: member countries.I.F (international monetary fund) 10 TH 11 NOVEMBER 2010 of an increase in quotas. Twenty-four of the Governors sit on the International Monetary and Finance Committee (IMFC) and meet twice each year. which represents the entire membership. the annual expenses of running the Fund have been met mainly by interest receipts on outstanding loans.

F (international monetary fund) 11 TH 11 NOVEMBER 2010 ORGANIZATION OF THE FUND The IMF has a management team and 17 departments that carry out its country. which gives an indication of resources available for lending. Income model reform: . Special Drawing Rights: The IMF's resources come mainly from the money that countries pay as their capital subscription when they become members. Management: The IMF has a Managing Director.M. This section also explains where the IMF gets its resources and how they are used.I. Borrowing arrangements: The IMF keeps track of its future ability to lend by monitoring its one-year forward commitment capacity. Gold: The IMF also has some of the largest official holders of gold in the world. who is head of the staff and Chairman of the Executive Board. policy. One department is charged with managing the IMF's resources. analytical. and technical work. He is assisted by a First Deputy Managing Director and two other Deputy Managing Directors Quotas: The IMF's resources come mainly from the money that countries pay as their capital subscription when they become members.

the IMF can declare it scare. If the demand of any particular country currency increases and its stock with the fund falls below 75% of its quota. The IMF allows the debtor country to purchase foreign currency in exchange for its own currency up to 75% of its quota plus an addition 25% each year. FUNCTION OF THE FUND: IMF main function is to purchase and sell the member countries currencies. .F (international monetary fund) 12 TH 11 NOVEMBER 2010 In May 2008. functional.M.I. and support responsibilities. they are responsible to the IMF and not to the authorities of the countries of which they are citizens. IMF purchases the Scare currency by gold. aimed at ending the organization's over-reliance on lending income. and information. The maximum limit of the quota is 200% in special circumstances. liaison. Staff of international civil servants: The IMF's employees come from all over the world. If any country is facing adverse balance of payment and facing the difficulty to get the currency of creditor country. it can get short term credit from the fund to clear the debit. But IMF also tries to increase its supply by these methods. the IMF's Board of Governors endorsed a new income model for the IMF. The IMF staff is organized mainly into area.

Some of the works done by IMF are: • • • • Helping in international trade.F (international monetary fund) 13 TH 11 NOVEMBER 2010 IMF borrows from those countries scare currency that has surplus amount.I. When the devaluation policy is indispensable for any country then IMF provides loan to correct the balance of payment of that country The IMF does a number of supervisory works relating to financial dealings between different countries. IMF is very useful to avoid the competitive depreciation which took place before World war-II. business between countries Looking after exchange rates Looking after balance of payments Helping member countries in economic development  SHORT-TERM CREDIT INSTITUTION  IMPROVING BOP POSITION  INTERNATIONAL CONSULTATIONS  PULLING DOWN TRADE BARRIERS  RESERVOIR OF CURRENCIES . IIMF allows the debtor countries to impose restrictions on the imports of creditor country.M. that is.

given by the lawyer and politician William Jennings Bryan to the Democratic convention in 1896.F (international monetary fund) 14 TH 11 NOVEMBER 2010 I. or payments in coin.F AND GOLD STANDARD: Gold Standard Act of 1900 The Gold Standard Act of 1900 (31 Stat. The Civil War was one such event. and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard. After the war the question of whether the country should return to a specie-based monetary system was hotly contested. were often suspended in times of monetary stress. shall be the standard unit of value. The act set the value of gold at $20. which was more plentiful than gold. but debate raged as to their relative values and whether one of those precious metals should be preferred over the other in the monetary system. Such specie payments.M.I... The high point of that movement was the "Cross of Gold" speech. But it also reflected an age-old debate over whether gold or silver should control monetary measurements. Bryan became the Democratic . A populist movement sought to inflate farm prices through the increased use of paper currency and called for the use of silver. as backing for that currency. 45) was the culmination of an epic political battle over monetary policy in the United States. The act further states that: the dollar consisting of twenty-five and eight-tenths grains of gold nine-tenths fine . BACKGROUND Gold and silver have long served as monetary standards throughout the world.M. The introduction of paper currency complicated this debate because it usually promised to pay gold or silver upon demand. and it shall be the duty of the Secretary of the Treasury to maintain such parity.67 per troy ounce (troy weight is based on a pound of twelve ounces).

These floating currency rates are set by market forces rather than the artificial parity rates set by the IMF. the United States and Great Britain created the International Monetary Fund (IMF).M. currency exchange rates were allowed to float against each other. Within two years. That system. President Richard Nixon announced on August 15. THE INTERNATIONAL MONETARY FUND At the conclusion of World War II. 1971. that the United States would no longer exchange dollars for gold under the IMF standard. and change constantly in foreign exchange transactions conducted through banks and currency dealers. and the United States went onto a gold standard in 1900 with the adoption of the Gold Standard Act. Treasury when world gold prices exceeded the $35. for example.R. and Congress nullified clauses in public and private contracts that provided for payment in gold.S. United States. and Norman v. Nortz v. thereby tying much of the world to a dollar standard that was in turn tied to a gold standard.00 value set under the IMF agreement—on U. The Gold Reserve Act of 1934 also withdrew all gold from circulation. Other countries participating in the IMF were required to maintain their currencies at a specified parity against the dollar. gold stocks. Supreme Court considered the constitutionality of the ban on gold in the so-called Gold Clause Cases. will get more dollars for their grain.S. In 1935 the U. President Franklin Roosevelt changed the valuation of gold to $35 per ounce of gold as an inflationary measure. United States. where an increase in the valuation of gold tends to increase price levels in general.F (international monetary fund) 15 TH 11 NOVEMBER 2010 candidate for president but lost in the general election. where the court upheld the statute's negation of gold clauses: Perry v. That body set a "value" of $35 per ounce for gold. but they will have to pay more for the goods purchased with the inflated grain sale proceeds. fell apart after debilitating inflation in the 1960s caused a run— as countries began exchanging dollars for gold from the U. Farmers. however. In 1975 the IMF eliminated gold as the basis for international monetary . The Great Depression in the 1930s resulted in the abandonment of the gold standard by the United States. Baltimore & O.I.S.R.

I. Individuals in the country are free to hold any amount of gold in bullion or coin. • • • • International reserves are mostly held in gold. The creation of paper money is linked to the amount of gold reserves held by the central banking system. the nominal or face value of the coin must be greater than the intrinsic value of the metal in the coin. Individuals are free to import and export gold in any amount. ROLE OF THE GOLD: The amended articles provide a gradual reduction in the role of gold in the international monetary system thus  Elimination of the function of gold as the common denominator of par value and as the unit of value of the special drawings rights  The abolition of the official price of gold . This is referred to as convertibility. the prohibition against gold clauses was repealed. and two years later. A nominal service fee (or seigniorage) is charged to cover minting costs while providing the government with revenue. This is known as inter-convertibility. Paper money and gold can be equally exchanged for each other at a legal predetermined rate.M. Metal coins (other than gold) can be used only as token money.F (international monetary fund) 16 TH 11 NOVEMBER 2010 standards. That is. • • • Monetary authorities will accept gold bullion on demand and coin it or convert the domestic currency into gold. A gold standard has eight distinguishing characteristics: • The value of the principal unit of currency of a country on a gold standard is measured in relation to a fixed and predetermined quantity of gold. The monetary authorities will also exchange paper currency and nongold coins for gold on demand. allowing private sales of gold.

created by the IMF in 1969 to supplement its member countries’ official reserves.F (international monetary fund) 17 TH 11 NOVEMBER 2010  The abrogation of obligatory payments in gold by members to the fund and by the fund to the members and elimination of the authority for the fund to accept gold except under decision taken with the majority of the total voting power  The fund is to complete the disposition of 50 million ounces of gold  The authorization of the fund to dispose of the remainder of its gold holdings in various ways by sale at market prices or official prices  Profit on the sales of gold to be placed in the special account for use in the ordinary operations or for the other use including those for the special benefit of members with low per captia income  The fund is to avoid the management of the price or the establishment of a fixed price in the gold market  The members to collaborate with the funds and the others members in order to promote better surveillance of international liquidity and making SDR’s the principal reserves asset in the international monetary system SDR SPECIAL DRAWING RIGHTS Special Drawing Rights (SDRs) September 29. and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on August 28 and a special allocation on September 9. .4 billion to SDR 204 billion (equivalent to about $308 billion. Its value is based on a basket of four key international currencies. the amount of SDRs increased from SDR 21.M. 2010 The SDR is an international reserve asset. converted using the rate of August 31.I. 2010). 2009.

only a few years later.M. In addition to its role as a supplementary reserve asset.S. It is . serves as the unit of account of the IMF and some other international organizations. In addition. through the arrangement of voluntary exchanges between members. dollar—proved inadequate for supporting the expansion of world trade and financial development that was taking place. the SDR was redefined as a basket of currencies. The SDR is neither a currency. The U. the SDR. and second. Rather. dollar. A country participating in this system needed official reserves— government or central bank holdings of gold and widely accepted foreign currencies— that could be used to purchase the domestic currency in foreign exchange markets.F (international monetary fund) 18 TH 11 NOVEMBER 2010 The role of the SDR The SDR was created by the IMF in 1969 to support the Bretton Woods fixed exchange rate system. dollar. Holders of SDRs can obtain these currencies in exchange for their SDRs in two ways: first.S. today consisting of the euro. it is a potential claim on the freely usable currencies of IMF members. Basket of currencies determines the value of the SDR The value of the SDR was initially defined as equivalent to 0. However.888671 grams of fine gold —which. the growth in international capital markets facilitated borrowing by creditworthy governments. After the collapse of the Bretton Woods system in 1973. Both of these developments lessened the need for SDRs. nor a claim on the IMF. as required to maintain its exchange rate. Therefore. the Bretton Woods system collapsed and the major currencies shifted to a floating exchange rate regime.I.S. by the IMF designating members with strong external positions to purchase SDRs from members with weak external positions. however. dollar-equivalent of the SDR is posted dailyon the IMF’s website. the international community decided to create a new international reserve asset under the auspices of the IMF. and U. was also equivalent to one U. pound sterling. Japanese yen.S. But the international supply of two key reserve assets—gold and the U. at the time.

I. the weights of the currencies in the SDR basket were revised based on the value of the exports of goods and services and the amount of reserves denominated in the respective currencies which were held by other members of the IMF.3 billion. DR allocations to IMF members Under its Articles of Agreement. conversely. .F (international monetary fund) 19 TH 11 NOVEMBER 2010 calculated as the sum of specific amounts of the four basket currencies valued in U. The SDR interest rate is determined weekly and is based on a weighted average of representative interest rates on shortterm debt in the money markets. it pays interest on the shortfall. and the interest paid to members on a portion of their quota subscriptions. 2006. The next review will take place in late 2010. the IMF may allocate SDRs to members in proportion to their IMF quotas.M. Such an allocation provides each member with an asset (SDR holdings) and an equivalent liability (SDR allocation). There are two kinds of allocations: General allocations of SDRs. The basket composition is reviewed every five years by the Executive Board to ensure that it reflects the relative importance of currencies in the world’s trading and financial systems.S. if it holds fewer SDRs than allocated. on the basis of exchange rates quoted at noon each day in the London market. General allocations have to be based on a long-term global need to supplement existing reserve assets. These changes became effective on January 1. If a member’s SDR holdings rise above its allocation. The SDR interest rate The SDR interest rate provides the basis for calculating the interest charged to members on regular (non-concessional) IMF loans. Decisions to allocate SDRs have been made three times. dollars. the interest paid to members on their SDR holdings and charged on their SDR allocations. In the most recent review (in November 2005). it earns interest on the excess. The first allocation was for a total amount of SDR 9.

2009 for an amount of SDR 161. the United States joined 133 other members in supporting the Amendment. Following the 2009 SDR allocations. the SDR market has functioned through voluntary trading arrangements. 2009 when the Fund certified that at least three-fifths of the IMF membership (112 members) with 85 percent of the total voting power accepted it. The third general allocation was approved on August 7. The special allocation was implemented on September 9. On August 5. A proposal for a special one-time allocation of SDRs was approved by the IMF's Board of Governors in September 1997 through the proposed Fourth Amendment of the Articles of Agreement. 2009.13 percent of their quota. It increased members' cumulative SDR allocations by SDR 21.2 billion and took place on August 28. 2009. . was distributed in 1979–81 in yearly installments. or they may wish to sell SDRs in order to adjust the composition of their reserves. Under these arrangements a number of members and one prescribed holder have volunteered to buy or sell SDRs within limits defined by their respective arrangements. For more than two decades. The second allocation. Special allocations of SDRs. the number and size of the voluntary arrangements has been expanded to ensure continued liquidity of the voluntary SDR market.5 billion using a common benchmark ratio as described in the amendment. The IMF acts as an intermediary between members and prescribed holders to ensure that SDRs can be exchanged for freely usable currencies. The allocation increased simultaneously members’ SDR holdings and their cumulative SDR allocations by about 74. The Fourth Amendment became effective for all members on August 10. 2009. Buying and selling SDRs IMF members often need to buy SDRs to discharge obligations to the IMF.I.1 billion. for SDR 12. Its intent is to enable all members of the IMF to participate in the SDR system on an equitable basis and correct for the fact that countries that joined the Fund after 1981—more than one-fifth of the current IMF membership—had never received an SDR allocation.M.F (international monetary fund) 20 TH 11 NOVEMBER 2010 distributed in 1970-72 in yearly installments.

an amount not exceeding 25 percent of its quota has to be paid in SDRs or usable currencies (“reserve assets”) specified by the IMF and the balance in the member’s own . FINANCIAL OPERATIONS: Financial Structure The financial transactions and operations of the IMF are conducted through the General Department. This arrangement serves as a backstop to guarantee the liquidity and the reserve asset character of the SDR. The operations of the IMF are other uses or receipts of monetary assets by the IMF. The transactions of the IMF in the General Resources Account are exchanges of monetary assets by the IMF for other monetary assets. the Fund can activate the designation mechanism.M. Under this mechanism. members with sufficiently strong external positions are designated by the Fund to buy SDRs with freely usable currencies up to certain amounts from members with weak external positions. the SDR Department.F (international monetary fund) 21 TH 11 NOVEMBER 2010 In the event that there is insufficient capacity under the voluntary trading arrangements. and the Administered Accounts (Figure 1). When a country becomes a member of the IMF. The IMF is a quota-based institution.I.

The IMF can deal only with. or other similar entity. August. when this reserve asset was paid in gold. Accounts in Member Countries Each member is required to designate a fiscal agency and a depository to conduct its financial dealings with the IMF. The portion of a member’s quota paid in reserve assets becomes its initial reserve tranche in the IMF (known as the “gold tranche” before the Second Amendment of the Articles. central bank. with financial quarters starting in May. stabilization fund. which is accordingly authorized to carry out on behalf of the member country all operations and transactions authorized under the Articles. the member can designate another institution such as a monetary agency or even a commercial bank. The IMF’s unit of account is the special drawing right (SDR). or through. If it has no central bank.F (international monetary fund) 22 TH 11 NOVEMBER 2010 currency. that is acceptable to the IMF. on demand and without delay. The fiscal agency may be the member’s treasury (ministry of finance). The IMF’s financial year runs from May 1 to April 30. the designated fiscal agency. normally in the form of nonnegotiable. official monetary agency. non-interest-bearing notes (essentially promissory notes). sums to any payee named by the IMF in the member’s own . each member is required to designate its central bank as a depository for all IMF holdings of its currency. and February. November.I. A depository is required to pay out of the IMF’s holdings of the member’s currency.M. whose value is calculated daily on the basis of a “valuation basket” comprising five major currencies. In addition. A member may draw up to the full amount of its reserve tranche position at any time (subject only to its representation to the IMF that it has a balance of payments need) by transferring to the IMF an equivalent amount of its own currency. The reserve tranche position can be defined as the amount by which a member’s quota exceeds the IMF’s holdings of its own currency.

repurchases. Each depository maintains (without any service charge or commission) two accounts. including subscription payments. in the first instance. purchases. In addition. The balances in these accounts. If any payment by the IMF reduces the balance in the No. as explained below. and hold securities for safe custody on behalf of the IMF if the member issues nonnegotiable. and sales of the member’s currency. do not yield any interest for the IMF.I. A member may establish an IMF Securities Account to hold nonnegotiable non-interestbearing notes. The depository holds these notes for safekeeping and acts as the agent of the IMF to obtain encashment of the notes in order to maintain at all times the minimum balance in the No. 1 Account. 1 Account is used for IMF transactions and operations. 1 Account and the IMF No. repayment of borrowing.M. . or similar instruments. the IMF No. or similar obligations. 1 Account below a minimum of 1/4 of 1 percent of the member’s quota. the balance is to be restored to that level by the next business day through the encashment of sufficient notes. from the payment to the IMF of the member’s quota subscription. all these transactions can also be carried out through the IMF Securities Account. and some depositories also maintain a Securities Account at the option of the member. 1 Account. in substitution for part of its currency holdings. The No. each member guarantees all assets of the IMF against loss resulting from failure or default on the part of the designated depository. Provided that a minimum is maintained in the No.F (international monetary fund) 23 TH 11 NOVEMBER 2010 territory. 2 Account. non-interest-bearing notes. which originate. payable to the IMF on demand if the currency is needed for the IMF’s operations and transactions.

The General Department also includes the Borrowed Resources Suspense Accounts. and repayment of principal to the IMF’s lenders. Small. 2 Account. out-of-pocket expenses.M. receipts from sales of IMF publications) in the member’s currency and within its territory. the Special Disbursement Account (SDA).F (international monetary fund) 24 TH 11 NOVEMBER 2010 The No. The assets held in the GRA include currencies of member countries (held in the No. which were established by a decision of the Executive Board in May 1981 but which have been inactive since 1991 when remaining borrowed resources under the Enlarged Access Policy were disbursed to members. the IMF’s own holdings of SDRs. purchases and repurchases. 2 Account is used for the IMF’s administrative expenditures and receipts (for example. The Articles envisage that assets in the Investment Account could derive--if authorized by the requisite majority vote--from . payment of remuneration on members’ creditor positions in the IMF. and the Investment Account (not activated as of June 30. no decision has been taken to this effect.I. see above). may be debited to this account on a quarterly basis. The Special Disbursement Account is the vehicle for (1) receiving and investing profits from the sale of the IMF’s gold (that is. The IMF is authorized to establish an Investment Account in the General Department. 1 Account. which had been funded from gold sales. and gold. however. the net proceeds in excess of the book value of SDR 35 per fine ounce). among other transactions and operations. to date. General Department Under the Articles. and the Securities Account with each member. the receipt of quota subscriptions.4 The assets in the Investment Account would be held separately from the General Resources Account and would not be subject to maintenance-of-value requirements. the IMF’s General Department consists of the General Resources Account (GRA). Most transactions between member countries and the IMF take place through the GRA. receipt and refund of charges. This account handles. such as telecommunications charges. the No. upon its termination. 1998). and (2) making transfers for special purposes authorized in the Articles. The SDA was activated in 1981 initially to receive transfers from the Trust Fund.

As already noted. the total amount transferred to the Investment Account may not exceed the resources held in the IMF’s General and Special Reserves. it uses SDRs to finance purchases by members and to pay remuneration to members . As mentioned above. The GRA receives SDRs in partial payment of quota increases and in the settlement of charges and repurchases. and (2) currencies received by the IMF in repurchases financed with borrowed resources before repayments to lenders could be made. Investments may be made only in income-generating marketable obligations of international financial organizations or of the member whose currency is used for the investment. The income may be reinvested or used to meet the expenses of conducting the business of the IMF. With the exception of income from the account’s investments.M.F (international monetary fund) 25 TH 11 NOVEMBER 2010 profits from the sale of the IMF’s gold. Members were not obligated to maintain the SDR value of their currencies held by the IMF in the Borrowed Resources Suspense Accounts. and invest (1) currencies borrowed by the IMF before they were transferred to the GRA for use in transactions or operations. including both operational and administrative expenses. the IMF uses the SDR as its unit of account.I. from a transfer of currencies held in the GRA. . The IMF can hold SDRs in the GRA and can use them in transactions and operations. The Borrowed Resources Suspense Accounts were established to hold. SDR Department The IMF’s SDR Department records all transactions and operations involving SDRs. The SDR is an interest-bearing asset allocated by the IMF to each member that is a participant in the SDR Department. or from the income or proceeds of investments in the account. transfer. and as far as practicable the currencies were invested in SDR-denominated obligations. since December 1991 no amount has been held in suspense in these accounts. convert.

and no assets in one department or administered account may be used to discharge liabilities or to meet losses incurred in the administration of other accounts or departments. Operating Costs The expenses of conducting the business of the IMF’s General Department along with the IMF’s general overhead are paid from the net operational income of the General Resources Account. SUPPLEMENTARY FINANCING FACILITY (SFF) SUPPLEMENTARY FINANCING FACILITY: SUBSIDY ACCOUNT—INSTRUMENT To help fulfill its purposes. including a Framework Administered Account to administer resources to finance technical assistance activities. and accounted for separately. the International Monetary Fund (hereinafter called the Fund) has adopted this Instrument establishing the Supplementary Financing Facility .5 The General and SDR Departments and the Administered Accounts are operated. The expenses of conducting the business of the SDR Department are also paid from the GRA.M. Also at the end of each financial year. which is reimbursed by the participants in the SDR Department at the end of each financial year. that are consistent with the Articles. such as financial and technical assistance. For this purpose.I.F (international monetary fund) 26 TH 11 NOVEMBER 2010 Administered Accounts The IMF may establish administered accounts for purposes. in relation to their net cumulative allocations. the IMF levies an assessment on the participants. the ESAF Trust reimburses the GRA for the cost of administering the trust during the year. Accounts have been established to administer resources for support for the low-income and heavily indebted members (the Enhanced Structural Adjustment Facility and the Heavily Indebted Poor Countries Initiative). at the same rate for all participants. There are several other Administered Accounts established for different purposes. recorded.

which shall be governed by and administered in accordance with the terms of this Instrument. 5069-(76/72). together with the other assets available to the Account. Amounts Transferred from Special Disbursement Account (a) Subject to (b) below. Purpose The purpose of the Account shall be to reduce the cost to eligible developing members.F (international monetary fund) 27 TH 11 NOVEMBER 2010 Subsidy Account (hereinafter called the Account). Section 4. Section 2. the Executive Board determines at any time that amounts already transferred to the Account. and (d) the income or net gains from investment of resources of the Account. a total equivalent to SDR 750 million shall be transferred to the Account from the assets received by the Special Disbursement Account of the Fund on termination of the operation. of using the Fund’s resources under the policies of the Fund referred to in Section 7 of this Instrument. to the Special Disbursement Account. it may authorize the suspension of further transfers from. in its present form. if this proves . consistent with the provisions of this Instrument. in accordance with Section 8. These transfers to the Account shall be made as the amounts are received in the Special Disbursement Account.I. provided that transfers shall be resumed. up to the total amount specified in (a). are sufficient to carry out the operations and to meet the liabilities of the Account in full. Resources The resources of the Account shall consist of: (a) amounts donated to the Account. on the basis of reasonable estimates. (c) the proceeds of borrowing by the Fund for the Account. of the Trust Fund established by Executive Board Decision No. Section 1.M. Donations The Fund may accept donations of resources for the Account in such amounts and under such arrangements as may be agreed between the Fund and the respective donors. and the re-transfer of any surplus back. (b) amounts transferred to the Account from the Special Disbursement Account of the Fund. (b) If. Section 3.

as necessary. The CFF has not been used since the modifications introduced in 2000. A further consideration of mechanisms to deal with shocks affecting low income countries is contained in the ongoing review of the role of the Fund in low- . Compensatory Financing Facility The Compensatory Financing Facility was established in 1963 to help member countries cope with temporary export shortfalls caused by exogenous shocks.M. The facility has been modified several times.I. including by broadening its coverage to include shocks affecting cereal imports. and considers the role of the CFF in the Fund's array of lending facilities. (b) Payments of interest and repayments of the principal amount under each such loan shall be made exclusively from the resources of the Account. consistent with the provisions of this Instrument. The staff paper suggests some reasons for this. shall not exceed the SDR 750 million that could be transferred to the Account from the Special Disbursement Account under Section 4. At the time of the most recent review in 2000. including the interest payable on the borrowing. including the interest payable thereon. to make payments due under such loans. the Executive Board decided to simplify the structure of the CFF. the Fund shall make every effort to obtain loans on concessionary terms. and that that CFF financing would need to made in parallel with a Fund-supported adjustment program when preexisting balance of payments weaknesses needed to be addressed. Section 5. in priority to other uses of such resources. In undertaking such borrowing. The aggregate amount of such borrowing. Borrowing (a) The Fund may borrow resources for the Account on such terms and conditions as may be agreed between the Fund and the respective lenders. except that donations shall not be used for this purpose without the consent of the donor. Resources transferred to the Account from the Special Disbursement Account pursuant to Section 4 shall be applied. All resources of the Account shall be available for such payments.F (international monetary fund) 28 TH 11 NOVEMBER 2010 necessary to complete the operations of the Account and to discharge its liabilities in full.

BUFFER STOCK FINANCING FACILITY: This is a recent facility provided to the members in order to help them overcome serious balance of payments difficulties. dollars shall be made on the basis of the SDR/U. in SDRs to beneficiaries agreeing to receive them. at the discretion of the Fund. dollars. Decision No. Subsidy payments in U.I. or in U.S. 1986 .S. 8185-(86/9) SBS/S. Financial aid is given for creating and maintaining buffer stocks of essential commodities in danger of falling short SUBSIDY ACCOUNT: Subsidy payments made after the effective date of this Decision with respect to charges paid on holdings of currency referred to in Section 7 of the Instrument establishing the SFF Subsidy Account may be made. dollar exchange rate in effect three business days before the payment date. January 15.M.F (international monetary fund) 29 TH 11 NOVEMBER 2010 income countries [reference] that was undertaken in parallel with the present review of the CFF.S. or in a combination of these two assets.

at what cost the support has been obtained.e. the Fund introduced new support facilities (i. such as emergent situations and structural weaknesses. SAF. DATA. What happened that led the country to knock at the door of the IMF once again. EFF and PRGF) of medium-term nature. .I. Disbursement of resources is linked with the conditionality laid down by the IMF.6 billion) on 24 November. and is this support a ‘one-time-shot-in-the-arm' or along-term ‘drip-in-the vein' are some of the questions that this paper is intended to address Background Established in 1944. The earlier Poverty Reduction and Growth Facility (PRGF) Arrangement had ended in December 2004 with proclamation by the authorities that they had broken the ‘beggar's-bowl' and that their policies had brought the economy to a position where IMF support would no more be required.M. 2008. ESAF.F (international monetary fund) 30 TH 11 NOVEMBER 2010 RESEARCH METHODOLOGY FOR DATA. PAKISTAN AND IMF After a four-year gap Pakistan has once again come under the IMF support arrangement by concluding a twenty-three month Stand-By Arrangement (SBA) of SDR 5. A member using IMF resources under these arrangements is required to agree on a reforms and stabilisation program with the Fund. Realising that short-term assistance is not sufficient to address the specific difficulties.17 billion ($ 7. the International Monetary Fund (IMF) was responsible for promoting exchange rate stability and providing temporary assistance (under Stand-By Arrangement) to a member state facing short-term balance of payments difficulty.

The Request was prepared jointly by Pakistani authorities and IMF Staff and approved by the Cabinet. Stand-By Arrangement (SBA) 2008-10 Main Features Pakistan submitted to the IMF a Request for Stand-By Arrangement on 20 November. The amount will be disbursed in seven tranches . 2008 and the balance amount will be disbursed in six quarterly instalments during 2009-10.the first tranche of SDR 2. The IMF Executive Board approved the Request on 24 November.F (international monetary fund) 31 TH 11 NOVEMBER 2010 Overview of Earlier Arrangements Pakistan is one of the ‘prolonged users' of the IMF resources. For this purpose the government of Pakistan has initiated an Economic Program covering 24 months.6 billion) equal to 500% of Pakistan's quota in the Fund.I. Objective and Economic Program (2009-2010) The main objectives of the Arrangement are to (i) restore confidence of domestic and external investors by addressing macroeconomic imbalances through a tightening of fiscal and monetary policies. It is on interest rate of 3. 2008.067 billion has been received on 29 November. and (ii) protect the poor and preserve social stability through a well-targeted and adequately funded social safety net.17 billion ($ 7.51%.M. The amount and interest will be repaid in five years from 2011. The eight medium-term arrangements concluded during 1980 and 2004 are listed in table 1. 2008 amounting SDR 5. it remained under the IMF support program for over twenty-five years . The Arrangement is for a period of 23 months. The main elements of the Program are: .51-4.almost continuously during 1988 and 2004 (the new Arrangement adds two more years).

6% of GDP to 0. lubricant for larger resource inflows. investors' confidence builder. The prior actions included increasing the State Bank's discount rate from 13% to15% as a measure to control inflation. performance criteria. and source of hardship to the people. Evaluation of SBA 2008-10 The IMF arrangements can be seen from different perspectives .3% in 2010  Tighten monetary policy (increase interest rate. The conditionality covers actions prior to the approval of arrangement by the IMF Board.M. The conditionality cover over half a dozen benchmarks . 2008. This section is intended to focus on evaluating it in . raise in electricity tariff by an average of 18% effective from 5 September. further adjustments in electricity tariffs. benchmarks and quantitative targets. eliminating of foreign exchange provision by State Bank for import of furnace oil.4% of GDP in 2008 to 4.contingency plan for handling problems of private banks. plan for elimination of intercorporate circular debt. economic stabiliser and revival of growth. measures for ensuring safety nets for poor.2% in 2009 and 3. and agreement on volume of quarterly issue of treasury bills for the remainder of second quarter of 2008/09. Quarterly quantitative targets have been set which also include ceilings on overall budget deficit and borrowing of government from State Bank.F (international monetary fund) 32 TH 11 NOVEMBER 2010  Reduce fiscal deficit: 7. and so on.9% in 2009) -work with World Bank to prepare a comprehensive program of safety net Conditionality of SBA The program is subject to quarterly review and performance criteria.bail-out package. and transition to a single treasury account. The performance criteria includes submission of amendments in two legislations (relating to enhancement of effectiveness of the State Bank and harmonisation of income and GST laws) in the Parliament by June 2009. reforms in tax administration.I. eliminate government borrowing) to reduce inflation to 6% in 2010  Increase expenditure on social safety net (0. step towards greater external dependence.

weak and too general. Investment prospects . social development and removal of structural weaknesses. oil/gas companies. and donor assistance is reportedly lined-up to meet the estimated gross external need of over $13 billion in 2009 and $12. inter-corporate circular debt. The likely default situation has been averted. The elements relating to legislative amendments.e. ceilings on government borrowing are desirable. are indebted to each other in millions of rupees) is serious issue lingering for years and needs to be resolved urgently Despite legislative provisions the government has been borrowing heavily from the State Bank and putting ceilings on such borrowings would help in ensuring financial discipline.M.5 billion in 2010[1]. It is a financial stabilisation plan heavily dependent on tight monetary and fiscal policies. tax reforms. It ignores the key issues of revival of economic growth. As a bail-out package the Arrangement has served its purpose. Pakistan: Request for SBA). Legislative amendments may make the State Bank more effective and improve tax system. safety nets.F (international monetary fund) 33 TH 11 NOVEMBER 2010 the context of the objectives of the Arrangement and as an instrument of long term economic and social development. Raising the interest rate and reducing public sector development program envisaged in the Arrangement will depress investment. Water Boards. WAPDA.I. Conditionality The conditionality of SBA has both positive and negative implications. It presumes that tight monetary and fiscal policies will ensure economic revival in later years. foreign exchange reserves have risen over $ 9 billion (equal to over two months of imports) on 29 November 2008 from less than $ 7 billion a week ago. Inter-corporate circular debt in energy sector (i. government agencies. The provisions of SBA on social safety net are. KESC. The Economic Program under SBA is restricted in scope as it only ‘seeks to restore the confidence of international and domestic investors while preserving social stability by protecting the poor' (ref. however. etc. The confidence of investor is yet to be restored.

political and security situation this seems to be a difficult task warranting strong steps both for enhancing revenue collection and controlling expenditure. is essential where extravagance and waste at Federal and provincial levels is common. In such a situation raising discount rate to control inflation will do more harm than good. Control and greater discipline in current expenditure and civil administration. The current inflation is cost-push and supply.M. As noted in the ‘Pakistan's Request for Stand-By Arrangement (paragraph 13 of Executive Summary) Pakistan is suffering from ‘weaker aggregate demand and depressed economic activity' and not with upsurge in aggregate demand. and increase in GST) and reducing expenditure from 21. Fiscal Policy The program envisages a challenging task of reducing the fiscal deficit from 7.2 percent in 2009 and further to 3.F (international monetary fund) 34 TH 11 NOVEMBER 2010 are also hampered by structural weaknesses.4 percent of GDP in 2008 to 4.9 percent of GDP (mainly through improved tax administration. and augment tax revenues. If financial discipline is not ensured it might not be possible to meet the quarterly ceilings on fiscal deficit and borrowing from the State Bank. namely. avoid wasteful expenditure. and internal law and security situation. Such an approach is not evident so far. . global recession. and zero financing of budget by State Bank after October 2008. Given the current economic. In theory increasing discount rate helps reduce inflation by mopping up access aggregate demand.3 to 14. The need of the hour is to adopt austerity. This could jeopardize even the release of second tranche due after the mid-March 2009 review of SBA.8 to 19.constrained rather than demand-surged. in particular.3 percent in 2010. Monetary Policy The tight monetary policy has two main elements.I. increasing discount rate from 13 to 15 percent as a prior action with provision to increase it further in the future. This is proposed to be realised by increasing revenues from 14.0 percent of GDP (mainly by eliminating fuel and other subsidies and adjustment in electricity tariff) in the first year.

The global economy is in turmoil and recession and many advanced and developing countries (including India. The SBA does not contain a plan for redressing the hardship. The issue of poverty reduction should have been dealt with in a comprehensive and well-conceived framework rather than being confined to social safety net. China.9% in 2009 and that reduction in development expenditure should not affect the allocations for safety net.M.6% of GDP in 2008 to 0. creating productive job opportunities. Projected Economic Scenario under SBA . lower production and rising unemployment. they even do not recognise that the hard measures contained in SBA have economic and social costs and are going to hit hard the common man. In recent years the number of people living under poverty line has increased dramatically due to high inflation. It is time for taking such measures that would help revive growth and increase output and employment rather than reigning demand. raise cost of production. The international price of oil (which was one of the main causes of inflation) has fallen drastically in recent weeks. It also notes that budget allocation for safety net has been increased from 0. which will also affect exports. Social Safety Net The SBA mentions about the development of a comprehensive and time-bound action plan on safety net by government in collaboration with the World Bank by mid March 2009. The issue needs urgent attention. The government had adopted a poverty reduction strategy under PRGF 2001-04.F (international monetary fund) 35 TH 11 NOVEMBER 2010 It will discourage investment. A more rational approach for checking inflation will be to pass on the benefits of declining oil price to the consumer and take measures to increase agricultural and industrial output. reassessing the situation and taking appropriate steps including acceleration of growth. This reverse directional move of Pakistan may further depress the already low growth rate. boosting investment and supporting marginalised and targeted groups. These stipulations are inadequate.I. USA and European Union) have reduced the discount rate to boost investment and economic activity.

0 15.5 4.6 6.2 11.291 Source: Pakistani authorities and IMF Staff . A sharp fall in inflation is projected from 2010 along with improvement in fiscal and reserves positions.9 21.0 6.M. The projections indicate some improvement in economic growth in 2010 (i.4 5.6 3. 5%) from a low level of 3.7 33.591 2009 3. greater dependence on external resources and rise in external debt.0 13. This scenario is based on the premise that the government will be able to take fiscal and monetary measures as stipulated in the Arrangement. Table 2 Economic Indicators 2008 GDP growth rate % CPI (end year) % Gross national savings (% GDP) Gross capital formation (% GDP) External resources(% GDP) Fiscal deficit (% GDP) Debt (% GDP) Current Account deficit (% GDP) External debt (% GDP) Reserves ($ million) 5.3 5.0 6.I.F (international monetary fund) 36 TH 11 NOVEMBER 2010 The main economic indicators under SBA for 2008-10 are given in table 2.3 8.5 12.9 8.5 31.5 20.4 percent in the earlier year.3 52.4 57.5 8.7 21.8 21.4 8.4 20.4 26.4 7.591 2010 5.2 54.e.

poor governance. In addition. The economic growth rate is projected to climb to 7. capital formation and foreign exchange reserves. and decline in inflation.0 13. public debt and current account deficit.1 24.0 5.F (international monetary fund) 37 TH 11 NOVEMBER 2010 The IMF Staff has also estimated a medium-term macroeconomic framework ending 2013.M. The main elements of the projected medium-term framework are given in table 3.6 . there has to be a long term plan in operation for removal of some critical elements hindering sustained growth.0 6. low quality of human resource. increasing external dependence and serious national security situation.0 21. The realisation of this scenario is dependent not only on persistently following the policy of resource mobilisation and disciplined expenditure but also on favourable external factors and improved political and security situation in the country. such as energy and water shortage.5 20. reduction in poverty and socio-economic inequality. fiscal deficit.I.4 23.5 2013 7. depicting steady improvement in all major indicators.0 percent in 2013 supported by rise in national savings. inadequate infrastructure. rising unemployment and income generation.8 3. Table 3 Selected Indicators of Macroeconomic Framework 2009-2013 2009 GDP (% growth) Consumer price (annual average) Gross national savings (% GDP) Gross capital formation (% GDP) Current account deficit (% GDP) 3. low productivity.

however.1 11.3 14.0 3. The credibility . be the real test of government's commitment and implementation capacity.7 18.2 Source: IMF: Pakistan Request for Stand-By Arrangement.6 2.2 2.0 19. 2008 Conclusion The deteriorating domestic and external situation coupled with failure of successive governments to take appropriate and timely action in the past years had led to a situation when Pakistan was left with no option but to seek IMF support.0 6.4 20.1 16.4 15.2 54.M. The quick disbursement of the SBA first tranche.F (international monetary fund) 38 TH 11 NOVEMBER 2010 Gross official reserves (in months of imports) External debt (% GDP) Revenues and grants (% GDP) Tax revenues (% GDP) Expenditure (% GDP) Current expenditure (% GDP) Development Expenditure (% GDP) Fiscal deficit (% GDP) Total govt.1 31.I. debt (% GDP) 2.6 28.2 46. has helped in averting the default situation and paving the way for other external inflows. 20 November.0 4.3 14. The fulfilment of various elements of the conditionality will. which is equal to forty percent of the total assistance.

For this purpose. It may help in developing favourable conditions for revival of growth but should not be seen as a development plan. As mentioned in the earlier section the implementation of conditionality warrants austerity. Debate on reforming the IMF is on for some time but it is focused on power-sharing in decision making.economic instability. This inadequacy is generally recognised but there is no serious attempt to remove it. The IMF agenda has never been painless. as it is financial/commercial than human'. Now that commitments have been made. A prudent approach for Pakistan.[2] . therefore. This approach is not in sight so far. and external debt. flight of capital. loss of credibility. and bold and timely actions by government. as the performance of the elected governments in the past had not been satisfactory. It is focused on averting current financial crisis. reverse flow of resources (even deferment of in-pipeline assistance). The plan should give priority to removing critical weaknesses hindering sustained and self-reliant growth. these should be met with dignity. following indicative benchmarks can be set for critical areas of current account balance.I. The SBA is a financial package aimed at short-term stabilisation rather than a plan for economic and social development. This may entail sacrifices for which the government and people should be prepared. taking bold and futuristic steps to avert financial slide (particularly in respect of foreign exchange reserves and fiscal and external deficits) that forces the country to seek the IMF support. The consequences of premature termination of the Arrangement due to non-compliance on Pakistan's part could be serious . fiscal deficit. financial discipline. The government should also make determined efforts to bring the economy back to a stage where IMF assistance would not be necessary after 2010.M. foreign exchange reserves. is to ensure stability and growth. For ensuring sustained growth a long-term plan should be formulated and put in operation using a ‘road-map' and ‘benchmarks'. Three IMF arrangements under government of Nawaz Sharif and two under Benazir Bhutto were terminated prematurely mainly on account of nonperformance.F (international monetary fund) 39 TH 11 NOVEMBER 2010 of government hinges on it.

5% of GDP  Foreign Exchange Reserves may be maintained at least equal to 4-6 months of annual imports  Stock of Public Debt should be kept below 40% of GDP (with external debt below 20% 0f GDP)  Fiscal Deficit should be maintained around 3.5% of GDP FINDINGS: .I.0-3.F (international monetary fund) 40 TH 11 NOVEMBER 2010  Current Account Deficit may be kept below 2-2.M.

Ashoka Mody.F (international monetary fund) 41 TH 11 NOVEMBER 2010 Recovery in Sight for Iceland October 05. and growth resumed in the first quarter of 2010. the fiscal deficit ended the year at more than 11 percent of GDP. reflecting strong policies that have stabilized the economy and improved debt dynamics following the crash in October 2008. Two senior IMF officials discuss the outcome of a recent review of the program. if any. the Irish economy has stabilized. and the recovery has so far been among the weakest in the European Union. Nascent Recovery for Ireland July 14. Review Hails Successes of IMF's Safeguards Assessments August 16. 2010 After a severe decline in late 2008 and 2009. 2010 Spain is undergoing a painful recession. After Deep Slump. 2010 The Safeguards Assessment Program is seen as an important element of the due diligence process in the IMF’s lending. are the benefits of foreign aid.M. In an interview. Unemployment now stands at 20 percent. mitigating the risks of misreporting and misuse of the IMF’s resources. 2010 It’s one of the thorniest issues in developmental economics: what.I. Two economists pit their radically different views against eachother. Foreign Aid: Good or Bad? September 09. IMF mission . 2010 Iceland has made impressive progress under the IMF-supported program. Fragile Recovery In The Cards For Spain July 30.

Modest Recovery in Store for Germany March 30. 2010 Gulf Cooperation Council (GCC) countries have managed to contain the fallout from the global financial crisis. IMF Pushes Reforms to Its Governance and Mandate June 08. IMF mission chief for Ghana Peter Allum talks in an interview about Ghana's prospects. The IMF’s Reza Moghadam discusses strategic shifts in how the IMF works and engages with its member countries.I. the IMF says. Gulf Countries Limit Fallout from Crisis March 12. 2010 As the world economy faces public debt concerns in many advanced economies and the lingering effects of the crisis. speaks about the nascent recovery and the many challenges that still lie ahead. 2010 In the next few years Ghana will become an oil producer. Reflecting Germany's role as the world's second largest exporter. IMF projections show.M. .F (international monetary fund) 42 TH 11 NOVEMBER 2010 chief for Ireland. If the country uses its newfound oil wealth wisely. followed by 1. it could achieve middle-income status within 10 years. 2010 The IMF is forecasting growth of 1. the IMF is pressing ahead with further reforms to make sure it continues to respond effectively to the needs of its 186 member countries. although fiscal stimulus continues to provide support to the economy.2 percent of GDP this year. but the crisis has revealed financial sector vulnerabilities that need to be addressed.7 percent in 2011. Oil Offers Hope of Middle-Income Status for Ghana February 17. the pickup in global trade is the main factor behind the recovery.

a move that could transform the way the country's economy works and influence reform in other energyproducing countries. Members' quotas and voting power.I. at the forefront in recommending the policy response to the global economic crisis.09 Governor Timothy F.M.74 . 2010 The International Labour Organization and the IMF are hosting a joint conference on ways of generating jobs as part of a sustainable recovery from the global economic crisis. Ahead of the conference. Geithner Alternate Governor Ben Bernanke Votes: number 371. IMF economists say. IMF Chief Economist Olivier Blanchard speaks about the objectives of the event.149. and board of governors IMF member country United States Quota: millions of SDRs 37. IMF Urges Action to Tackle Unemployment. 2010 The Islamic Republic of Iran has begun eliminating energy subsidies.F (international monetary fund) 43 TH 11 NOVEMBER 2010 IMF Explores Contours of Future Macroeconomic Policy February 12.3 Quota: percentage of total 17. Iran to Cut Oil Subsidies in Energy Reform September 28. has entered the debate about how macroeconomic policy should be adjusted in the future. Create Jobs September 09.743 Votes: percentage of total 16. drawing lessons from the worst global recession in 60 years. 2010 The IMF.

08 1.158.88 Jim Flaherty Mark Carney Aleksei Kudrin Nout Wellink Guy Quaden Pranab Mukherjee Sergey Ignatyev L.M.369.302 41.65 3.F (international monetary fund) 44 TH 11 NOVEMBER 2010 Japan Germany United Kingdom France China Italy Saudi Arabia Canada Russia Netherlands Belgium India 13. Weber George Osborne Christine Lagarde Zhou Xiaochuan Giulio Tremonti Ibrahim A.945.88 2.4 4.94 3.69 2.72 3.B.91 Yoshihiko Noda Axel A.12 1.01 5.2 6.985.2 4.704 51. AlAssaf Masaaki Shirakawa Wolfgang Schäuble Mervyn King Christian Noyer Yi Gang Mario Draghi Hamad AlSayari 133.008.73 2.832 6.87 4.605.12 5.37 2.94 4.162.635 107.I.8 13.4 5..105 63.738.5 6.942 59.21 2.1 7.5 8.378 130.635 81.16 2.332 107.090.5 6.874 46..151 70.738.5 10.85 4.2 10.J.19 3.2 5.055.24 3.85 3. van Geest Jean-Pierre Arnoldi Duvvuri Subbarao SUGGESTIONS: ADVANTAGES AND DISADVANTAGES OF IMF: Advantages – the main advantages of the IMF are seen as.312.93 2.34 2. .98 4.805 70.

The livelihoods of people in poorer countries are destroyed by unfair competition from foreign goods and services. 3. These conditions increase poverty.promotes international monetary co-operation and global financial stability. Decisions about which countries may borrow money are made by rich countries. The IMF does not give good financial advice. Disadvantages – against this. It provides temporary financial help to countries in debt – particularly those with balance-of-payments problems. It encourages economic growth.M. CONCLUSION: Thus the IMF has stepped up its lending to countries that are making serious efforts to adjust their economics policies to current realities . 3. Countries have suffered by following it.F (international monetary fund) 45 TH 11 NOVEMBER 2010 1. It gives financial advice to countries about how to run their economies.I. The IMF will only lend money to countries if they agree to certain conditions. Poor countries have little say about loans and the conditions attached to them. some people think… 1. 2. 2. 4. 4.

Pakistan under IMF Shadow.F (international monetary fund) 46 TH 11 NOVEMBER 2010 Fund’s lending commitments had amounted to 4. the fund stands ready to assume an increasing role in recycling and to make flexible and sensible use of its resources REFERENCES : Fasihuddin.M. Islamabad.I.900 million SDRs In the words of the president of the fund. 2008.300 million SDRs during 1979 while in the first nine month of 1980 they had risen to 5. . Institute of Policy Studies.

Pakistan Economic Survey (various issues) IMF .Need for a New Paradigm. M.M. 24 November.I. Islamabad. 20 November. Akram.Press Release on Pakistan's Request for Stand-By Arrangement. 2008 . 2006. Ministry of Finance. Annual Reports (various issues) • • • • • • Wikipedia Modern economics theory by K. Swati. 2008 State Bank of Pakistan.Pakistan: Request for Stand-By Arrangement. Government of Pakistan. Pakistan's Economic Journey . Institute of Policy Studies.K DEWETT Global economics issues by NAVEED NAWAB Dawn newspapers Survey from biztek university faculty Questionnaires from facebook APPENDIX: I.F (international monetary fund) 47 TH 11 NOVEMBER 2010 Fasihuddin. Government Structure .

I.M. or fiscal rules. The Budget and Related Documentation Budget summary or citizen’s budget Recent annual budget law List full titles of all documents presented to the legislature and the public to support the annual budget Fiscal responsibility law. Budget Preparation and Approval Circular instruction from finance ministry prescribing budget preparation procedures (recent) 1 . Public Nonfinancial Corporations. and Financial Corporations Central bank law Central bank annual report Central bank statistical reports Laws on banks and banking III. if any V. Government. Government. the Central Bank.F (international monetary fund) 48 TH 11 NOVEMBER 2010 Constitution1 An institutional table or list of general government entities Laws defining responsibilities of subnational government Laws defining revenue sources of subnational government Laws on intergovernmental transfers Laws creating extrabudgetary funds Laws creating statutory boards or other entities that will perform mainly noncommercial activities II. and the Private Sector Key laws regulating private sector activity Key laws governing privatization processes Laws on public enterprises IV.

and Administration Main tax laws and regulations governing tax policy. tax administration. or other aspects of the tax system IX. Policy.F (international monetary fund) 49 TH 11 NOVEMBER 2010 Macroeconomic framework—key budget assumptions Medium-term fiscal framework or statement of medium-term objectives Analysis of fiscal sustainability Analysis of long-term public finances VI. External Audit Law on national audit Laws giving assurance of ethical behavior by civil servants Laws to combat corruption in the civil service . Accounting and Oversight Mechanisms Laws and regulations governing  budgetary accounting and budget execution  internal audit and control  civil service employment  procurement VIII.M. Budget Execution and Reporting Budget system law/public finance act/organic budget law Debt management law List full titles budget execution reports/bulletins or mid-year reports issued within-year List full titles of monthly/annual reports on public debt List full titles of reports on public financial assets List full titles of all final accounts documents presented to the legislature Law on national statistical collection or agency(ies) Annual/monthly reports on fiscal statistics VII. Tax Law.I.

Determined on an annual basis and in the context of the budget (negotiated) Ad hoc arrangements Based on formulas with objectively measurable variables. e. Restricted—allowing amendments but with the consent of the executive XI. How would the borrowing authority of subnational governments be described? (select one of the following) g. Not explicitly defined in the constitution or the budget legislation b.M. Unrestricted—able to vary expenditure/ revenue without the consent of the executive c. How would the amendment power of the legislature on the draft budget be described? (select one of the following) a. and predictable XII. i. f.F (international monetary fund) 50 TH 11 NOVEMBER 2010 X.I. h. Unrestricted Subject to administrative approval of the central government Prohibited or determined in the context of subnational fiscal rules defined by law . How would the sharing arrangements or transfers of resources to subnational governments be described in practice? (select all that apply) d.

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