International agencies and their role in Pakistan economy

1. IMF(International monetary funds)

The International Monetary Fund (IMF) is an organization Created in 1945, the IMF is governed by and
accountable to the 189 countries that make up its near-global membership. It works to foster global
monetary cooperation, secure financial stability, facilitate international trade, promote high
employment and sustainable economic growth, and reduce poverty around the world.

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 transact with
each other. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector
issues that bear on global stability.

Pakistan joined IMF in 1950 as newly established country was facing fiscal problems since its creation in
1947 from British India.
In 1958, for the first time, Pakistan went to IMF for bailout. For this, IMF lent out US$25,000 to Pakistan
on standby arrangement basis on 8 December 1958. Pakistan again went to IMF in 1965. This time, IMF
gave US$37,500 to war-torn nation on 16 March 1965. Three years later, Pakistan again went to IMF for
third time for balance of payment problems for which IMF gave US$75,000 on 17 October 1968.
In 1971, Pakistan lost its Eastern half, East Pakistan, in a war against India. This war caused huge loses to
Pakistan. For which, Pakistan got loan of US$84,000 in 1972, US$75,000 in 1973 and another
of US$75,000 in 1974 to meet its growing needs. In 1977, another standby arrangement
of US$80,000 was made on urgent basis. Three years later, an extended facility of US$349,000 was
reached in 1980. Struggle of Pakistan continued, as Pakistan withdrawn another US$730,000 as Pakistan
was already part of US cold war against Soviet Union.
Another era was started, as democracy came back to Pakistan but old ways to handle economy poorly
continued. Benazir Bhutto government withdrawn US$194,480 as standby arrangement and
another US$382,410 in shape of structural adjustment facility commitment on 28 December 1988. . In
1990, government of Nawaz Sharif decided against going to IMF instead arranged donations from
friendly countries like Saudi Arabia.
In 1993, Benazir Bhutto again came to power and her government again went to IMF and reached an
agreement to get standby arrangement of US$88,000 on 16 September 1993. Poor handling of economy
continued by her government as she got loan of US$123,200 under the extended fund facility and
another US$172,200 were borrowed on 22 February 1994. During that period economy of Pakistan
remained in poor shape and Pakistan had to go to IMF again for record third in the period of Bhutto
government. Some say, this was the most corrupt government in the history of Pakistan. This time
Pakistan got an amount of US$294,690 on 13 December 1995.
In 1997, Nawaz Sharif came to power. Benazir Bhutto government was sacked on the corruption charges
and left economy of Pakistan in worst shape. Sharif government went to IMF on urgent basis for the first
time and reached an agreement to get two amounts of US$265,370 and US$113,740 on October 20,
1997.
In 2018, Imran Khan became Prime Minister of Pakistan. From start, Pakistan had a large balance of
payment deficit and its foreign reserves were only good enough for two months. For this, they arranged
friendly loans from Saudi Arabia, United Arab Emirates and China to avoid tough IMF conditions. In
2019, when economic conditions worsened, they went to IMF for twenty-second time and got a largest
loan in history of US$1 billion. IMF gave loan based on conditions such as hike in energy tariffs, removal
of energy subsidy, increase in taxation, privatization of public entities and fiscal adjustments to the
budget.
Normally, IMF signs contracts with our Government that is based on macroeconomic policies (fiscal and
monetary), inflation targeting policies, financial deregulation and increased openness to
international capital flows, trade liberalization (including reduction of tariff and non-tariff barriers) and
privatization of public-sector enterprises. he value of rupee is falling down every other day and it will
lose its value more, in return we will see the increase in the inflation rate. So, get ready to face a great
depreciation. The fiscal deficit is about to hit more than six percent of GDP.

Positive Effect of IMF Loan:

 Ease the problems of BOP by stabilizing the foreign exchange reserves
 Settles international import bills
 Proven helpful for enhancing government revenue by increasing the new tax culture.
 Reduces the unnecessary expenditures of the government
 Improvement in credit rating by reducing the country’s default risk
 Enhancement of foreign exchange reserves

Negative Effects of IMF Loan:

 Increase in central excise duty on service and agriculture sector.
 Reduction in expenditures on the public sector development program
 Devaluation of the Rupee
 Freezing of non-development expenditure
 Increase in markup rate of banks and on inter-bank transitions.
 Stoppage of government financial intervention in the stock market.
 The decline in GDP growth rate
 The decline in other economic indicators right after infusion of IMF funds in the economy

Conclusion:
If we look into the long-run impact of IMF loan, then there is a negative and insignificant relationship
between government borrowings and GDP. It will also lead to political instability. However, it will have a
positive impact on our exchange rate. The Government should play its role in increasing the pace of
economic growth in Pakistan. In the short term, we can see benefits and quick transformation but in the
long run, we all have to pay.

2. World Bank Group

I. IBRD

The International Bank for Reconstruction and Development (IBRD) is a global development cooperative
owned by 189 member countries. As the largest development bank in the world, it supports the World
Bank Group’s mission by providing loans, guarantees, risk management products, and advisory services
to middle-income and creditworthy low-income countries, as well as by coordinating responses to
regional and global challenges. Created in 1944 to help Europe rebuild after World War II, IBRD joins
with IDA, our fund for the poorest countries, to form the World Bank.  They work closely with all
institutions of the World Bank Group and the public and private sectors in developing countries to
reduce poverty and build shared prosperity.

II. IDA

The International Development Association is an international financial institution which offers

concessional loans and grants to the world's poorest developing countries. The IDA is a member of
the World Bank Group and is headquartered in Washington, D.C. in the United States. It was established
in 1960 to complement the existing International Bank for Reconstruction and Development by lending
to developing countries which suffer from the lowest gross national income, from
troubled creditworthiness, or from the lowest per capita income. Together, the International
Development Association and International Bank for Reconstruction and Development are collectively
generally known as the World Bank, as they follow the same executive leadership and operate with the
same staff.

III. IFC

The International Finance Corporation is an international financial institution that offers investment,

advisory, and asset-management services to encourage private-sector development in less developed
countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C. in
the United States. It was established in 1956, as the private-sector arm of the World Bank Group, to
advance economic development by investing in for-profit and commercial projects for poverty
reduction and promoting development. The IFC's stated aim is to create opportunities for people to
escape poverty and achieve better living standards by mobilizing financial resources for private
enterprise, promoting accessible and competitive markets, supporting businesses and other private-
sector entities, and creating jobs and delivering necessary services to those who are poverty stricken or
otherwise vulnerable.

The IFC is owned and governed by its member countries but has its own executive leadership and staff
that conduct its normal business operations. It is a corporation whose shareholders are member
governments that provide paid-in capital and have the right to vote on its matters. Originally, it was
more financially integrated with the World Bank Group, but later, the IFC was established separately and
eventually became authorized to operate as a financially-autonomous entity and make independent
investment decisions. It offers an array of debt and equity financing services and helps companies face
their risk exposures while refraining from participating in a management capacity. The corporation also
offers advice to companies on making decisions, evaluating their impact on the environment and
society, and being responsible. It advises governments on building infrastructure and partnerships to
further support private sector development.

IV. MIGA

The Multilateral Investment Guarantee Agency (MIGA) is an international financial institution which

offers political risk insurance and credit enhancement guarantees. These guarantees help investors
protect foreign direct investments against political and non-commercial risks in developing
countries. MIGA is a member of the World Bank Group and is headquartered in Washington, D.C. in
the United States. MIGA was established in 1988 as an investment insurance facility to encourage
confident investment in developing countries. MIGA is owned and governed by its member states, but
has its own executive leadership and staff which carry out its daily operations. Its shareholders are
member governments that provide paid-in capital and have the right to vote on its matters. It insures
long-term debt and equity investments as well as other assets and contracts with long-term periods. The
agency is assessed by the World Bank's Independent Evaluation Group each year.

World Bank

The World Bank was created at the 1944 Bretton Woods Conference, along with the International
Monetary Fund (IMF). The president of the World Bank is, traditionally, an American. ] The World Bank
and the IMF are both based in Washington, D.C., and work closely with each other. In its early years the
Bank made a slow start for two reasons: it was underfunded, and there were leadership struggles
between the US Executive Director and the President of the organization. The first country to receive a
World Bank loan was France. The Bank's president at the time, John McCloy, chose France over two
other applicants, Poland and Chile. From 1974 to 1980 the bank concentrated on meeting the basic
needs of people in the developing world. The size and number of loans to borrowers was greatly
increased, as loan targets expanded from infrastructure into social services and other sectors. ] During
 the 1980s the bank emphasized lending to service Third-World debt, and structural adjustment policies
designed to streamline the economies of developing nations. UNICEF reported in the late 1980s that the
structural adjustment programs of the World Bank had been responsible for "reduced health, nutritional
and educational levels for tens of millions of children in Asia, Latin America, and Africa".Beginning in
1989, in response to harsh criticism from many groups, the bank began including environmental groups
and NGOs in its loans to mitigate the past effects of its development policies that had prompted the
criticism.  order to promote global public goods, the World Bank tries to control communicable disease
such as malaria, delivering vaccines to several parts of the world and joining combat forces. In 2000 the
bank announced a "war on AIDS" and in 2011 the Bank joined the Stop Tuberculosis Partnership.

World Bank Group assistance to Pakistan

 They are supporting reforms at both the federal and provincial level.

For encouraging growth, investment, and employment generation, the Federal and Provincial
Governments have been implementing various reform programs. In June 2007, the World Bank
approved a US$350 million to support ongoing implementation of the Government’s Poverty Reduction
Strategy. At the provincial level, the Bank approved operations worth US$430 million for Punjab, Sindh
and the North West Frontier Province to help improve irrigation, education and human development
indicators.
 They are working with Pakistan Poverty Alleviation Fund to bring difference in the lives of
poor.
The World Bank funded Pakistan Poverty Alleviation Fund Project (PPAF) is designed to reduce poverty
and empower the rural and urban poor in Pakistan through the provision of resources and services to
the poor, especially women. This is being achieved through an integrated approach that includes
building institutions of the poor and then providing them with micro-credit loans; grants for small scale
infrastructure projects; training and skill development and social sector interventions. The program is
impacting over 10 million people. PPAF has issued 1.5 million micro-credit loans, (average loan-size US$
150), benefiting nearly 9 million people.
 They are helping the victims of the Earthquake.
The October 2005 earthquake in Pakistan destroyed or damaged around 575,000 rural houses, and
rendering over 3 million people without shelter in North West Frontier Province (NWFP) and Azad
Jammu and Kashmir (AJ&K). In response, the government created the Earthquake Relief and
Reconstruction Authority (ERRA) and launched an ambitious US$1.5 billion owner-driven rebuilding
program – largely suited to the mainly rural affected population. It is partially funded by World Bank.
 They are working with the government to improve education outcomes.
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 provided through development policy operations with a
strong focus on primary and secondary education. These programs target increasing participation of girls
and children from poorer houses. The World Bank is also assisting the government in improving the
quality and relevance of its higher education and technical and vocational training system. They have a
strong focus on improving the quality of education.
 They are joining with international partners to help Pakistan fight polio.
 They approved two projects US$42.71 million in 2003 and US $ 74.27 million in 2006 for Pakistan to
purchase the oral polio vaccine. The loan to Pakistan will help the country’s Polio Eradication Initiative
which aims to make Pakistan a Polio free country. Since 1997 the number of polio cases has decreased
from 1147 to 31 in 2007. The first project has been successfully completed.
 They are focusing on un-served and underserved low-income communities.
In NWFP and AJK, Bank projects are supporting delivery of cost effective and sustainable community
development schemes, and basic infrastructure and services. To achieve this, the role and capabilities of
local governments at the district and lower levels have been strengthened. In AJK, the project has
already reached a population of 893,000 against the original target of 830,000, through 320 CBOs. Out
of the 54 Tehsil Municipal Authorities (TMA) in NWFP, 50 are now participating in the Project.
 They are helping Pakistan prevent the spread of HIV/AIDS.
The key challenge facing the country is to expand and improve quality of HIV preventive services to
vulnerable groups that are most at risk of contracting and transmitting the disease. These include sex
workers and injecting drug users. The Bank is supporting the Government efforts to control AIDS
through the HIV/AIDS Prevention Project designed to prevent the disease from becoming established in
these populations, while at the same time working to protect these groups from stigmatization.  A key
focus of the project is delivery of HIV preventive services to high risk populations through public-private
partnerships. A total of 17 service delivery packages for injecting drug users (IDUs), sex workers, truckers
and jail inmates have been contracted out to NGOs by the National and Provincial AIDS Control
Programs covering most major cities across the country.
 
 They are 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.
 They rely on local expertise. 
They rely mostly on local expertise. As 90% of their staff is local who are working for Pakistan. While a
large part of World Bank’s value is its global experience and expertise, local knowledge is indispensable
to effective development.