THE ROLE OF IMF (INTERNATIONAL MONETORY FUND) PAKISTANI ECONOMY?

1. IMF & PAKISTAN
Dr. Arifa Saeed

2. OUTLINE:
1. Introduction
2. Role of IMF
3. Impact of Foreign Aid on National
Economic Policy,
4. Current state of the Economic Policy.

3. IMF
 The International Monetary Fund (IMF) is
the intergovernmental organization that oversees
the global financial system by following
the macroeconomic policies of its member
countries, in particular those with an impact
on exchange rate and the balance of payments
 It is an organization formed with a stated objective
of stabilizing international exchange rates and
facilitating development through the enforcement
of liberalizing economic policies on other countries
as a condition for loans, restructuring or aid

4. MEMBERS
 Members of the IMF are 186 of the UN
members and Kosovo
 The other non-members are: North
Korea, Andorra, Monaco, Liechtenstein,
Nauru, Cook Islands, Niue, Vatican City and
the rest of the states with limited recognition.
 All members appoint a Governor to the IMF's
Board of Governors

6. BOARD OF GOVERNORS
 The Board of Governors is the highest decision-
making body of the IMF. It consists of one governor
and one alternate governor for each member
country
 The governor is appointed by the member country
and is usually the minister of finance or the head of
the central bank.
 The Board of Governors also elects or appoints
executive directors and is the ultimate arbiter on
issues related to the interpretation of the IMF's
Articles of Agreement. Voting by the Board of
Governors usually takes place by mail-in ballot.

7. MINISTERIAL COMMITTEES
 The IMFC is responsible for advising, and reporting
to, the Board of Governors as it manages and
shapes the international monetary and financial
system.
 The IMFC also monitors developments in global
liquidity and the transfer of resources to developing
countries
 The Development Committee is a joint committee,
tasked with advising the Boards of Governors of the
IMF and the World Bank on issues related to
economic development in emerging and developing
countries.

8. EXECUTIVE BOARD
 24-member Executive Board
 These 24 board members represent all 187
countries
 The Board discusses everything from the
IMF staff's annual health checks of member
countries' economies to economic policy
issues relevant to the global economy.

9. IMF AND GLOBALIZATION
 Marked by massive movements of capital
and abrupt shifts in comparative advantage,
globalization affects countries' policy choices
in many areas, including labor, trade, and tax
policies.
 Helping a country benefit from globalization
while avoiding potential downsides is an
important task for the IMF

10. NEED FOR RESTRUCTURING OF IMF
 Inability to Prevent Global Economic Crisis
 Changes in Communication and Technology

11. AREAS OF RESTRUCTURING
 Defining a New Role
 Governance
 Surveillance and Analysis
 Lending
 Financial Sources

12. DEFINING A NEW ROLE
 Make Crisis Prevention and Crisis Resolution
to go hand in hand
 Work Out a Relationship with The World
Bank and avoid “overlaps”
 Reduce the number of extraneous roles

13. CRISIS PREVENTION
 Significant improvement in the Quality of
Fund’s Financial and Economic Surveillance
 Reform of the member’s obligations so as to
bring about a reasonable degree of
Multilateral discipline

14. REDUCING THE NUMBER OF EXTRANEOUS ROLES
 Involvement in Surveillance of Developing
Countries
 Identifying another organization or body
better suited to carry out certain activities,
including work on terrorist financing and
money laundering

15. WORLD BANK AND IMF
 The IMF should pull back from debt relief
programmes in developing countries as this would
“help clarify the roles of the IMF and the World
Bank.”
 Fund should utilize the expertise of the World Bank
in social and poverty issues, to augment the Fund’s
more macro-economics based analysis. The IMF
should remain within its remit of crisis prevention,
not extend its activities into areas of social policy
and development it does not appear to be equipped
to deal with.

16. GOVERNANCE
 While we note that changing the quotas may
have no discernible effect on how the Fund
operates, there is a good case for reforming
the quotas to improve the Fund’s governance
 There is a balance to be struck between the
rights of those that provide the Fund’s
resources, and the needs of those that utilise
those same resources

17. QUOTAS REFORM AND APPOINTMENT OF CMD
 Ensure that all countries are better
represented in the governance structure of
the IMF
 Open selection process for the IMF’s
managing director so that it could be less
Transparent

18. ENHANCING THE EXECUTIVE BOARD AND IMFC
 There needs to be a resident board, to allow
effective oversight of the Fund’s activities. This
underlines the need to ensure proper
representation of all the Fund’s members
 We welcome the moves to make the IMFC more
effective. It is important that, as a high level body of
the IMF, it is particularly cognizant of its role in
providing guidance and oversight of the work of the
Fund.
 Other member countries to persuade the Fund to
release more material, including Executive Board
minutes.

19. SURVEILLANCE AND ANALYSIS
 it seems entirely appropriate that the IMF, as
the guardian of the global financial system,
should seek to redouble its efforts in
assessing the effects of the interplay
between the world’s economies
 Ensure that there is broad consensus for this
change in focus of the surveillance across all
members of the Fund.

20. MULTILATERAL CONSULTATION
 IMF’s new approach to multilateral
consultation, given the Fund’s new focus on
crisis prevention
 member states must feel that the actions that
may be required from the conclusion of this
process will be broadly beneficial
 In a manner which reinforces its neutrality
and authoritativeness of the Fund

21. IEO
 The Independent Evaluation Office (IEO) has
been a significant success
 it still has scope for further development,
especially given the International Monetary
and Financial Committee' recommendation to
include the IEO within the oversight of the
surveillance remit

22. CONDITIONALITY IN LENDING
 Key concern about conditionality has been
that it appears to undermine the sovereignty
of the countries receiving IMF support
 Conditions with a Democratic process
Should be Advocated

23. NEW LENDING FACILITIES
 Exogenous Shocks Facility (ESF): “policy support
and financial assistance to low-income countries
facing exogenous shocks”, where exogenous
shocks are described as including “commodity price
changes (including oil), natural disasters, and
conflicts and crises in neighbouring countries that
disrupt trade”.
 it Should be designed so as to ensure that all
member states that require it are not dissuaded by
onerous conditionality

24. FINANCING OF IMF
 The Fund’s primary source of income
derives from the difference between the
interest received on its lending activities and
the interest it has to pay out to the member
states that hold money with the Fund
 separate funding and lending decisions.

25. REFORM IN FINANCING
 The search for a solution to the long-term financing
of IMF operations should be considered against two
criteria
 The first is that poorer nations should not have to
pay to gain access to the range of services the IMF
can provide. The second is that funding for
surveillance should be seen to be as independent
as the actual analysis, especially where the IMF
may also be a lender to a specific country

26. WHAT IS IMF ?
IMF is UNO recognized international monetary
fund or reserve which helps its members.
 It established in 1946 after bretton wood
meeting.
 It has 185 members across the all nations
but soviet Russia and its member are not
linked with IMF.

27. OVERVIEW OF IMF
1.SURVEILLANCE:
 the institution adopted a Decision on Bilateral and Multilateral
Surveillance with the objective of better integrating IMF monitoring of
the global economy with its oversight over individual countries.
 It also adopted a strategy for financial surveillance aimed at
improving risk identification,
 Developing better instruments to support integrated policy response
to risks, and increasing engagement with stakeholders to improve
impact

28. 2.THE GLOBAL ECONOMY:
 Although economic activity showed signs of stabilizing in
advanced economies during the year and even accelerated
somewhat in emerging market economies.
3. FINANCING:
 With the ongoing crisis, financing remained an important mode of
IMF support for its members.
 The IMF continued its support to low-income member countries
under the Poverty Reduction and Growth Trust (PRGT).
 A review of the IMF’s framework for assessing debt sustainability
recommended changes to promote more uniform outcomes.

29. POLICY AGENDA:
 The institution’s policy work for the year reflected the
priority areas identified in the Managing Director’s Global
Policy Agenda.
 In addition to short-term policy actions required to move
the global economy from stabilization to growth,
 The focus of policy priorities needed over the medium term
was on four areas. In the area of jobs and growth, analytical
and operational considerations for the IMF

30. CAPACITY DEVELOPMENT:
 Capacity Development, as part of a
strategic approach to this core area of IMF
activity.
 The majority of technical assistance
continued to be provided to the IMF’s low-
and middle-income members.
 Demand for IMF training programs,
supported by external donors and training
partners, remained robust, with the IMF’s
middle-income members the primary
beneficiaries

31. LOW-INCOME COUNTRIES:
 The global crisis, the IMF has remained committed to
meeting the changing needs of low-income countries.
 Increasing the financial support available to these low
income countries, other reforms have included overhauling
the institution’s lending framework, streamlining loan
conditionality, and reducing to zero the interest charges on
concessional IMF loans for low-income countries through
the end of 2014.

32. SMALL STATES:
 The IMF’s smallest member countries share a number of intrinsic
characteristics that translate into a common set of development
challenges. Because of their small size, they have higher fixed and
variable costs, with little scope to exploit economies of scale.
 In the public sector, this results in higher costs and reduced volumes
of services provided; in the private sector, in concentrated market
structure and a lack of diversification.
 Small size also influences the financial sector and how small states
manage their exposure to natural disasters.

33. SUPPORTING JOBS AND GROWTH:
 The Articles of Agreement commit the IMF to
“the promotion and maintenance of high
levels of employment and real income.”
 In the wake of the global crisis,
unemployment has reached unprecedented
levels in many countries, heightening the
need to generate conditions for job creation
and inclusive growth.

34. DEBT SUSTAINABILITY:
 Public debt has been on the rise since 2008, particularly
in advanced economies, where it has reached very high
levels.
 The resulting debt overhang presents challenges for
financial stability and economic growth.
 Issues associated with assessing debt
sustainability and reducing vulnerabilities
associated with high debt were a major focus
of the IMF’s work during the year.

35. IMF AND ITS CONDITIONS
• The primary objective of conditions in an IMF program is
to reserve money growth to address the macroeconomic
imbalances faced by a country.
 Adopting policies of fiscal.
 Exchange rate devaluation; "getting the
prices right",
 Investment.
 Cuts in real wages,
 Cuts in public expenditure.

36. CONTINUE..
 One of the major reasons was that the
successive governments used foreign
resources to fix the external payment
imbalances but they did not adopt
complementary policy reform.
 high external debts and debt servicing
problems.

37. IMF ADVANTAGES
 If a country has a balance of payments
deficit, the IMF can step in to fill the gap.
 It serves as a council and adviser to
countries attempting a new economic policy.
 balanced growth in international trade.
 promote exchange rate stability.

38. IMF DISADVANTAGES
 The IMF has been criticized for not doing much and for
overreaching.
 It has been criticized for being too slow or too eager to
assist failing national policies.
 it has been accused of being a tool for free-market
countries only
 Return on interest.

39. CHALLENGES FOR THE FUTURE:
(i) Higher trade deficit.
(ii)Increase in imports of machinery. The higher
oil import bill due to higher international oil
prices is a source of concern but is beyond
our control.
(III)The higher machinery import, on the other
hand, is still welcome as it is a reflection of
the growing capacity of the economy.

40. OTHER LONG TERM CHALLENGES INCLUDE:
 Investment in infrastructure: Higher growth
rates for an extended period of time in the
range of 7 to 8 percent
 Annually are possible only if energy, water
resources and infrastructure needs are
fully met.

41. IMF AND PAKISTAN

42. WHY PAKISTAN BECOME THE LOAN RECEIVER
OF IMF ??

43. 1987 AND PPP GOVT
 Record Deficit Budget
 Dialog on structural adjustment facility

44. 1988-1999 DARKEST ERA
 Lack of implementation
 Undrawn amount
 Back to back Nine Agreements

45. 2000-2007
 The best regime
 Fulfillment of polices

46. ERA OF RECESSION
 2008 to 20009
 Deficit of record time

47. 2010 AND ONWARD
 Implementation of policy
 New grants
 Easy pay back procedures

48. SPECIAL DRAWING RIGHTS
 Easy way to return money
 Facilitation to its members

49. CONDITIONS OF IMF
 Imposition of central excise duty (CED) on
services
 Increase in interest rate.
 Changes in the Islamic Development Bank
loans
 The devaluation of Pakistani Rupee.
 Non-provision of supplementary grants to
government departments.
 Removal of subsidies.

50. WHAT ACTUALLY RESEARCHER THINK ABOUT
IMF ????