Poverty Reduction Strategies in Pakistan

Essay by juve118University, Bachelor's May 2005

download word file, 11 pages 2.6

Structural adjustment loans have been among the important leveraging tools of bi and multilateral donors in the post-war era. They have come to dominate economic policy contexts of a large majority of poor countries, and ostensibly will continue to do so as the debt trap intensifies. In Pakistan, beginning in the 1980s, the adoption of structural adjustment programs began in earnest, with collaboration between the Pakistani government and international financial organizations (IFIs). This paper will trace the adoption and development of the structural adjustment and poverty reduction strategies (PRSs) adopted in Pakistan over the past two decades, highlighting the recurrent failures and shortcomings of orthodox IFI strategies.

In Pakistan, structural adjustment has officially been a rather stop-start process. While the first structural adjustment loans were issued during the tenure of General Zia ul Haq, they were discontinued due to unsatisfactory compliance with conditionalities. It was in 1988 that the first main loan package was signed, based on a need to combat a rapidly growing budget deficit and declining remittances from the Middle East.

Also important to mention is that the Soviets had retreated from Afghanistan and the huge aid packages that had been coming into the country courtesy of the US had dried up. Therefore, the IFIs stepped in to fill the void.

The main focus under this first program was reduction of the deficit, cutting subsidies, and financial sector reforms. Subsequently another program was initiated in 1991, essentially a follow-up to the earlier program. The first program did not yield the results that the IFIs wanted (when do they ever?), but the IFIs were ever so gracious in extending deadlines for desired targets. This process seemed to continue unabated with agreements signed in 1993, and then 1997. Privatization, trade liberalization, and financial liberalization were mainstays from the early days...



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