"To Study the Impact of Structural Adjustment Programmes on Developing Economies - A Case of Pakistan"

Abstract

BACKGROUND OF THE RESEARCH: Structural Adjustment Programmes are considered as the set of economic policies that move a country towards market based development. Specifically the policies focus on the external and internal account deficits, liberalization of trade, optimal allocation of resources and export expansion as opposed to import substitution. During the last three decades various developing countries including Pakistan have implemented these policy regimes and have come about with different and varying outcomes. The developing countries implemented these policies as part of the conditionality to grant them loan from the international financial institutions particularly International Monetary Fund and World Bank. Over the years various economists and analysts have questioned on the ability of these programmes to improve the poverty situation of the poor economies by bringing about a positive change in their human development index or increasing the income levels of the poor. They also question on whether they hinder or support growth as compared to the pre reform situation. Structural adjustment programs (SAPs) and policies are designed to stimulate growth and development of an economy by improving the structure of incentives, trade regime, distribution of resources, and efficiency in the use of resources. It has been argued that the developing countries are still dependent on new loans despite the fact that they have always paid back their initial loans. This has in response increased their dependency on aid from the Bretton Woods institutions (IMF and World Bank). This further gave way to rescue them by the hands of IMF and World Bank. They were established to make sure that the developing world will receive the required amount of loan in order to make them pay their debt continuously and accept the conditionalities accordingly that are known as Structural Adjustment Programmes. RATIONAL FOR RESEARCH: The Structural Adjustment Programmes are based on the premise of the Neoliberal ideology of growth which supports globalization and advocates the abolishment of the protectionists’ measures within an economy in order to accelerate the pace of growth. The theory advocates raising the income level of the population in developing country through which developments in their human capital i.e. health and education can be achieved. The theory further states that a market is the best factor for the optimal allocation of the resources and if allowed to operate freely it can result into productivity gains. The motivation for the purposed research is derived from: 1. The doctrine of the neo-liberal ideology behind the origin of these policies. 2. The human development variables that have been impacted by these policies taking the case of Pakistan. 3. The continued dependence of the LDC’s on the developed countries through the use of such policies/conditionalities.

PROBLEM STATEMENT: The study will explore the impact of the Structural Adjustment Programmes (SAPs) on the developing economies taking the case of Pakistan. Specifically, it will ascertain the following problems: 1. What is the impact of SAPs on the growth and development of Pakistan? 2. What is the impact of SAPs on Balance of Payment position of Pakistan? 3. How are SAPs contributing towards the economic independence of Pakistan? 4. How are SAPs and the neo-liberal ideology on which it is based are contributing to Pakistan’s development?

THEORETICAL FRAMEWORK: The research will uncover the macroeconomic and microeconomic objectives of the Structural Adjustment Programmes (SAPs) that affect the trade, monetary, fiscal and industrial policies of Pakistan’s economy. It will link the effect of such objectives on the economic variables or the indicators of economic performance. The independent variables as mentioned are the conditionalities imposed by the World Bank and the IMF i.e. the Structural Adjustment Programmes (SAPs). These include: 1. Liberalisation: opening up of the national boundaries in order to promote international competitions and the free flow of capital. 2. Privatization of state-owned enterprises and companies. 3. De-regulations of labor market and reducing the safety nets provided to society. 4. Improving competitive position of the national industries

Now the dependent variables will be the indicators of Human Development Index (HDI) and growth index. These will include: 1. Literacy rate 2. Mortality rate 3. Poverty rate 4. Inflation rate 5. Unemployment rate 6. Inequality rate (Gini Coefficient)