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The Role Of International Financial Institutions

The Role Of The International Financial Institutions In Public Policies In The Developing Countries And Its Implications , Pakistan A Case Study.


The developing countries have long suffered from lack of finances to follow their development and administrative functions. The problem is not only the paucity of the funds but the crippling political system and the outdated bureaucratic operation of the administration. The paper discusses the impact of the IFIs in rectifying the grave issues by providing financial and technical assistance. The institutions not only help developing countries in correcting their financial imbalances and technical needs but suggest a corrective policy in the public and the private sector.

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The research paper gives insight regarding the role of IFI in public policy making and implications in the developing countries by bringing reforms in the civil services, private sector, physical infrastructure, and education, energy and health sectors at their behest.

The general perception regarding the IFIs influence is negative as far as the economic and social growth of the recipient countries is concerned. The paper will analyze the various research papers on the subject, using the experiences of developing countries in Latin America, the African continent and the Middle Eastern Countries. Last but not the least a case study of Pakistan will be prepared critically analyzing the influence of the IFIs in the country’s public policy decisions and their implications.

Statement of the Problem

Are the IFIs in a position to influence the public policy of the recipient countries? It is widely believed that these donor institutions, tend to arm twist the countries to adopt policy that guard their specific interest. Resultantly, the anticipated benefits from the financial and technical assistance are diminished.

The impact of three major IFIs namely International Monetary Fund, World Bank and Asian Development Bank has been good in certain economic and social sectors however; it has largely caused stagnation or even deterioration in the governance of the recipient countries.

The study will highlight the role of IFIs in the public policy sectors of development and reforms in the developing countries. The paper will analyze how successful have these institution been in bringing structural reforms in the governance of these countries? What is their contribution in the development of the energy, health, education and the private investment sector?

Significance and Scope of the Study

Since the World Bank and the International Monetary Fund were launched more than 50 years ago, the world’s economy has changed in important respects. Essentially, many of the IFI driven initiatives have been guided by ‘Structural adjustment approach’ to poverty reduction in much of the developing world, the evidence that it actually brings about poverty reduction remains controversial. Such debate provides background for this paper. So this study would provide a detailed and comprehensive know-how of the functions of these financial institutions and would remarkably help to analyze their implication on the economy of a country. As these institutions are playing a vibrant role in the public policy sectors of development and reforms in the developing countries, this study would help to critically analyze the performance of these institutions.

Literature Review

The paper “Making the most of markets: The role of IFIs” suggested a way forward to IFIs role in developing countries by providing useful insights to boost market oriented growth with the help of private sector.”

It analyses how IFIs collaborate with private sector to boost market oriented growth by creating sustainable investment conditions. The paradigm shift to technology and globalization has greatly changed the world tactics to attain economic development and private sector has become an agent of change in this changing scenario. The influence of the IFIS in this sector enables the civil society to actively take part in the formation of the policies of the developing countries. IFIs in collaboration with the governments of the recipient countries can facilitate social safety nets by employing privately managed pension accounts and by suggesting ways of eradicating structural flaws and restoring public confidence. These institutions can pursue further by improving the regulatory mechanism of the developing countries so that private sector potential be fully utilize to facilitate market oriented growth.

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The paper “The Political Economy of Administrative Reform, Building State Capacity in Developing Countries” emphasizes that the IFIs are influential in initiating the reforms but the relationship between the political and bureaucracy are essential for a successful reforms in the civil services, the democratization and the managerial sectors of the governance .The paper further concentrates not on the changes in the economic sector development but the affect of the reforms on the institution of the tax collection , for instance , and the employees of the taxation sectors as a result of the reforms.

The paper “Political Economy of International Financial Institutions lending to Pakistan”, analyzes the impact of International Financial Institutions’ (World Bank, IMF, ADB) lending on political economy of Pakistan. The IFIs being the most relevant for Pakistan since 1960 have been the World Bank, the IMF and the Asian Development Bank (ADB). During the second half of the 20th century, these IFIs have provided both financial support and policy advice to Pakistan. According to World Bank (2004) “it is primarily a reflection of Pakistan’s progress in a number of key areas of reform.” However, Stone (2004) notes that neither of the lending decisions had anything to do with Pakistan’s domestic economic management, which continued to be poor. Pakistan was among the five developing countries which had the highest number of professional staff at the IMF in 1999.There is some evidence that Pakistani nationals working with the IMF or other IFIs obtained top positions in their home government later on.

Methodology and Data

The process for the research is going to be academic. The syndicate will be divided into sub groups working through research papers on the subject. These will be preparing critical briefs on the information thus collected.

The data will be secondary data consisting the research papers, academic journals, periodicals and reports of the IFIs along with the papers on the experiences of the developing countries.

Data and Statistics available will be analyzed with appropriate statistics to draw conclusions whether the IFIs were able to improve or impede the reform process and the economies of the developing countries.

The syndicate will analyze the problem statement by case study method. Case studies and experiences of various IFIS led initiatives in different countries i.e. Latin America, Africa and Asia etc. would be discussed.

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