Macroeconomic Effects of Adjustment Lending in Pakistan

Zafar Iqbal


During the 1970s and early 1980s, many developing countries
faced macroeconomic problems, notably large fiscal deficits, vulnerable
balance of payments positions, increasing inflation rates, lower rates
of domestic savings, and as a consequence lower capital formation and
economic growth rates. The major financial lending institutions,
preeminently the W orId Bank and the International Monetary Fund (IMF),
argue that the present macroeconomic problems in less developed
countries (LDCs) are due to structural maladjustments-poor economic
policies and weak institutions. Therefore, since 1980, these donor
agencies have been proposing Structural Adjustment Programmes (SAPs) and
Sectoral Adjustment Programmes (SECAPs) associated with Structural
Adjustment Lending (SALs) and Sectoral Adjustment Lending (SECALs),
respectively. These programmes focus on broader macroeconomic adjustment
policies. The disbursement of SALs and SECALs are, how~ver, conditional
upon the recipient countries adopting economic policies specified by the
staff of the World Bank and the IMF.

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