balance-of-payments problem

Pakistan continues, with US support, to receive International Monetary Fund (IMF) and World Bank loans to help resolve its balance-of-payments problems, most recently negotiating a USD 6 billion IMF loan.

This was all the more inexcusable since balance-of-payments problems were supposed to be the IMF's main area of expertise and external economic surveillance was supposed to be its basic raison d'etre.

In a global financial upheaval like our most recent one, capital flows shift abruptly and dramatically, causing credit, financing, and balance-of-payments problems, as well as volatile exchange rates.

Partly because of the floods that recently overcame Pakistan, which will shave off at least 1 percent from GDP, partly because of the administration's inability and unwillingness to curb non-essential expenditures, and partly because of slowing export growth, Pakistan is once again facing serious fiscal and balance-of-payments problems.

The first is fiscal situation, second low growth and the challenge to revive it so as to create jobs and reduce poverty while the third is to improve the competitiveness of the economy so as to expand exports, sustain growth, and avoid balance-of-payments problems in the future.

The Washington-based IMF advises governments on economic policy and lends money to help with balance-of-payments problems.

Its remit was twofold: first, to encourage financial stability by managing a system of fixed but adjustable exchange rates tied to the US dollar (backed by gold reserves) and second, to lend, on a short-term basis, to countries with balance-of-payments problems.

When the United States developed balance-of-payments problems in the early 1970s, it was able to shift the international financial system from fixed to floating exchange rates, enabling continued growth of U.S.

The IMF should return to it original mandate and lend to countries (rich or poor) facing short-term balance-of-payments problems. Conditions would be few, dealing strictly with core macroeconomic problems and with repayment to the IMF.

The restrictions have been in force since the 1950s, but were accepted by other countries because of India's earlier endemic balance-of-payments problems. But with the steady growth in the country's foreign exchange reserves, which reached USUSD28.8 billion in June, other WTO members have insisted that Delhi agree to move quickly to drop the curbs.

RELATED ARTICLE: BANKING AND BALANCE-OF-PAYMENTS PROBLEMS

In fact, Wu's own presentation of the political economy of Deng's reforms indicates that a shift in the property rights system was not the key factor that allowed the PRC to break out of its "political business" cycle - reform-(marketization or privatization) stimulated inflation, balance-of-payments problems, inequality, and political discontent, which in turn provoked economic and political repression.

Regional problems of slow growth and unemployment may be highly correlated with balance-of-payments problems. Chapter 9 presents some interesting applications of the balance-of-payments constrained growth model that consider the effects of the removal of tariffs and the regional effects of the factor market integration.

While firms in Europe and Japan are restructuring and developing their capital, American firms are hampered by a large trade deficit and balance-of-payments problems caused by the governmental budget deficit.