Pakistan’s Balance of Payment Crisis and IMF Loans

Abstract

International Monetary Fund commonly known as IMF was established in 1944 at Bretton Wood conference in the United States of America. The major aims of this monetary institution were to provide stable framework related to currency exchange rate and reduce frequency of balance of payments deficits by providing member states loan and financial and technical guidance. In broader sense, IMF establishment aimed at ensuring reducing the risk of collapse of world monetary and exchange systems as it happened during 1930 when old exchange system, based on gold standard, collapsed and resulted in economic meltdown that is known as Great Depression of 1930.Furthermore, this monetary institution was created to stabilize and promote free trade or rather free market based on liberal economic principles. Apart from that, the two World wars that happened respectively in 1914-1918, and 1939-1945, had devastated the world economic and render many into severe economic crisis. Thus, IMF intended to help such countries, especially, western European states. Later on IMF widen its purview and helped countries, though not directly affected by wars, facing severe balance of payments crisis (Masters, et al., 2021).