Effects of IMF Financial Assistance on Economic Performance of Pakistan

Abstract

Developing countries like Pakistan seek financial assistance in order to meet their deficits and economic habitual activities. IMF is one of the largest financial institutions for this purpose. This study is designed to assess “the role of IMF in the economic performance of Pakistan” over the time period from 1980 to 2020.  The data has been taken from IFS, World Bank, and the State Bank of Pakistan. The Augmented Dickey-Fuller test has been used for unit root. The ARDL estimation technique has been used. Economic Performance Index used as dependent variable, whereas Foreign Direct Investment, Money Supply, Exchange Rate, Gross National Expenditure, and Terms of Trade have been taken as independent variables. IMF is treated as a dummy variable in this study. The result shows that the IMF has an adverse relation with the economic performance of Pakistan in both the short and long run. Foreign Direct Investment has positively influenced the economic performance in the short run but negatively in the long run. The exchange rate has negatively affected the economic performance in the short run but positively in the long run. The result also shows that money supply, gross national expenditure, and terms of trade are positively affected by the economic performance as well.