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Impact evaluation of structural adjustment program: a case of Pakistan

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  • Khan, Rana Ejaz Ali
  • Nawaz, Muhammad Atif
  • Hussain, Altaf

Abstract

We analyzed the effect of Structural Adjustment Program (SAP) on macroeconomic variables of Pakistan using annual time series data for the years 1981-2001. The impact of four policy instruments of SAP, i.e. reduction in budget deficit, increase in indirect taxes,adjusting the exchange rate and sliding down of subsidies, on employment, income distribution, per-capita income and inflation has been analyzed. It is found that the first policy instrument, i.e. decrease in budget deficit has affected employment, income distribution and inflation adversely. The second policy instrument of imposition of indirect tax negatively affected the employment, income distribution, per capita income and positively affected the inflation. The third policy instrument of SAP was adjustment of exchange rate. It is estimated that adjusting exchange rate has resulted into increased unemployment and inflation. The fourth policy instrument of shrink in subsidies augmented the unemployment, unequal distribution of income and inflation and dwindled the percapita income. It appears that SAP has adversely affected the major socioeconomic variables of the economy. Currently the government is considering for loan from IMF, so it is proposed to avoid such type of policy directives from IMF.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34835.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:34835

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Keywords: Structural Adjustment Program; Budget deficit; Indirect taxes; Exchange rate; Subsidies; Employment; Income distribution; Per-capita income; Inflation; Pakistan;

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  1. International Monetary Fund, 1998. "Do IMF-Supported Programs Work? a Survey of the Cross-Country Empirical Evidence," IMF Working Papers 98/169, International Monetary Fund.
  2. Rashid Amjad & A.R. Kemal, 1997. "Macroeconomic Policies and their Impact on Poverty Alleviation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(1), pages 39-68.
  3. Haroon Jamal, 2003. "Poverty and Inequality during the Adjustment Decade: Empirical Findings from Household Surveys," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 42(2), pages 125-135.
  4. Dollar, David & Svensson, Jakob, 2000. "What Explains the Success or Failure of Structural Adjustment Programmes?," Economic Journal, Royal Economic Society, vol. 110(466), pages 894-917, October.
  5. Ricardo Martin & Alex Segura-Ubiergo, 2005. "Social Spending in IMF-supported Programs," Public Economics 0504011, EconWPA.
  6. A. R. Kemal, 2003. "Structural Adjustment and Poverty in Pakistan," MIMAP Technical Paper Series 2003:14, Pakistan Institute of Development Economics.
  7. A.R. Kemal, 1994. "Structural Adjustment, Employment, Income Distribution and Poverty," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(4), pages 901-914.
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