IMF bailouts: roads to stability or recipe for disaster?(essay outline for CSS)

 

Topic Name: IMF bailouts: roads to stability or recipe for disaster?

1. Introduction

Thesis Statement: The opportunity cost of financial assistance made by IMF toward Pakistan is low. Although, there are pros and cons of providing the bailouts, certain measures can provide stability, prudential regulation and save the economy from disaster.

2. Past episodes of bailouts for Pakistan's economy: An Overview

3. IMF bailouts indeed provide stability to the economy [Thesis] 

[A] Free float exchange rate and decline in current account deficit

[B] Stability in output through rational expectations

[C] Strong prudential regulation

[D] Balanced the mis-match maturity of financial assets

[E] Balanced the state bank reserve requirements

[F] Automatic stabilizer and balanced budget

4. Bailouts are sometimes disastrous for the economy [Antithesis]

[A] Upward movement of ex-post interest rate

[B] Mismatched ex-ante interest rate

[C] Decline in exports activities

[D] High risk premia and reduction in foreign direct investment

[E] Uncertainty in domestic prices

[F] Volatility in domestic investment through uncovered interest parity

5. Bailouts can provide stability and save the economy from disasters under certain measures [Synthesis] 

[A] Balanced the interest rate through monetary rule

[B] Control the ex-ante interest rate

[C] Effective control on balance of payment

[D] Manage the portfolio investment

[E] Adjust the cost of living through welfare schemes

[F] Central bank independence

6. Conclusion