Why Pakistan’s growth cycle keeps ending in IMF programmes

The post-war Bretton Woods system was based on exchange rate stability, where the Official Development Assistance (ODA) was used to provide necessary development finance to the developing countries. The system ran successfully during the 1950s and 1960s, when developing economies achieved high rates of capital accumulation. However, the collapse of the Bretton Woods system in the early 1970s brought a turn in development finance, where private international finance started to take a driving seat. The private turn in international development finance has changed the international financial architecture. Under the new global financial architecture, private capital flows are calling the shots. Under the changed international financial architecture, the economy has been experiencing a trade deficit in goods and services. Remittances cover a large part of the trade deficit, while the remaining deficit requires capital inflows, which are financed by external debt.