Globalisation: 1.2c - Making Money

Question 1

Evidence that global institutions are good: Pakistan will receive $6 billion of funds from IMF over 39 months

Answer 1

Large amount of money; can be invested in useful things

Like Pakistan’s most profitable sectors, primary and secondary; textiles, food processing (secondary) + petroleum (primary) = 78% of exports

Money is received gradually so less likely that corruption in government will result in it being wasted at one go

Question 2

Evidence that global institutions are good: Pakistan might agree to structural reform (reduce spending, reduce government deficit)

Answer 2

Structural reform means Pakistan will have to reprioritise what they spend money on =

Spend more money on repaying debt
Adopt policies that encourage free trade -> more SEZs

Question 3

Evidence that global institutions are good: Rupee will be devalued (current value is too high)

Answer 3

Makes FDI cheaper
Good for TNCs
Encourages them to invest

Question 4

Evidence that global institutions are bad: Pakistan will privatise/sell-off loss making companies owned or subsided by the government

Answer 4

Can easily cause mass employment
Can put off TNCs as the affluence of population isn’t high enough to make it a viable option

Spiral of decline:

• > decreased affluence because of unemployment
• > services like shops earn less money and eventually close
• > results in more unemployment
• > further decreased affluence

Question 5

Evidence that global institutions are bad: Pakistan might agree to structural reform

Answer 5

People may not like having their country be forced to change; may lead to social backlash

Question 6

Evidence that global institutions are bad: The World Bank and Asian Development Bank might agree to lend another $2bn

Answer 6

$2bn is a huge amount of money that will have to be repaid, let alone with interest added onto it

Question 7

Evidence that global institutions are bad: Rupee will be devalued

Answer 7

Poorer people now need to pay more for what they could have bought before for less
Makes president unpopular -> civil unrest -> president being elected out

Question 8

Evidence that global institutions are bad: Pakistan has had 12 IMF programs since 1988, receiving $19bn overall

Answer 8

Pakistan is in a huge amount of debt -> virtually under the control of international political and economic organisations like the IMF

85% of their GDP is spent paying off debts