The impact of structural reform strategies of international financial institutons on the rule of law, good governance and development in Pakistan.

Author:Ahmed, Naveed


Issue: 2016 (2).

This article was published on: 16 Jan, 2017.

Keywords: Rule of Law, Good Governance, Development, Structural Reform Strategies, Pakistan.


This article aims to critique the impact of Structural Reform Strategies of International Financial Institutions (IFIs) upon the rule of law, good governance and development in Pakistan. The key contention of this article is that the absence of social justice in Pakistan is a consequence of the interaction IFIs policies and weak structures of governance, the rule of law and development introduced by the government of Pakistan. Whilst IFI policies have recently attempted to emphasise human rights, good governance, the rule of law and development, they have been ineffective in part due to submissiveness of IFI's to the geo-strategic interests of the U.S. and Western powers and internal factors within Pakistan.

This article is organised into three parts. Part I examines the impact of Structural Reform Strategies (SRSs) of the IFIs upon the rule of law and good governance in Pakistan. Part II highlights the impacts of SRSs of the IFIs on development in Pakistan whilst focussing upon three key issues such as, poverty, education and health. Part III concludes the article and summarises key arguments.


Since the early 1980s, the notion of law and development has been used to accelerate development within developing countries. The foundations of this movement hinged upon the formulation and incorporation of "good governance programmes to rule of law and development", This resulted in the injection of huge amounts of money into development related projects. The projects involved improving legal scholarship, judicial reform, providing legal aid, combatting corruption as well as providing training and teaching programmes. A number of institutions were involved in the law and development movement. These include the Ford Foundation, the United Nations Development Programme (UNDP), the World Bank, USAID, the European Bank for Reconstruction and Development (EBRD), the American Bar Association (ABA), the Inter-American Development Bank (IDB), the Asian Development Bank (ADB) and the United Kingdom's Department for International Development (DFID) among others (Tamanaha, 2009: 1-2).

Nader notes that to examine the capacity of any law and development plan, it is important that the initial concepts of development strategies be outlined regardless of their consequences to established authorities. The underlining rationale of legal reform is to promote social justice, human rights and the improvement of the structures and functionality of the state. The concept introduced the idea of law as a tool of social change and progress (Nader, 2007: 1-2).

In the law and development movement, similar things were highlighted in the World Development Report 2006. The World Bank identifies various principles, however, a lack of clear vision and lack of familiarity with the previous exercise has been observed in the application of law and development (World Bank, 2006). Nader concluded that the rule of law programmes will remain deficient if law serves to uphold issues of power and control (Nader, 2007: 20-21).

Yet despite this, Tamanaha suggests that there have been little lessons learned from the fault lines of law and development experiences;

One implication of this thought experiment is that the failures of law and development projects in the past five decades does not entail that legal development is failing. Rather, it means that that law and development projects--mostly related to the establishment of capitalist, democratic, and liberal legal institutions--are not showing much success. Legal development still takes place, although not according to or in compliance with this formula (Tamanaha, 2009: 242). Tamanaha contends that a number of factors are central to legal transformation such as political strength, social approaches to law, sufficient human capitals, social balance and adequate financial assets. He further asserts that by constructing indigenous capabilities, the probabilities for effective legal growth can be improved as it grows its form and appeal inside a specified culture which is primarily an indigenous problem. Previously, the funds were misused by spending the money on armaments for the armed forces or through the establishment of foreign accounts by the elites which was basically provided for financial growth. Tamanaha also asserts that Sen has provided a broad and influential approach which includes justifiable growth, political and democratic freedoms, safety from violence and uncertainty, sufficient social services, an open print and broadcast media, and rights of women in relation to improve the capabilities and liberty of individuals (Tamanaha, 2009: 12-15, 23). Tamanaha identifies several problems. In the context of Pakistan, Tamanaha points to the dominance of the military in relation to internal issues of governance. noting that a well-functioning legal system and courts serve only urban areas at the expense of those living in rural areas. (Ibid: 7).

Legal reforms have also been neglected in Pakistan in the last three decades. This is coupled with the fact that previously, executive interference in judicial matters not only affected its independence, but also disrupted the structure and reliability of courts. Armytage identified a number of other serious problems such as prolonged adjournments, (1) insufficient services, lack of judges and courtrooms and inadequate renumeration which results in corrupt practices. The Asian Development Bank was the first International Financial Institution (IFI) to provide financial support and fund judicial reforms in Pakistan. It allocated $350 million (US dollars) for the Access to Justice Program (AJP) from 1998 to 2002 (Armytage, 2003: 5-6).

Although, the AJP was not successful in obtaining all of its objectives immediately, it contributed largely to the transformation of future trends for the judicial and legal system of Pakistan. For example, in 2009, the National Judicial Policy2 was announced in order to ensurespeedy trial of cases, abolition of corruption, misuse of power and judicial independence. After the reinstatement of the Chief Justice of Pakistan (CJP), the judiciary entered into a new era of reforms including the lower judiciary and legal institutions (NJCP, 2009).

On May 20, 2004, the World Bank provided $55 million (US dollars) to Pakistan to fund the Public Sector Capacity Building Project which was expected to be completed by November 2009. The project focuses upon three sectors for reform; namely the professional development of civil service, reforming both important federal and provincial ministries, as well as enhancing the capacity building enterprise of the controlling organizations such as Oil and Gas Regulatory Authority (OGRA), Pakistan Telecommunication Authority (PTA) and National Electric Power Regulatory Authority (NEPRA) (World Bank, 2004a).

Armytage (2003:7) notes the AJP has facilitated the publication of the progress and performance of the courts through annual reports. Moreover, there has also been a positive interaction between civil society and the judiciary, which is evident through the activist dimension of the Lawyer's Movement in Pakistan. What all these factors show is that although it is difficult to identify the immediate impact of the AJP, there were positive long term effects. In the case of the World Bank (WB) and International Monetary Fund (IMF), their investments have been largely confined to the reformation of governance structures in Pakistan. The projects have variously helped in improving good governance, which has also impacted on the general functionality of state institutions. It is important to note however, that despite their seemingly distinct focus, rule of law and governance have a number of interfaces implying that a disruption in one may profoundly affect the other.


There are two underlying issues here, firstly whether the policies on rule of law and good governance are effective in promoting development and secondly, the impact of IFIs general policies upon development. The rule of law and good governance are important but are unfortunately being hindered by various internal factors in Pakistan i.e. the govt. of Pakistan has prevented effective reforms such as those relating to tackling corruption. Doubts also seem to exist as to whether the approach taken by the World Bank, IMF and ADB are likely to succeed.

Sen's capability approach suggests that improvement of capabilities in poverty, education and health is essential to development. Poverty, education and health are three relevant problems caused by a combination of inadequate policies of both the IFIs and Pakistan. This section will move on to explore how these issues manifest in reality.

It is a common perception that aid to Pakistan was conditional to the geo-strategic interests of the U.S. but the liability of the government of Pakistan cannot be ignored as it plays a significant role in formulating policies for development.

The international institutions started paying attention to the problems of poverty and famine in terms of finance during the second half of the 20th century. Initially, finance was mainly project based with a continued emphasis upon infrastructure projects. From the 1980's onwards, there was a shift to structural adjustment lending. These programmes were predominantly ineffective in dealing with the interrelated issues of poverty and famine. At the end of the 20th century, international organizations, IFIs, development banks and powerful nations realised the crucial role they could play in alleviating poverty and...

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