DefinePK

Abstract

Pakistan is enduring a serious economic downturn and facing the probability of the collapse of the banking and financial systems. The growth outlook is meek and risk of default is hanging over the head of the nation as a sword. Banking and financial institutions and economic systems of Pakistan like that of ASEAN and other crises hit countries, suffer from bad loans, political interference, corruption, declining exports, budget and trade deficits, internal and external debts, crashes of stock exchanges, currency mismanagement, and double digit inflation. While 'survival of the fittest’ is ever a self-evident truth, the lessons of the rise and fall of nations are important for survival. In order to meet the challenge of survival, it may be crucial to learn the underlying causes that accounted for and understand the strategies and reforms that attempted to manage the economies of the countries suffering from the crises. The banking and financial sectors play significant roles in the contemporary world of business and economic growth. They influence economic activities in the field of production and facilitate the distribution of financial resources in diverse and integrated ways. The experiences of developed countries such as the United States of America, Germany and U.K. clearly demonstrate that organised economic structures and sound banking and financial systems not only boost their macro and micro economies but also may save them from any sudden banking and financial crisis. Economic and banking crises vividly illustrate the consequences of weak financial systems and inadequate macroeconomic policies. Many countries of the world faced crises in their economic and banking systems that tended to worsen the structure of their entire economies. Rapid trade, globalisation, financial integration of world economies and technological developments are considered as catalysts for the ‘East Asian Crisis’ that hit many Southern Asian countries especially and the rest of the world generally.