ABSTRACT

The global financial crisis of 2008 was the worst of its kind since the Great Depression of
the 1930s. It surfaced to notice in September 2008 with the failure of several large United
States based financial firms. Its underlying causes had been reported following the
subprime mortgage crisis. The failures of large financial institutions in the United States
rapidly evolved into a global crisis resulting in European bank failures, declines in
various stock indexes, and significant reductions in the market value of equities and
commodities worldwide. The crisis led to liquidity problems and the de-leveraging of
financial institutions especially in the United States and Europe, which further
accelerated the liquidity crisis. World political leaders and central bank directors
coordinated their efforts to reduce fears but the crisis progressed into a currency crisis
with investors transferring vast capital resources into stronger currencies leading many
emergent economies to seek aid from the International Monetary Fund. International
Monetary Funds and World Banks Structural Adjustment Programmers have returned to
countries, including Pakistan, which were doing well before the ongoing financial crisis.1
Therefore, the financial crisis carries many pertinent lessons for the economies of
countries like Pakistan. The paper aims at highlighting the salient aspects of the global
financial crisis, its impact on developing countries and drawing lessons for Pakistan.