Structural adjustment program is a plan implemented by the World Bank and the

International Monetary Fund (IMF) in a developing nation to try to get their economies to
be more productive. The goal of a structural adjustment program is to help the borrowing
nation pay off its debts and have a growing economy that will sustain them into the
nation to receive a lower interest rate on past loans.

Structural adjustment is a term used to describe the policy changes implemented by the
International Monetary Fund (IMF) and the World Bank in developing countries. These
policy changes are conditions (Conditionalities) for getting new loans from the IMF or
World Bank, or for obtaining lower interest rates on existing loans. Conditionalities are
implemented to ensure that the money lent will be spent in accordance with the overall
goals of the loan. The Structural Adjustment Programs (SAPs) are created with the goal
of reducing the borrowing country's fiscal imbalances.

IMF Conditionalities:

Currency Devaluation, Import liberalization, and Export Promotion

Tax reforms and reduction in government expenditures
Deregulation of markets agriculture price reforms
Public Enterprise reforms and Privatization
Financial Reform

Structural programs began sensibly as a cure to acute macro economic instability mainly
inflation rates and unsustainable external debts. The range of policies that the conditions
of the SAPs have prescribed for the crises-bitten countries is quite vast and covers almost
every sector of the economy.

Regardless of the crises of the developing countries they are routinely required to
implement restrictive fiscal and monetary policies. Their main are area of concentration
has been to liberalize imports and encourage exports and permit unhindered international
flow of capital.

Yet another area of concentration has been the restructuring of operations of the public
sector and reducing its size. Furthermore in the belief that the markets are infallible in all
circumstances and locations, these programs demanded of all the developing countries to
abandon the government supported, inward looking import substitution policies.

In its place privatization of the public sector enterprise has been diagnosed to be the
ultimate remedy for infusing efficiency in the production and financial sectors. The
problems with the implementation of the SAPs have generally arisen from the donor’s
failure to estimate the costs and benefits of the conditions. The impacts of the programs
on growth have been negative, the record is still spottier with respect to poverty
reduction.

They tend to raise food prices, reduce public expenditure and employment. Owing to
these, the programs have been extremely unpopular among the people. Their weak focus
on distribution, the implementation has led to food riots and protests against raising
prices of health and education services.

The current practice of imposing on national governments a set of development policies

and priorities in the form of conditions, disregarding their own understanding and
economies must be discontinued. True, some important shifts have taken place he design
of SAPs they now have a “human face” in that poverty reduction as key objectives.

Yet most of these improvements count for little when the needs of the borrowers conflict
with the needs of the richer countries, whose values and priorities have set the form of the
multilateral lending. Thus not-withstanding some window-dressing, the focus of the
SAPs remains the same as before. They are systematically contract-based involving high
interest rates, too low budgetary targets, higher taxes etc. Their net effect has been to
destroy jobs, increase inequities and enhance poverty

What are Structural Adjustment

Programmes (SAPs)?
"Structural adjustment" is the name given to a set of "free market" economic policy
reforms imposed on developing countries by the Bretton Woods institutions (the World
Bank and International Monetary Fund (IMF)) as a condition for receipt of loans.

SAPs were developed in the early 1980s as a means of gaining stronger influence over
the economies of debt-strapped governments in the South. To ensure a continued inflow
of funds, countries already devastated by debt obligations have little choice but to adhere
to conditions mandated by the IMF and World Bank.

Most donor countries, including Canada, condition their bilateral assistance upon a
country's adoption of structural adjustment programmes.

What are SAPs Designed to Do?

SAPs are designed to improve a country's foreign investment climate by eliminating trade
and investment regulations, to boost foreign exchange earnings by promoting exports,
and to reduce government deficits through cuts in spending.

What Measures are Imposed Under SAPs?

Although SAPs differ somewhat from country to country, they typically include:
 1. a shift from growing diverse food crops for domestic consumption to
specializing in the production of cash crops or other commodities (like rubber,
cotton, coffee, copper, tin etc.) for export;
2. abolishing food and agricultural subsidies to reduce government expenditures;
3. deep cuts to social programmes usually in the areas of health, education and
housng and
4. massive layoffs in the civil service;
5. currency devaluation measures which increase import costs while reducing the
value of domestically produced goods;
6. liberalization of trade and investment and high interest rates to attract foreign
investment;
7. privatization of government-held enterprises.

Canadians can begin to identify with the citizens of developing nations when we
experience similar SAP-like cutbacks to health, education and other basic social services.

Why the Need for SAPS?

The World Bank and the IMF argue that SAPs are necessary to bring a developing
country from crisis to economic recovery and growth. Economic growth driven by
private sector foreign investment is seen as the key to development. These agencies argue
that the resulting national wealth will eventually "trickle down" or spread throughout the
economy and eventually to the poor.

The achievement of social well-being is not an integral component of SAPs but a hoped-
for result of applying free market principles to the economy. The process of adjustment,
as described by many World Bank and IMF officials to developing countries, is one of
"sacrifice," of "present pain for future hope."

What's Wrong with SAPs?

Many groups argue that SAPs impose harsh economic measures which deepen poverty,
undermine food security, and self-reliance and lead to unsustainable resource
exploitation, environmental destruction, and population dislocation and displacement.
These groups, which include non-governmental organizations (NGOs), grassroots
organizations, economists, social scientists and United Nations agencies have rejected the
narrow conception of economic growth as the means to achieve social and environmental
objectives. They believe SAP policies have increased the gap between rich and poor in
both local and global terms.

Despite claims to the contrary, World Bank-imposed SAPs have paid little or no attention
to their environmental impact. SAPs call for increased exports to generate foreign
exchange to service debt. The most important exports of developing countries include
timber, oil and natural gas, minerals, cash crops, and fisheries exports. The acceleration
of resource extraction and commodity production that results as countries increase
exports is not ecologically sustainable. Deforestation, land degradation, desertification,
soil erosion and salinization, biodiversity loss, increased production of greenhouse gases,
and air and water pollution are but among the long-term environmental impacts that can
be traced to the imposition of SAPs.

Women are bearing a disproportionate share of the burdens imposed by SAPs. The
macro-economic thinking on which SAPs are based, takes little account of the gender-
based division of labour. For example, SAPs promote export- oriented crops, which tend
to be grown by men. This eaves women with little support, marginal land, and fewer
resources to grow food crops to feed their families. In addition, cutbacks to public
services result in a greater workload for women as they struggle to pay extra fees to
secure health care and education for the family. Often, these cutbacks simply place such
services out of reach.

Are there Alternatives?

There have been a variety of alternatives that address both the economic model upon
which SAPs are based, and the non-democratic and excessively harsh method by which
SAPs are imposed. The UN Economic Commission for Africa provided a comprehensive
and credible alternative to SAPs in 1989. The African Alternative Framework called for
"adjustment with transformation" which called for a reduction in the continent's
reliance on external trade and financing, the promotion of food self-sufficiency and
greater popular participation in economic planning and decision-making.

The Third World Network and Freedom from Debt Coalition have proposed numerous
alternative policies in the areas of international trade and sustainable development. Some
specific alternatives for reform include:

• promoting diversification in the products that Southern countries export and

increase processing capacity. This would coincide with the recognition of
providing some protection to infant industries and the promotion of greater
regional trade;
• recognizing the need for states to play a greater role in facilitating the
diversification away from traditional commodities, determining and promoting
investment priorities; economic policies and planning which include a gendered
analysis of the various options;
• policies that take into account environmental impacts and include sustainable
natural resource use that benefits local communities;
• an emphasis on non-price structural reforms such as land reform, institutional
reforms to increase democratic practice and accountability;
• at the international level, measures to reduce the debt problems of poorer
countries, regulate capital markets and address unfair trading practises.

What is urgently required is to open up the debate to allow for serious consideration of
alternative measures. What stands in the way is the total control over the development
debate currently exercised by the Bank and the IMF with the blessing and support of
Northern governments, including Canada.

In addition, fundamental reform of the Bretton Woods Institutionsto ensure greater

transparency, accountability, and equitable participation in the development of any
programmes that will directly affect communities is essential (see brief on "Reforming
the Bretton Woods Institutions"). The Halifax G-7 Summit provides an important
opportunity to alter the debate and begin the process of transformation.

Structural Adjustment Programmes:

• over-emphasize the restoration of balance of payments instead of adopting a more
just and equitable approach to resolving the debt crisis;
• undermine the state's sovereignty and limit its role for socio-economic
intervention through a fixation on deregulation, privatization and dismantling of
the state in the name of unfettered "free markets";
• exacerbate the disparities between rich and poor by facilitating income
concentration by the wealthy and the exclusion of the poor from decisions and
control over resources;
• undermine democracies and democratic process. Southern governments must
accept SAP measures imposed by non-democratically elected bank officals even
if they conflict with government policy and the will of the people_the alternative
is default and bankruptcy;
• lack transparency, accountability and public participation in their design and
implementation;
• hurt the poor disproportionately through deep cutbacks in social programmes.
User fees, privatization, massive layoffs and cutbacks of scial services have led to
malnutrition, school and hospital closures, recurrence of previously eradicated
disease, and deepening poverty;
• undermine national food security through an over-reliance on investment that is
short-term, concentrated in the export sector;
• make many basic necessities inaccesible to local people as currency devaluations
drastically reduce the buying power of local wages;
• violate the UN Convention on the Rights of the Child, the UN Declaration on the
Right to Development, and the Convention on the Elimination of Discrimination
Against Women;
• focus on domestic economic adjustment to the exclusion of the whole world
economy, which includes Northern economies, to the priority goals of sustainable
development, self-sufficiency and greater popular participation in economic
planning and decision-making.