Structural adjustment

Posted: 14 December 2007

Structural adjustment programmes were introduced by the International Monetary Fund and the World Bank in the early 1980s, when many developing countries were in deep recession, caused partly by international factors outside their control. Countries had to implement SAPs if they wanted aid, debt relief and investment. Over 80 developing countries have implemented these programmes.

  • A typical SAP required a government to liberalise trade, reduce spending on social programmes such as health care and education, eliminate food subsidies and increase the prices to growers of crops for the export market. SAPs are supposed to lead to economic recovery, long term growth and stability. But their record is poor. SAPs have led to hunger for the poor and have even failed when measured against the IMF's and World Bank's own criteria. In most countries, they have not led to higher economic growth or to development; few people have seen any benefits.

  • SAPs have concentrated on domestic changes in developing countries, but ignored the international changes needed if these countries were to have a chance of recovery. Crucially, they ignore the need for improved trading arrangements for crops that are exported. And the policy of paying producers higher prices for export crops has led to their expansion at the expense of food crops; food output has often declined as a result. Faced with low world prices, governments have often been unable to sustain good prices to farmers. Instead, returns to farmers from export crops have often fallen below the cost of production, again driving many into poverty.

  • Support for food crop farmers has tended to decline as a result of SAPs which has again lowered food output. This has happened in some of the most famine-prone countries, such as Ethiopia. The cumulative effort of trade liberalisation, reduction in food subsidies, higher food prices and often lower wages, is that in both urban and rural areas, poorer households cannot afford to buy as much food as before. Access to food by vulnerable households has especially become more difficult.

  • This attention to export crops has meant that more land has been brought under these crops - frequently some of the best land - and that less land and resources are available for domestic food crops.

  • SAPS did not work for the poor. By 2000, for example, average incomes in Africa were 10 per cent lower than in 1980. Many countries were further in debt than in 1980.

  • Poverty Reduction Strategy Papers (PRSPs) were introduced by the IMF and the World Bank in 1998 and effectively took over from SAPs. PRSPs lay down the conditions attached to loans and usually set limits on government spending.