Structural Adjustment Programmes (SAPs) & its failure

1. Course Teacher: Associate Professor Khairul Chowdhury,
Department of Sociology, University of Dhaka.
Presented by:
Nazia Afroz
Masters of Social Policy
University of Dhaka
Topic: Structural Adjustment Programme (SAPs)

2. "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.
 Developed in the early 1980s
 Initiated in Turkey
 Gaining stronger influence over the
economies of debt-strapped
governments in the South
 187 SAPs negotiated for 64 developing
countries
Structural Adjustment Programmes (SAPs)

3. VS.
IMF’s SAPs
 IMF mainly lends to
countries that have
balance of payment
problems,
 IMF loans focus on
temporarily fixing
problems that countries
face as a whole,
 IMF loans were meant
to be repaid in a short
duration between 2½
and 4 years.
World Bank’s SAPs
 World bank offers loans
to fund particular
development projects,
 World Bank SAPs focus
on providing loans and
grants to countries that
provide funding on a
project basis,
 The World Bank is
divided into two lending
and development
institutions; the IBRD
and IDA. IBRD focuses
on "middle income and
credit-worthy poor
countries" while the IDA
focuses on the lowest
income and least credit
worthy countries.

5. 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.

6. Objectives of SAPs
SAPs have 4 fundamental objectives according to which they
are shaped:
1. Liberalisation: promoting the free movement of capital;
opening of national markets to international competition.
2.Privatisation of public services and companies.
3.De-regulations of labour relations and cutting social safety
nets.
4.Improving competitiveness (Toissant and Comanne 1995:14)

7. Measures Imposed Under SAPs
Although SAPs differ somewhat from country to country, they typically include:
 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;
 abolishing food and agricultural subsidies to reduce government expenditures;
 deep cuts to social programmes usually in the areas of health, education and
housing and massive layoffs in the civil service;
 currency devaluation measures which increase import costs while reducing the value
of domestically produced goods;
 liberalization of trade and investment and high interest rates to attract foreign
investment;
 privatization of government-held enterprises.

8. Typical stabilization policies comprise:
 balance of payments deficits reduction
through currency devaluation
 budget deficit reduction through higher
taxes and lower government spending
 restructuring foreign debts
 monetary policy to finance government
deficits
 raising food prices to cut the burden of
subsidies
 raising the price of public services
 cutting wages
 decrementing domestic credit.
Long-term adjustment policies usually
include:
 liberalization of markets to
guarantee a price mechanism
 privatization, of all or part of state-
owned enterprises
 creating new financial institutions
 improving governance and fighting
corruption
 enhancing the rights of foreign
investors vis-à-vis national laws
 focusing economic output on direct
export and resource extraction
 increasing the stability of
investment.
Conditions of SAPs

9. Impact of SAPs
• Benefits of Structural Adjustment in Ghana:
 Economic growth increased (becoming slightly positive, 1-2% annual per capita
growth).
 Agricultural production began growing again
 Imports and exports (including in agriculture) grew
 Inflation fell to low levels
 Budget deficits reduced
 Growth in “civil society”, civic organizations
• Countries like Zambia & Ivory Coast received dozens of loans without
actually implementing any reforms
• Lenders (like the World Bank) have incentives to make large loans, but
few incentives to carry out evaluations of their programs
• There is basically no cross-country empirical evidence that increased
foreign aid improves economic performance in less developed countries
(despite claims by Jeff Sachs)

10. Effect of SAPs
• End of the Structuralist model of development
• Competitive insertion into the world market
• Removal of trade and financial barriers

13. 1. Sovereignty
- SAPs threaten the sovereignty of
national economies because an outside
organization is dictating a nation's
economic policy.
2. Privatisation
- When resources are transferred to
foreign corporations and/or national
elites, the goal of public prosperity is
replaced with the goal of private
accumulation.
3. Austerity
- SAPs emphasize maintaining a
balanced budget, which forces austerity
programs. The casualties of balancing a
budget are often social programs.
Criticisms of SAPs

14. What Went Wrong with SAPs?
• SAPs lead to decreasing the quality education.
• SAPs have had a particularly negative effect on women because:
 Privatisation of social services like health and education makes these services
unaffordable,
 Women's unpaid work increased,
 Greater unemployment decreased purchasing power and cutbacks in social services,
 Cuts in education services lead to an increase in illiteracy among women and girls,
• In Zambia, the hardships caused by SAPs led to an increase in divorces
• Reduced spending on health leads to an increase in child mortality
• Collapse of small enterprises
• Trade Unions lost 60% of their members in 1990
• Drop in formal sector employment to less then 14% of active population
• Collapse of small enterprises

15.  WB and IMF needed to launch a new initiative to address the
raising levels of poverty as well as the level of dissatisfaction and
disappointment caused by SAPs.
 In 1999, Poverty Reduction Strategy Papers (PRSPs) became
the “successor” to structural adjustment programmes.
 In responding to these criticisms, the UN has came out with a
set of goals known as the Millennium Development Goals
(MDGs).
 PRSPs are seen as the key tool for operationalizing the World
Bank’s approach to poverty as identified in 2000/01 World
Development Report highlighted above and for meeting the
Millennium Development Goals.
SAPs to PRSPs & MDG