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IMF Structural Adjustment Program - Term Paper Example

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The author of the "IMF Structural Adjustment Program" paper discusses the nature and aims of the International Monetary Fund's structural adjustment program and its impact on the economic and social conditions of the developed and developing countries. …
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IMF Structural Adjustment Program
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Download file to see previous pages Third world countries had to approach the IMF or the World Bank and concede to their policies to avoid economic and political repercussions. Some of the conditions that third world debtors needed to fulfill were devaluing currency, import liberalization, privatization, “cuts in government expenditure”, continued debt servicing, economic development focused on exporting goods and moratorium on hiring and pay increases for both public and private sectors (Kreye and Schubert,1988, p.264).

“The structural adjustment scheme was primarily implemented to address the balance of payments issues”. These issues were largely generated by internal conditions such as high inflation rates, budget deficits or inefficient allocation of resources. The IMF assumed that in order to recover from the debts, third world countries must tighten its expenditures and divert them to more productive domestic investments. However, tightening the belt meant reduced government subsidies on food and services, higher interest rates, more lay-offs, higher interest rates, and taxes. The scheme inadvertently affected the poorest segments of the third world country.

Ferraro and Rosser (1994) noted that instead of easing the burden debt, the policies of the IMF appeared to drive the country into further debts. The IMF’s policies with exclusive emphasis on internal economic improvements failed to consider external factors such as oil price movements or global recession that might affect the fiscal positions of the third world nations. Their policies had pushed the heavily indebted countries into more desperate conditions and the future of economic growth in these countries was hampered.
The structural adjustment programs were perceived as benefiting more creditors than debtor countries. In addition, the foundation of the SAP framework was rooted in neo-liberalization and an emphasis on the export capacities of debtor countries. The SAP also would require the poor country to be integrated into the international market economy.  ...Download file to see next pages Read More
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