Structural Adjustment Programs by the World Bank and the International Monetary Fund - Essay Example

Topic: Lecturer: Presentation: Introduction Since the inception of structural adjustment programmes in the 1980s by the World Bank and the International Monetary Fund (IMF), many sectors of the economy have deteriorated especially agriculture in sub-Saharan Africa. Structural adjustment programmes are economic policies imposed on countries by World Bank and IMF as pre-conditions for loan qualification and debt repayments. They deal with macroeconomic policies or fiscal and monetary policy and involve features such as; liberalisation, currency devaluation, export-led growth, reduced government spending among others (Hope & Kayira, 2010). They encourage balanced budgets by increasing taxes and reducing government spending on essential services like education, health and elimination of subsidies. They also encourage production of goods for export as opposed to consumption and also imports. The market is controlled by demand and supply and not the government even where intervention is required in order to stabilize prices. These structural policies were supposed to develop the economies of developing countries but less or no achievements have been made. They have discouraged private investors or made them to be monopolies hence straining the poor. The standard of living of member states has deteriorated due to high prices as a result of currency devaluation and lack of price controls. It has also contributed to poverty, unemployment due to reduced investments, and environmental degradation due to overemphasis on cash crop production among others (Holden, 1997). Environmental degradation is a hindrance to agricultural development. Agriculture has further been hindered by removal of subsidies on inputs such as fertilizer and entrance of subsidized imports from European markets as well as lack of credit for agriculture expansion. This paper is a critique of the impact of structural adjustment programmes on agriculture in Southern Africa. The Impact of Structural Adjustment Programmes on Agriculture Agriculture is the backbone of most economies in Africa. Many countries engage in food crop production for subsistence, livestock farming and cash crop farming as a foreign exchange earner. Bryceson (1995) observes that agriculture is mostly considered as the practice for women and children as men engage in formal careers or sometimes cash crop production. Many factors affect agricultural activities leading to poor yields, hunger and malnutrition. These include; climate change, cost of farm inputs like fertilizer, market accessibility, land tenure, land degradation and health of workers among others. The southern African countries experienced economic crisis as a result of increase in oil prices by organization of petroleum export countries (OPEC) in early 1970s. In order to deal with economic crisis, they turned to Bretton wood institutions for development loans but due to inflation in the 1980s, USA increased its interest rates on loans. The loans therefore became enormous as the Southern African countries acquired more loans to repay earlier ones leading to debt crisis (Hope & Kayira, 2010). The IMF and World Bank therefore introduced structural adjustment programmes to make the economies stable but as it turned out, these programmes did not auger well for agriculture. Export Promotion Structural adjustment programmes involve encouraging production of export food crops as opposed to subsistence or imports. Cash crops are supposed to earn foreign exchange needed to repay debts. The Southern African governments therefore engaged in cash crop production while neglecting food crops. Vast lands which were meant for food crop were replaced by cash crops. All these countries relied on one cash crop and due to competition, the price of export in the global market declined leading to poverty and acquisition of more debts (Commander, 1989). Countries like Malawi sold their grain reserves to service debts and in countries like Zimbabwe, communal farmers lacked access to suitable farming land and subsistence farming was done on poor soils. Forests were cleared to give way for farming land for cash crops leading to deforestation which is a catalyst for environmental degradation and reduced rainfall and famine. Structural adjustment policies discouraged importation and encouraged currency devaluation to make imports expensive. This made it difficult for countries to import machinery for agriculture expansion hence poor technology and consequently poor crop yields (Cleaver & Donovan, 1995). Furthermore government spending was also restricted making it difficult to acquire sophisticated farm implements. Export promotion also encourages mining and logging activities leading to deforestation, pollution and land degradation hence destroying agricultural activities. In a nutshell, export promotion led to poor yield, famine and poverty due to land degradation and decline in export prices of cash crops leading to layoffs of employees mostly females who are the main providers of subsistence food to the family. Budget Balancing In order to have a balanced budget without deficits, IMF and World Bank restricted the governments from further public spending and encouraged increase in taxes to as to get funds to repay debts. The governments thus stopped building infrastructure, removed subsidies, neglected extension and research services and diverted its attention to industrial growth at the expense of agricultural investments. Removal of subsidies led to hike in input prices making it hard for farmers to cultivate their lands (Holden, 1997). The rural peasants are the worst hit by removal of subsidies. Fertilizer becomes costly and these farmers are poor hence they cannot afford to buy and improve the soil thus they continue cultivating on the same land leading to degradation of the already infertile soil. This has negative effects on agricultural production especially food crops which depend on soil fertility. Decline in agricultural output accelerates farmers’ poverty as well as deterioration of the whole economy since most people depend on agricultural produce to survive hence food insecurity. Malawi decided to give farmers subsidized fertilizer and seeds and this resulted into bumper harvest although it was forced to give up those subsidies and sell grain reserve by the Bretton Wood institutions. Unfortunately in 2001, there was a famine that led to the death of 1500 people since Malawi had already depleted strategic grain reserve. The Malawi government could not take it any more and so in 2005, it reintroduced subsidies and was a supplier of food to other Southern Africa countries during the food crisis (Walden, 2008). Removal of government support on extension and research was a major hindrance to agricultural development in Southern Africa. Gibbon et al (1993) emphasizes the need for a government to carry out research to establish new methods of crop production as well as new crop and livestock breeds which are suitable especially with the current climatic changes. Research also helps to acquire new markets for the already produced goods and ways of dealing with emerging crop and animal diseases. Without research and extension services, the economy of a country is doomed especially with the current market liberalization. Building infrastructure is an essential service governments should provide for economic development to occur. Lack of infrastructure especially roads makes marketing of agricultural products difficult and results to higher cost of transportation and overall food prices. It becomes difficult for peasant farmers to cope with the rising prices and so they continue being poor and malnourished and hence become unproductive (Duncan & Howell, 1992). Lack of access to educational and health facilities pauses a great risk to farmers. Agriculture depends on healthy individuals as it involves manual work and education is important as it can be used to develop new agricultural techniques or alternative ways of improving soil fertility. If farmers are unhealthy, agricultural output declines denying a country the much needed foreign exchange. Currency Devaluation Currency devaluation was a way of maintaining a balance of payments for countries by discouraging imports. Currency devaluation makes exports to European and American countries cheap and therefore they would buy a lot from African countries to their advantage. The African countries would benefit from increased foreign exchange from the increased volume of exports. Cash crops were a main source of exports thus discouraging food production. On the other hand, currency devaluation resulted in reduced imports as they were expensive hence reduction in import of farm inputs such as machinery and fertilizer. According to Holden (1997), agricultural intensification requires capital and this was not forthcoming due to increased input costs. Currency devaluation made countries to borrow more funds to acquire imports and so in reality no balance of payments is achieved. Countries spent most of foreign exchange in acquiring imports instead of agriculture extension hence poverty, inequality and land degradation. As Oygard (1997) notes, countries are not trapped in decline but can improve by use of alternative farming methods or increase non-farm income so as to reduce poverty and income inequalities. Currency devaluation in a country discourages foreign investments and also private investments. This results to increased unemployment and wage decline as well as reduced purchasing power of people. This translates to decline in consumption of farm produce and other products hence lowering the price of those products. The farmers therefore get little amount from sale of their products and incur heavy losses. Most countries rely on importation of food since they are not self sufficient in food production as a result of poor farming methods and reliance on cash crops. Increased importation costs make these foods expensive and unaffordable to ordinary citizens leading to malnutrition, hunger and health problems (Hope & Kayira, 2010). Trade Liberalisation This is removal of import and export restrictions or barriers to international trade. The World Bank and international monetary fund deemed it necessary to remove these barriers in order to promote trade in Sub-Saharan Africa and earn foreign exchange required to repay debts. Most of these developing countries had restrictions on imports and had policies biased against agriculture. Trade policies protected manufacturing sector while imposing taxation on agriculture. McKay et al (1997) argues that trade reforms are necessary to remove this bias although sector reforms are also needed for better results to be achieved. The only problem is that these countries rely on one primary export commodity and liberalisation of trade can lead to shrinking prices in the world market due to competition and lack of control of prices by the countries, instead they are price takers in the global market. Export liberalisation is beneficial to farmers as it leads to more resource allocation as countries move away from the inefficient imports. Devaluation of exchange rate is an incentive to exporters as they earn more from exports. The problem occurs when countries decide to increase acreage on cash crop or export farming at the expense of food crops leading to food insufficiency. These primary exports also do not earn much to enable developing countries to acquire food imports and become self reliant. These countries therefore continue relying on food aid from developed countries. Due to reduction of subsidized inputs accompanied by poor infrastructure and lack of new technology as a result of structural adjustment programmes, export trade benefits may not be realised (Holden, 1997). There is also decline in world prices due to competition leading to low export earnings and competition from import producers. Import liberalisation involves removal of quantities restrictions and removal of tariffs especially as a result of trade agreements such as world trade agreements (WTO). This leads to reduction in import prices hence the entry of subsidized imports into African countries and consequently competition with local products. Walden (2008) noted that the entry of subsidized European Union beef in west and South Africa led to the collapse of cattle production. Supporters of trade liberalisation argue that reduced import prices enhance consumption of a country since consumers can acquire variety of cheap products. However, there is a lot of competition in the global market especially from developed nations and also from local food producers leading to closure by producers who depend on imports. Further, IMF and World Bank are opposed to government subsidies to improve local production and hence unfair competition between imports and local produce (McKay et al. 1997). Environmental Degradation Structural adjustment policies by IMF and World Bank have great impact on the environment. Agricultural production is dependent on environmental conservation which affects climatic conditions of a nation and world as a whole. Climatic changes have been a concern for many nations as depicted by the Copenhagen summit held recently. It is the cause of suffering especially for developing countries who depend on agriculture for survival hence famine, hunger and malnutrition. Structural adjustment policies have positive as well as negative impact on environment. Zambia aimed at sustainable agricultural intensification to satisfy food demand without further soil degradation but according to Holden (1997), this was not achievable due to increased input costs as a result of structural policies of removing subsidies. He also argues that credit rationing in Zambia and decreased profit in farm produce encourage shift cultivation hence increased deforestation and further land degradation. Replacement of parastatals with private companies led to loss of jobs for many individuals in Sub-Saharan Africa especially because not many private companies or individuals were willing to invest. This led to urban unemployment and consequently rural migration leading to large population in rural areas and encroachment in marginal lands and consequently environmental degradation Oygard (1997) stresses the need for increased non-farm incomes and alternative farming methods to reduce land degradation especially in Tanzania where there is poverty, inequality and migration. Over reliance on cash crop makes the rural farmers to cut trees in order to expand land for more plantations so as to get more income. Forests are therefore diminishing at high rate exposing the countries to drought and desertification. Removal of subsidies by government on farm inputs has contributed to a cleaner environment. There is reduced use of fertilizer and pesticides to more environmental friendly products. Reduction in pollution leads to a healthy nation which is essential in agricultural production. On the other hand, lack of fertilizer to enrich the soil leads to soil depletion or degradation and hence poor crop yields. Structural policies encourage governments to engage in other sectors of the economy like mining which degrade soil. Governments should therefore device ways of maintaining soil fertility and good environment for sustainable agricultural. Gender and Agriculture Agriculture in most countries is stereotyped as the work of women as men engage in income earning jobs in other sectors or cash crop production in agriculture. Since pre-colonial era women in society are usually discriminated against. In Zambia for example the role of women was to provide food for the family through sorghum cultivation while men used to provide other necessities like shelter and clothing. Even after introduction of large scale maize production, male dominated the field while women concentrated on food crop production (Crehan, 1997). Women also perform heavy task jobs of cultivation while men migrate to urban areas for paid work which is not heavy. Women are also discriminated against in terms of access to land and most land policies do not favour women and even extension services are provided by men, only a few women engage in this practice as is the case in Tanzania (Due et al. 1997). Concerns have been raised by many scholars as to the way women are discriminated yet they are the most importance in agricultural sector development. Even men who engage in cash cop farming which is an income earner use the services of women to get output. Geisler (1993) argues that gender differentiated control over household production should be recognized. Structural adjustment policies led to government involvement in other sectors of the economy creating jobs in the urban areas and hence mass migration of men from rural to urban areas. This leaves women performing all the household tasks including agriculture but returns from cash crops usually go to men. Women also lack education in reproductive health and are mostly illiterate due to emphasis on education of boy child and this situation was accelerated by removal of government assistance in education due to structural adjustments. Illiteracy of women makes them vulnerable to land rights denial. Meer (1997) articulated the voice of South African women against oppression, subordination, violence, unfair work load and sexual harassment. She is also instrumental in women reproductive health education and HIV/ AIDS research to help women be productive in agricultural activities and advance themselves through income earning. Globalisation due to structural adjustments is a source of spread of feminist ideas and movements in Africa who air women grievances and agitate for policy reforms for gender equity especially land reforms. Such movements are prevalent in South Africa and Zimbabwe where land rights of women are not adhered to. These feminist ideas are not taken well in Zimbabwe but South Africa has tried to incorporate such ideas in development planning. However, in both cases women are still discriminated against in terms of land acquisition and low wages. According to Jacob (1998), land subdivision in Zimbabwe is biased against married women, widows and divorcees. Land is owned by men and women provide labour in the farms assisted by their children hence the women are under pressure to bear more children to provide labour. These feminists therefore are essential for freeing women from oppression. However, they are met with resistance by the authoritarian leadership which suppresses press freedom. Feminist activities in South Africa are prevalent and advocate for rights of black women. These women work in commercial farms but are lowly paid and not much involved in trade unions (Jacob, 1998). However, recently there have been improvements in gender equity especially among urban women who know their rights as opposed to their rural counterparts. World Bank has also played role in land reforms in South Africa by advocating for transfer of land to black small holders from large scale white farmers (William, 1996). Feminist ideas are also in Malawi through studies of rural women and their challenges especially HIV/ AIDS. The importance of women in agriculture and other development activities has been realised (Bryceson, 1995). Diseases are the worst enemy of women as they hinder agriculture production. Structural Adjustments and Food Security Food security entails the availability, accessibility and affordability. Most countries can avail food to citizens but it is not sufficient enough and the households are poor hence they cannot afford to buy food. Some areas are inaccessible thus making it difficult to transport food or agricultural inputs to them hence food insecurity. Devereux & Maxwell (2001) argue that food insecurity is brought about by the fact that countries lack understanding for effective food policies. Food insecurity in most southern Africa countries is due to climatic conditions, environmental degradation, HIV/AIDS and political and economic problems. According to the latest figures by food and agricultural organization (FAO, 2002), 16.7 Million people in Southern Africa are in need of emergency food assistance. This is due to policy failures which emphasized on production rather than equitable distribution of food and resources. After structural adjustments Malawi exhausted its grain reserves to pay debts and hence when famine stroke, it was faced with food insecurity (Walden, 2008). For some countries like Zimbabwe political intrigues have crippled the agricultural sector. Land reforms in this country are not efficient to sustain agriculture as most land still belongs to the state hence there is no security of tenure. Structural adjustments contributed much to food insecurity in Sub-Saharan countries. Removal of government interventions in the market were a hindrance to agriculture sector but favoured other sectors. Subsidized seeds and fertilizer boosted agriculture and hence when they were removed agriculture declined. Land degradation was and is still imminent leading to poor yields and is the cause of famine and drought in Southern Africa. Clover (2003) attributes food insecurity to closure of markets due to trade liberalisation whereby rich nations impose barriers on poor countries while those poor countries are prohibited in doing so. Entry of cheap imported commodities cripples most agricultural markets leading to food insecurity. Emphasis on cash crop production led to activities that deteriorated agriculture such as marginal land farming hence countries are not able to prevent disasters. Furthermore these crops fetch little earnings from world markets hence poverty rates increase in rural areas. World trade organizations are also a barrier to food security as they result to closure of local markets. Poverty and diseases are major causes of food insecurity in Southern Africa. Poverty results from war or conflicts which are prevalent in Africa and unequal distribution of income. The rural people who are the mainstay of agriculture lack access to essential services such as; health facilities, education, clean water, infrastructure and security of land tenure (Hansen & McMillan, 1986). The health of farmers determines agricultural productivity. The poor rural people cannot afford to cater for medical services especially those associated with HIV/AIDS and some are not even aware of its existence or ways of prevention hence accelerating its spread. This results to emergence of high dependency ratio and food insecurity as sick individuals cannot be involved in productive work. Farmers also lack access to credit facilities due to constraints by government like in Zambia. Structural policies encourage strict monetary policies hence interest regulations which make it difficult to acquire credit especially by peasant farmers. This hinders agricultural development and leads to food insecurity. Conclusion The World Bank and IMF had great vision for Africa when introducing structural adjustment programmes but little did they know that they were creating problems for those countries. Some adjustments though are beneficial such as opening the market to outside world and removal of price controls. However, they also have side effects such as unfair competition in the world market and shrinking of export prices. Agricultural sector especially in Sub-Saharan Africa was much affected by those policies and accompanied by other natural factors like floods, drought and famine Southern Africa countries are facing severe food crisis. Diseases like HIV/AIDS have taken toll in those countries and are aggravated by poverty as a result of structural policies. Environmental degradation is prevalent as people farm on marginal lands and forest encroachment leading to deforestation. Women continue to suffer all forms of discrimination especially land ownership. However, land reforms have been taking place as a result of these interventions such as land subdivision and titling. Overall SAPS are beneficial and also negatively affect farmers and agriculture as a whole and they can only be effective if accompanied by policy reforms of the governments involved. References Bryceson, D. (ed). 1995. Women Wielding the Hoe: Lessons from Rural Africa for Feminist Theory and Development Practice. Oxford: Berg. Cleaver, K., Donovan, W. 1995. Agriculture, Poverty, and Policy Reform in Sub-Saharan Africa. Washington: world Bank, Discussion Paper no. 280. Clover, J. 2003. “Food Security in Sub-Saharan Africa”. African Security Review. Vol. 12, 1. Commander, S. (ed). 1989. Structural Adjustments and Agriculture. London: James Currey. Crehan, K. 1997. The Fractured Community: Landscapes of Power and Gender in Rural Zambia. London: University of California press. Dereveux, S., Maxwell, S. (eds).2001. Food Security in Sub-Saharan Africa. London: ITDG. 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