Structural Adjustment Programmes (SAPs) are economic policies which countries must follow in order to qualify for new World Bank and International Monetary Fund (IMF) loans and help them make debt repayments on the older debts owed to commercial banks, governments and the World Bank. Although SAPs are designed for individual countries but have common guiding principles and features which include export-led growth, privatization and liberalization and the efficiency of the free market.
The essay questions whether the adjustment policies are consistent with long-term development needs. To answer this question we can take a look on the subject within two dimensions: first is the issue of whether introduced policies succeeded to restore non-crisis conditions, in terms of the balance of payments and the domestic economy so that growth of investment, public expenditure and imports can be resumed without causing a critical foreign exchange shortage. Secondly, there is a question of whether the policies moved countries towards an appropriate structure for long-term development objectives. (G.A. Cornia and G.K. Helleiner, 1994)
Despite considerable controversy over the issue of Structural Adjustment Programmes, the evidence suggest that the policies are not succeeding in restoring viable conditions and do not help poor and indebted countries to restore normal economical and political order. Over 15 years since its inception, the Third World debt crisis remains unsolved. The fiscal deficit continued to be large. Debt continued to accumulate. Current account deficit remained very large. Therefore in my opinion, term “short term pain for long term gain” is highly inappropriate.
In the first part of the essay, short theoretical explanation of SAPs failure will be examined. The next paragraph will show the effects of three random policies introduced in SA programmes: Trade Liberalization, Liberalization of Financial sector and reform of labour market. Next paragraph will examine the outcomes of adjustment policies in both: Latin America and Africa proving their inadequacy.