Structural adjustment programmes and developing nations
by Saiful Islam Shyam

From the earliest days of the debt crisis, access to multimillion dollar loans from the World Bank and IMF was made contingent on a country’s entering into a formal agreement to carry out a drastic programme of economic liberalisation.’ This array of monetary, budgetary, market and trade reforms have together come to be known as, Structural Adjustment Policies’, or SAPs.

The package varies in detail from country to country, but the main policies include: reducing the state’s role in the economy, lowering barriers to imports, removing restrictions on foreign investment, raising taxes, eliminating subsidies for food staples and for local industries, reducing spending for social welfare, cutting wages, devaluing the currency, and emphasising production for export rather then for local consumption.In the half of the 1980s three-quarters of African countries had implemented WB/IMF SAPs.

By the mid-1980s, negative impacts of SAPs began to emerge as falling real incomes, higher cost of living and reduced government spending on social services produced a severe deterioration in the living standards of the majority in sub-Saharan Africa.

Per capita income fell by over 25 per cent in the 1980s and unemployment increased in many countries. The same scenario was seen in Latin America. A 12-country study by UNICEF on the impact of SAPs revealed increasing unemployment – over 25 per cent in

Jamaica, 16 per cent in Chile and from 5 to 11 per cent in Peru.

Declining formal sector employment was reported to be pushing people to the informal sector. The special session of the UN General Assembly on International Economic Cooperation from 23 to 28 April 1990, concluded that SAPs had in many instances exacerbated social inequality without restoring growth and development and with threats to political stability.

The brunt of the programmes had been acknowledged to fall on the poorest of the poor, who have been repeatedly urged to tighten their non-existing belts. So while to the WB and IMF, Structural Adjustment Program (SAP) meant economic growth and development, to the poor in developing countries these three letters often seemed to denote Suffering and Poverty.

Liberalisation’ means freeing the economy from government control, with the presumption that a relatively unregulated free market will bring growth that trickles down for the benefit of everyone.

But the rapid introduction of SAPs has been frequently terribly traumatic to a people already limping under the crushing burden of foreign debt, as the history of every impoverished country has clearly shown. If all state-owned enterprises are privatised - such as electricity, transport and communications - many low- wage workers are likely to lose their jobs.

When the national currency is devalued to make exports cheaper on the world market, unlimited foreign investment is encouraged, and tariffs and import quotas are lowered, local producers rapidly lose control of their own economy.

Abolishing subsidies for local industries, raising interest rates and restricting credit put many small enterprises out of business and bankrupt many small farmers.

SAPs demand that real wages be reduced, taxes be increased, and government spending for health and welfare be reduced, all in order to balance the budget. And, finally, agricultural and industrial production must be shifted from food staples and basic goods for domestic use to export products that will bring in hard foreign currency.

The United Nations Children’s Fund(UNICEF) regularly documents how the cost of

SAPs is borne disproportionately by the poor and their children.

Drastic austerity is demanded in social spending and domestic policies to demonstrate an impoverished nation’s fiscal responsibility.’ This translates most directly into fewer social services for the poor, the elimination of consumer subsidies for basic food staples and public transportation, schools without teachers or textbooks, and health clinics without nurses or medicine.

A major feature of the immediate post-colonial period in Africa and Asia was that the state became the major instrument for social transformation through public sector reforms. Equity and social justice in social sectors like health, education and public distribution were landmarks during that period. Health was accepted both as a product of and a contributor to economic and social development.

The Infant Mortality Rates (IMR) which had begun to decline in many African countries rose by four to 54 per cent in the SAP period of five years between 1980 and 1985 in seven African countries. African countries under SAPs have been reported to have experienced rising rates of ill-health and mortality in both urban and rural poor.

Diseases that had reportedly been eliminated such as yaws and yellow fever in Ghana had staged a comeback during the SAP regime. Nutrition and food security are two major determinants of health.

A 10-country study by UNICEF on the effects of SAPs on health concluded that the nutritional status of children had declined in eight of those 10 countries.

Between 1980 to 1984 at the height of the adjustment period in Zambia, hospital deaths due to malnutrition increased from 2 to 6 per cent in the 0 to 11 month age group, and from 38 to 62 per cent in the one to four year age group.

In a 1987 survey in the University Teaching Hospital in Lusaka, almost 60 per cent of the child admissions were from the low-income areas of the city and 37 per cent suffered from malnutrition.

SAPs have led to food scarcity in several African countries where food crop production occupies the majority of the poorest peasants, particularly women farmers, and provides for a substantial part of rural food security.

There are no incentives for food crop production. The major policy tools of SAPs are designed to raise producer prices of export crops to stimulate production but the poor rural households which produce food crops are not benefited by these policy measures.

Removal of food subsidies causes a real increase in food prices. In Mozambique, for example, the removal of food subsidies caused a 400 to 600 per cent increase of food prices. In January 1989, the cost of a kilogram of tomatoes was equal to the absurd figure of 5 per cent of an office worker’s wage. Low income earners spend up to 80 per cent of their income on food. A study revealed that the mid-1980 average wage in Ghana was sufficient to buy only 30 per cent of the food needs.

Source: The Independent, Dhaka, April 9, 2002

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