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International Monetary Fund
The intended purpose of the International Monetary Fund (IMF) is to maintain global economic stability.
The IMF coordinated a rescue operation with the aide of private banks, governments and managed to restore the major debtors ability to pay in the short term and for the time being an economic collapse was averted.
The IMF supported initiatives that have reduced the outstanding external debt of 26 countries by two thirds). In Uganda, school enrolment has tripled; Mozambique has seen about half a million children vaccinated against deadly but preventable diseases, and in Honduras children have 3 extra years of free primary school education. (IMF 2001
What went wrong?
One index that substantiates the effectiveness of SAPs is the number of countries that continue to be customers of the IMF which itself shows that the Fund is not helping to solve structural problems revealed by debt crises (Kцrner et al, 1984)
The sharp disparity between the expected results of SAPs and their actual results has led to the endemic perspective that the stabilization and adjustment policies widely adopted in Africa have not succeeded in restoring growth in most countries, in fact they are tantamount to economic deterioration (Stewart, 1991)..
Characteristics of Structural Adjustment Programmes
Stabilising measures
The revival of neo-liberalism saw market orientated strategies re-appear, a minimal role of the state was required and a movement towards an export focus in international trade relation (Harris & Fabricus, 1996).
The IMF argues that a liberal economic market creates a win-win situation, and countries that have liberalized their economies have seen better growth performances than those countries that have closed off their economies (IMF 1999). Looking at fiscal changes in the1980s in Table 1.0 shows a different story.
Region
Agriculture
Industry
Services
1965-73
1980-89
1965-73
1980-89
1965-73
1980-89
Sub Saharan Africa
– 0.3
– 0.2
East Asia
Latin America
Table 1.0 Structural Growth Rates 1965-89
Table 0.1 shows that in sub-Saharan Africa, growth in all three sectors declined. However one area that did see a growth was Agriculture in East Asia. It is not a coincidence that countries such as Thailand, Indonesia and Malaysia managed to avoid precipitous economic downfall. They were slow to remove the protective measures, which permitted their own companies to develop before they were exposed to direct competition with bigger business and imposed stringent controls on the operations of foreign investors (Monbiot, 2003)
Devaluation effects
The difficulty of export focus is that domestic prices of food would increase and the urban economy would suffer as it depends on stable prices for food. Thus is would be difficult to open up the agricultural trade to international competition because it would reduce domestic supplies in the short term.
When devaluation is added to it creates monetary austerity and escalates contraction effects, which in turn discourages foreign investors.
Compounding effects of liberalisation
Liberalisation doesnt necessarily spark investment especially in the agricultural sector. When the market determined fertilizer prices in many African countries,