Structural Adjustment Program and the IMF

AN ASSESSMENT OF THE STRUCTURAL ADJUSTMENT PROGRAM OF THE INTERNATIONAL MONETARY FUND

This research assesses the structural adjustment program of the International Monetary Fund (IMF). The structural adjustment program is implemented by the IMF through the Structural Adjustment Facility (SAF) and the Enhanced Structural Adjustment Facility (ESAF) within the context of the concept of conditionality.

Structural Adjustment and Conditionality

Perhaps the most controversial of all of the concepts and criteria applied by the IMF is the concept of conditionality, which refers to policies that nations are expected to agree to implement and observe, as a requirement, before a balance of payments loan or development loan is extended from any of the special financing facilities. All loans are distributed in increments so the IMF may monitor the borrowing nation's adherence to the conditions established.

The nature of the conditions imposed vary from case to case. More often than not, conditions established emphasize measures which affect balance of payments through the level and composition of demand within the borrowing nation's domestic economy. Conditions may also emphasize supply factors.

In recent years, conditions have also often emphasized the creation, within a borrowing nation's domestic economy, of positive interest rates, and the establishment of rational pricing for public services. Rational pricing, in the jargon of economics, refers to realistic,

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to private sector operations. In many developing economies, however, privatization is employed as a means of converting industrial enterprises from state ownership and control to the private sector at virtually no costs to the recipients. Assessing the Structural Adjustment Program The IMF, in a role comparable to God looking over her or his handiwork on the seventh day, assessed the organization's structural adjustment program in 1995, and pronounced itself as very satisfied with its efforts. The IMF report stated that: The substantial progress made by many developing countries in fostering macroeconomic stability and in their pursuit of structural reform is expected to sustain robust growth in the period ahead. The Mexican financial crisis and its repercussions on other economies have clouded the short-term outlook for some countries, but longer-term prospects remain promising. All developing countries, however, will have to respond both to the challenges posed by large and potentially reversible capital flows and to many other policy challenges. For the strongest performers, these challenges include the need to avoid overheating and to strengthen efforts in the areas of deregulation and privatization. For many other c

Category: Economics - S