Name: Zhao Beiyang Student ID：s07506
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year 
 

 Abstract: The International Monetary Fund (IMF) has emerged as one of the most powerful transnational financial institutions, as it makes loans to and evaluates credit worthiness of Third World states. To be acceptable credit risks, many countries in Sub-Saharan Africa (SSA) often must implement a number of IMF "structural adjustment" in 1980s. Having provided a brief historical and empirical background, this paper identifies the underlying issues in the ongoing debate: (1) the relationship between IMF and SSA in 1980s (2) Did the Structural adjustment programs(SAPs) truly help the poor? This paper first distinguishes between areas of consensus and dissent and briefly assesses the impact on the poor, and then analyze Ghana and Zambia as two interesting cases to further prove that Ghana program, the success story of World Bank and IMF policies, is not likely to be replicable by other countries and that even in Ghana, the relative success of the program cannot be sustainable and cannot be considered as success of poverty reduction. This paper concludes that Structural adjustment is enormously tough and politically sensitive in Sub-Saharan. It is important not to oversell these programs, but also not to be pessimistic about their prospects. In each country, on each issue, policy-makers and analysts should attempt an even-handed weighing of probable costs and benefits of involvement in structural adjustment programs. In order to protect the poor, social costs of privatization, agriculture, environment and gendered effects should be carefully examined.
 
Key words: IMF  structural adjustment programs  Sub-Saharan Africa
 
Introduction
Two decades between 1970s and 1980s have witnessed dramatic changes in economic policy in the developing world. Many Sub-Saharan African (SSA) countries have moved to open their economies, free up prices, and reduce the role of the state in managing and regulating economic activity. The design of structural adjustment programs is seen to “direct at the four …ation-stabilization, liberalization, deregulation, privatization” (Summers and Pritchett 1993). Efforts at structural adjustment have been assisted and encouraged by the international community, most directly through multilateral financial institutions, in this paper’s case the IMF. Structural-adjustment lending (lending conditioned on specific economic policy changes) has emerged as a major instrument of IMF support to SSA countries. This paper summarizes and highlights the crucial problem involved in assessing structural-adjustment programs and argues that the SAPs have actually hurt the poor by cutting expenditures on education, public health, and other various social safety nets. Commonly, these are programs that are already underfunded and desperately need monetary investment for improvement. The cut of education funding would impair long term economic growth. Similarly, cuts to health programs have allowed diseases such as AIDS to devastate some areas' economies by destroying the workforce. The purpose of this article is to address SAPs’ influence on the poor in relation to sub-Saharan Africa. In so doing it also aims to provide a context for the two African case studies included (The Ghana and Zambia) by discussing some of the wider issues surrounding debates about the future of Sub-Saharan African countries.
 
1. IMF and SSA in 1980s
1.1 Structural Adjustment Policies(SAP)
According to IMF, structural Adjustment is a term used to describe changing the way in which an economy is organized in order to raise productive capacity. Reforms associated with structural adjustment can include liberalization of trade and investment policies and anti-competitive agricultural policies; removal of exchange and price controls; and reform of tax policies. Since the late 1970s，attempts to redress SSA's privative economic setbacks have centered on adjustment instruments implemented by several major international lending agencies, such as IMF and World Bank. In general, adjustment covers all strategies designed to reduce imbalances in external accounts and in the allocation and utilization of national resources (Cornia 1987; Okogu 1989). Structural adjustment policies (SAPS) are medium to long-term (3-5 years) economic restructuring strategies aimed at improving a country's economic performance and balance of trade situation. Mengisteab and Logan (1991) outline three categories of SAPS: expenditure-reducing, expenditure-switching and institutional reforms. Expenditure-reducing policies are designed to improve a country's balance of trade position by increasing export volumes while decreasing import volumes. Instruments under this rubric contain credit and wage restrictions, contractions in money supply, and reductions in public outlays. Expenditure-switching policies are directed at mobilizing factor inputs away from consumption to savings and investment (Campbell and Loxley 1989). Main instruments in this strategy include currency devaluation, and income taxes producer price increases or other means of increasing government income. Institutional reforms deal with the transformation to market liberalization, such as privatization and marketization, with the notion that “the market can do better than the state at allocating resources to different segments of society.” (Mengisteab and Logan 1993) These policy changes are conditions (Conditionalities) for getting new loans from the IMF or World Bank, or for obtaining lower interest rates on existing loans.
 Conditionalities are implemented to ensure that the money lent will be spent in accordance with the overall goals of the loan. Some of the conditions for structural adjustment can include: Cutting social expenditures, also known as austerity; Focusing economic output on direct export and resource extraction; Devaluation of currencies; Trade liberalization, or lifting import and export restrictions; Increasing the stability of investment; Balancing budgets and not overspending; Removing price controls and state subsidies; Privatization, or divestiture of all or part of state-owned enterprises; Enhancing the rights of foreign investors an improving governance and fighting corruption. (Marchesi and Thomas 1999) Through conditionalities, Structural Adjustment Programs generally implement "free market" programs and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Since the late 1990s, some proponents of structural adjustment such as the World Bank, have spoken of "poverty reduction" as a goal.
1.2 Sub-Saharan Africa（SSA）'s Debt Crisis and SAPs
The degree of Africa's debt problem has been documented and discussed at length (for example, Cox and Owen 1988; Desta 1988). Is SSA's Debt a Cause or Outcome of Its Economic Difficulties? While many will agree that SSA's economic problems need urgent attention, there is less agreement over their origins and how they relate to the debt crisis. One school of thought, represented by the World Bank, the IMF, and some scholars (for example, Jaycox 1989), suggests that the debt problem is underpinned by a host of factors, including poor economic policies, low rates of economic productivity, public corruption, political instability, and environmental catastrophes. According to this view, the debt burden has!been created by the need for excessive borrowing brought on by SSA's sluggish economic performance. George(1990) argued that many SSA countries are in debt and poverty partly due to the structural adjustment programs which have been heavily criticized for many years for resulting in poverty. In examining the demands made on SSA economies for debt servicing, Smith (1988) estimates that total interest paid in 1986 amounted to $27 billion, projected to reach $40 billion by 1995. Comparable figures for Nigeria were $12.2 billion and $3.8 billion (32%), respectively.
Whether SSA's debt is a cause or an outcome of its economic difficulties becomes a controversial point when the problem is placed within the context of the complex exigencies that plague the region's economies. A catalogue of these problems includes: the volatile nature of the commodities market (Bentsi-Enchil 1990); declines in domestic food production with concurrent increases in food imports （Bassett 1988); worsening international terms of trade for primary products (Nixon 1989); unfavorable domestic terms of trade for food producers (Lele 1990); The complexity of Africa's economic problems now have some experts calling on the IMF and World Bank to be more flexible in their approaches and on African policymakers to be less hostile to the recommendations of the multilateral institutions. The policy slogan for the 1990s has become "cooperation instead of confrontation" (Diallo 1991, 5). In addition, for these countries, there has been an increased dependency on the richer nations. This is despite the IMF and World Bank’s claim that they will reduce poverty. Following an ideology known as neoliberalism, Structural Adjustment Policies (SAPs) have been imposed to ensure debt repayment and economic restructuring. But the way it has happened has required poor countries to reduce spending on things like health, education and development, while debt repayment and other economic policies have been made the priority. In effect, the IMF and World Bank have demanded that poor nations lower the standard of living of their people.
2. Assessments of Adjustment in SSA
One of the effects of structural adjustment is that developing countries must increase their exports. Usually commodities and raw materials are exported. But as Samatar（1993）noted, poor countries lose out when they export commodities (which are cheaper than finished products) are denied or effectively blocked from industrial capital and real technology transfer, and import finished products (which are more expensive due to the added labor to make the product from those commodities and other resources). This leads to less circulation of money in their own economy and a smaller multiplier effect. Historically this has been a partial reason for dependent economies and poor nations. This [...]

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