Structural Adjustment Programs:

The IMF established the structural adjustment facility in March 1986 as a means of providing concessional financial assistance to low-income member countries undertaking medium-tem macro-economic and structural adjustment programs designed to overcome protracted balance of payments problems and foster economic growth. SAP's sometimes require that specific policy actions be taken before any financial aid is released.

IMF assistance under the SAF (Structural Adjustment Function) has been closely co-coordinated with the World Bank and other lenders. For support under the SAF, an eligible country must develop and update, with the help of the IMF and the World Bank, a medium-term policy framework for a three year period, set out in a policy framework paper. Within this framework, detailed yearly policy programs are formulated and are supported by SAF arrangements, under which annual loan disbursements are made. The programs include quarterly benchmarks to assess performance. The rate of interest on SAF loans is 0,5 percent a year and repayments are made in 5 1/2 to 10 years.

Typical IMF stabilization measures involve:

  1. Devaluing currency
  2. Restricting the money supply
  3. Pursuing fiscal adjustment (in particular, cut government spending)
  4. Pursuing liberalization of trade and the exchange rate
  5. Adjusting incomes policy (in particular restraining wages

Source: Mailafia, O, Europe and Economic Reform in Africa-structural adjustment and economic diplomacy, 1997

In response to the concern that SAP's were too focused on macro-economic aspects, and neglecting the rural and poor population, the IMF now also recommends that countries undertake certain measures to alleviate poverty.

These include:

  1. - Increasing agricultural producer prices
  2. - Improving extension services, marketing, credit availability, and transportation services in the rural sector
  3. - Encouraging labor-intensive public works projects that provide employment and income for thee poor
  4. - Increasing outlays on public health and education services that directly benefit the poor and rural areas
  5. - Well-targeted transfers to vulnerable groups, such as the poor being exempted higher user fees for health and education, and
  6. - Providing severance pay and/or retraining programs when adjustment involves a retrenchment of employment in the civil service or public enterprises

IMF support for African Adjustment Programs - Questions and Answers, IMF, 1993

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