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, market value pricing. To most developing nation’s, however, rational pricing is a euphemistic phrase meaning higher prices. Conditions also often support exchange rate adjustments, where over valuation prevails.
The central issues involved in economic stabilization programs are the governmental budget, exchange rate, money supply growth, and interest rate. Most successful stabilizations have been characterized by reduced budget deficits, pegged exchange rates, h…