Structural adjustment and poverty: This challenge of linking social development at the grass roots with the requisite measure of accountability, is decried by many a vested interest group who instead favour a controlled top-down approach. Privatization of government owned enterprises and government-provided services.
Authors Ikubolajeh Bernard Logan and Kidane Mengisteab make the case in their article "IMF-World Bank Adjustment and Structural Transformation on Sub-Saharan Africa" for the ineffectiveness of structural adjustment in part being attributed to the disconnect between the informal sector of the economy as generated by traditional society and the formal sector generated by a modern, urban society.
Implementation of unpopular conditionality of the Fund might have contributed to the political instability or perhaps the political instability caused the failure of the program. In addition, lowering the real wages contracted the aggregate demand in the goods market, thus reduced the labour income and depressed the demand for consumer goods.
Since the various policy reforms are implemented sequentially as well as simultaneously, structural adjustment programme is defined as a set of policies which combines short-term stabilisation measures and longer-term adjustment measures.
This is considered essential for the stimulation of employment growth, reallocation of resources from nontradables to tradables production and promotion of exports. During the economic boom ofcapital inflows registered a phenomenal growth.
Reduction in subsidies, retrenchment of development expenditure, wage freezes and attempts at setting prices right increased both poverty and inequality.
Pakistan did not withdraw last two installments of the loan from the Fund under the SBA, as mentioned earlier. Current account deficit rose to 4. Hence, some slippages occurred in the monetary, fiscal and financial reforms.
With devaluation, your exports become cheaper, hence more demand. IMF requires wage restraint in the Fund-supported stabilisation programmes in many developing countries.
The objectives of the adjustment programme were to be achieved through policy reforms in the trade, industry, agriculture, financial and energy sector as well as in fiscal area.
Taxes on goods and services are considered to be more regressive than income taxes, primarily because consumption forms a larger proportion of the income of lower income groups.
Such a trend is already evident in the field of pharmaceuticals and biotechnology. In contrast to universal food subsidies, targeted subsidies as a short term policy measure not only offset the real income losses caused by higher prices but also greatly reduce the economic costs in the fiscal budget.
There was slight reduction in budget deficit in terms of GDP. Hence, the IMF stabilisation measures usually working in a contractionary direction tend to come first and have immediate effect. The measures are targeted to allow the governments to undertake better long-term planning.
Over the period of adjustment, employment cost fell from Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves———. Hence, the combined effect of public expenditure reduction discussed above and liberalisation resulted in an increase in the urban unemployment from 4.Pakistan has been a signatory to the structural adjustment programme of the IMF for almost 10 years.
Despite assurances to the contrary and the imposition of IMF conditionalities, the same period has seen a dramatic rise in the proportion of national budget devoted to debt servicing and a corresponding rise in the incidence of poverty 17, We analyzed the effect of Structural Adjustment Program (SAP) on macroeconomic variables of Pakistan using annual time series data for the years The impact of four policy instruments of SAP, i.e.
reduction in budget deficit, increase in indirect taxes, adjusting the exchange rate and. IMF and World Banksâ€™s Structural Readjustment Program for Pakistan World Bank assistance for Pakistan traces back towhen the country received $25 million IDA assistance for cyclone-devastated East Pakistan.
Pakistan became a member of the IMF in and the first time the Government of Pakistan opted for a loan from the IMF was in This was a Standby Agreement (SBA) amounting to USD 25 Million. The experience of Pakistan's structural adjustment programme and a subsequent decline in the living standard of the poor highlights concerns voiced previously by critics of the structural adjustment programme within the framework of IMF/World Bank.
1 Structural Adjustment Program has touched all the countries at one time or other, except Botswana, Kuwait and Malaysia (Barro and Lee ). 2 Pakistan’s.Download