Structural Adjustment Programs (SAPs) were applied in several developing countries since the 1980s. According to Leftwich (1996), “SAPs is outlined as a collection of institutional and economic measures meant to resolve the economic issues facing by developing countries by rectifying a country’s borrowing deficit, reducing the intervention of governments within the economy and opening up the state’s economy to the global market”. It believed the SAPs designed by the Bretton Woods institution to make policies that may start the reduction of impoverishment and sustainable economic process. These programs or policies are a collection of conditions associate degree terms that developing countries should first adhere to before qualifying to acquire an IMF or World Bank loan. Being the drowning nations they’re and desperate for facilitating, the poor countries abide by and by doing this sign the death certificate of their economies. This paper tries to describe a brief background of the SAPs, discuss the aspects of SAPs thenceforth figure out what are the impacts have been attributed to the SAPs.
2. History of SAPs
The emergence of SAPs was a consequence of a debt crisis that has hit especially developing countries since the 1980s. This debt crisis has its starting point in the mid-1970s when oil-producing countries that had joined the Organisation of Petroleum Exporting Countries (OPEC) increased the oil price to gain more revenue. Then, most of these profits were invested with banks in industrialized countries. These banks, thusly, were interested to loan this cash to developing countries to fund for the product purchasing from the industrialized countries. In this way, they believed that the loans given to developing countries facilitated to spur the production in the North (Toussaint and Comanne, 1995).
Amid the 1970s credits were given openly at low-interest loans yet this interest rate changed significantly in the mid-1980s. USA pushed up the loan interest radically trying to stop the inflation. Developing countries that had taken out advances with US banks now needed to pay tremendous premiums. The major lending banks in Europe stuck to this same pattern and the debt crisis was conceived (George, 1995). Developing countries were not able to reimburse their credits and were compelled to take up new advances to pay the intrigue. The rising financing costs made developing countries to take out new credits to keep a strategic distance from bankruptcy.
Regardless of the way that developing countries have long paid back their underlying credits, they are still highly indebted and are reliant on new loans. This gave the route for the IMF and World Bank to come ‘to the save’. They were given the undertaking to ensure that developing countries will keep paying their debts by offering new credits to countries who acknowledge certain conditions which called Structural Adjustment Programmes (SAPs), informed by neoliberal ideals. According to A Sen 1999, neoliberalism is characterized as a set of market-based, liberal monetary approaches (A Sen, 1999). Neoliberalism is often connected to the alleged ‘Washington Consensus’, a term instituted by John Williamson to outline key monetary strategy shared characteristics between IMF, World Bank, and U.S. Treasury Division (Rodrid, 2006). These arrangements argued that total economic development would profit the majority impoverish countries and also the wealthier minority in developing countries, and introduced the “free-market” as a superior apparatus for development than government intermediation (Williamson, 2005).
3. The implementations s of SAPs
As per Haynes. J, 2008, lessening state’s economic and developmental part was a corresponding condition for the receiving of significant external financial help with the type of SAPs. The ultimate had a few ideas; (1) to energize a high state of financial and fiscal discipline, (2) propel changes driving towards market economies, and (3) empower free trade, free capital flow and monetary participation among countries. To accomplish these objectives, the accompanying key advances were trusted fundamental: