NAME: VERONICA KANDEWO

REG NUMBER: P1952042C

COURSE: PERSPECTIVES IN DEVELOPMENT STUDIES

CODE: BSDS 101

LEVEL: 1.2
QUESTION: Critically examine the impact of the SAPs in the economies of the formerly colonised
countries of the south.

Structural Adjustment Programmes of the IMF (IMF) and World Bank (WB) were implemented as
part of aid conditionality in Africa and Latin America since the 1980s. There is a wide range of
literature critical of Structural Adjustment Programmes (SAPs). Several debates have focused on
whether the failure of SAPs was a result of the inherent weaknesses of the IMF/ WB sponsored
structural adjustment or whether it was caused by structural failures of policy implementation
within the African continent. SAPs were implemented in over forty countries in Africa for two
decades. SAPs generally required countries to adopt policies such as reduction in government
spending, monetary tightening, elimination of government subsidies, privatization of state
enterprises and reductions in the barriers to trade and foreign investment. Structural adjustment
was therefore comprised of a set of policies designed to replace state led economic interventionism
with market-based mechanisms whilst simultaneously seeking to correct the imbalances between
national income and spending. However this policy had its negative and positive impacts. The essay
will unravel the negative impacts of SAPS in Africa looking specifically in the case of Zimbabwe and
Kenya.

DEFINITION OF KEYTERMS.

According to Herbert (1999) SAPs are programs that were designed by the International Monetary
Fund (IMF) the World Bank and imposed as a condition to further loans.

According to Oberdaberning . (2005) SAPs are programs which make it possible for countries to get
a loan from the IMF of the World Bank and are connected with conditionality.

Before the essay proceeds there is need to look at the conceptual framework. Structural Adjustment
Programmes were originally developed from the ‘Washington Consensus’, a term Williamson initially
coined in 1989 to refer to specific economic policy prescriptions that constituted the standard
reform package promoted for crises hit developing countries by International Monetary Fund (IMF),
World Bank (WB) and the United States Treasury Department (Williamson 2004).These policies, as
indicated by Williamson (2004), included fiscal discipline, a redirection of public expenditure
priorities, tax reform, interest rate liberalization, competitive exchange rates, trade liberalization,
liberalization of inflows of foreign direct investment, privatization, deregulation and securing
property rights. The IMF and WB adopted these policies as conditions for providing aid to developing
countries under the assumption that this would lead to development as had been witnessed in
Europe. Hence, most countries followed these conditions across Africa and Latin America. Walle et
al. (2003) indicates the major reasons why structural adjustment was implemented in Africa.
Highlighted is the fact that the Bretton Woods Institutions took the view that the Post Colonial
African state had failed in its developmental mission because of its excessive and counterproductive
intervention in domestic economic processes, its over-bureaucratic and excessive size, the
domination of its apparatus by clientelist networks and an urban coalition that orients it against the
rural sector, its monopolization of the main economic levers of society with the resultant
proliferation of rent seeking activities and its over-centralization which discouraged local initiative. It
is in light of these factors that SAPs aimed at rolling back the frontiers of the state, trimming its size
and encouraging the emergence of economic rationality. According to Walle et al. (2003) it was
assumed that through the unfettered rule of the impersonal market forces, and promoting the
growth of the private sector, there would be sustainable democracy and a better system of
governance, which would replace the neo-patrimonial structure that pervaded the African continent
and underlie public policy.

Zimbabwe implemented SAPs from 1990 to 2000. Zimbabwe was not in a state of economic crises
when SAPs were adopted as point out by World Bank (2004). Dashwood (1996) suggests that rather,
the economy was growing at an average GDP growth rate of 3.3% in the first decade of
independence, incidences of absolute poverty had declined from 75% in 1985 to 40.4% in 1989 and
incidences of extreme poverty also declined from 31.3% to 16.7% during the same period, a view
which is was widely supported by the report of Zimbabwe Statistical Office (1999). The
implementation of SAPs was pushed therefore, by the need to accelerate the process of economic
development, for instance, to achieve a higher GDP growth rate and to meet the social needs of a
growing population, a view that was supported by World Bank (2004) and Dashwood (1996). Though
SAPs were adopted partly as a requirement for receiving external financial aid, the government of
Zimbabwe willingly, consistently and persistently implemented them ( T. Davies of World bank e’tal
2001). The adoption of SAPs in 1990 presented a change in public health policies. Streamlining of
public sector employees, privatization, user fees and reduction of the public health grant were rolled
in as driving forces of SAPs. Thus each of these four components of SAPs impacted negatively on the
public health sector, leading to the economic crumbling of a country.

A profile of Zimbabwe’s health sector shows that before the implementation of SAPs (1980 to 1990),
Zimbabwe’s public health sector performance was reasonable. Based on its socialist driven ideology
at independence (1980), the government embarked on designing programmes and policies targeting
at expanding health care to the majority of the black population. Examples include the free health
for all policy, rehabilitating and expanding rural health centres (which increased by 58% from 1980
to 1985 according to Dashwood 1996:36), Zimbabwe Expanded Programme on Immunization (1981),
declaration of diarrheal disease control as a national priority in 1982, Children’s Supplementary
Feeding Programme, National Village Health Worker Programme (1981), Traditional Midwives
Programme (1981) and the Zimbabwe National Family Planning Programme (1981) among other
programmes and policies. But when SAPS were implemented Women’s health situation was
affected there was no longer preventive programmes to educate them on critical health issues like
breast and cervical cancer as well as inaccessibility of maternal care caused by increased costs
among other issues. Medical bills increased in hospital even in government hospitals

There are also gender dimensions of the implementation of SAPs in Zimbabwe’s public health sector
by assessing their negative effects on women. The prevailing gender divisions of labour in
Zimbabwe’s patriarchal society gives women responsibilities over child care and household
management, particularly food provision and bestows upon them major responsibilities in health
care at household level. Reductions of public health personnel, cuts in public expenditure and
institutionalization of cost recovery which resulted as part of the implementation of SAPs tended to
increase the care roles of women as they were expected to take care of the sick family and
community members. Women’s health situation was also affected given the lack of preventive
programmes to educate them on critical health issues like breast and cervical cancer as well as
inaccessibility of maternal care caused by increased costs among other issues. To a larger extend
SAPs increased women’s care burden and worsened their health situation. Household food
consumption and family health needs are responsibilities bestowed upon women in Zimbabwe’s
patriarchal society. Therefore, user fees and reduction of public health expenditure increased
pressure on women to take care of the sick who could not afford medical fees. Furthermore, rising
costs of maternal health, reduction of funds for preventive programmes and declines in public health
staff had negative economic, psychological and health impacts on women.

The saps had a negative impact on to the Kenyan economy were by it affected the inflation
negatively and the poor remained the poor and even became poorer meaning there was no
economic growth. The inflation rate averaged 11.6 percent between 1971-1979, in the next decade
it shot up to 13.68 but averaging 15.32 in the entire adjustment period. The overall terms of trade
deteriorated significantly, As a matter of fact, eradication of poverty was not addressed by these
programmes, and it is no surprise that they impact quite adversely on the poor. The serious
problems of under-development that this country sought to overcome using these strategies remain,
with the levels of inequality and the incidence of absolute poverty increasing. In Kenya, poverty
remains a major problem (GoK 1996). The 1996 Policy Framework Paper thus estimates that at least
ten million Kenyans are living below the poverty line (ibid). In its Social Dimensions of Development
Paper the Kenya government seeks to explain this as a problem of strategy when it states that
poverty remains one of the greatest challenges in Kenya as 46% of Kenya's population is considered
as still living below the poverty line (GoK 1996). Kenyans' daily calorie consumption per capita in
1980 was 2241 but had plummeted to 2109 by 1991 according to statistics from the African
Development Bank, thanks to a decade of adjustment programs. In the period 1984-1988 as
adjustment policies were yet to be introduced in the agricultural sector, the average annual growth
of food production was 7.7 percent which dropped to -0.1 percent in the 1988-1992 period after the
country got sector adjustment loans for agriculture. During the same period, per capita food
production fell from 4.0 percent in the 1984-1988 periods to -4.3 percent in the 1988-1992 periods.

When Kenya gained Independence in 1963, it did so in a period of global economic expansion and
stability. Commodity prices were generally high and the country benefited from these high prices. In
addition, the country was left with significant foreign exchange reserves and was therefore able to
deal with economic instability. The first decade after Independence was, therefore, a period of
economic prosperity and high aspirations as observed by Swamy (1994).In the first decade of
independence Kenya made tremendous progressing the area of economic development in that the
gross domestic product (GDP) grew by 6.6 per cent. But this was heavy affected by the coming in of
SAPS which brought the rate of income inequality. Inflation, unemployment, retrenchment, and so
on, which have lowered living standards, especially, those relating to the material resources in the
family. Furthermore, the SAPs in Kenya have been linked to the increasing deviant and crime rates,
ethnic hatred and discrimination and welfare problems, especially in the areas of education and
health the economic growth model has arguably failed.

IMF and the World Bank whose roles as earlier explained have been to lend money to needy
countries, have indeed given loans which however have come up with strings and conditions that
have left the borrowers in worse situations than they were currently in. These conditions come in
the form of policy prescriptions called ‘Structural Adjustment Policies (SAPs)’ which Robinson (1996)
label as neo-liberal. The SAPs require debtor governments to open their economies to penetration
by foreign corporations, allowing access to the country’s workers and environment at bargain
basement prices. The SAPs meant across-the-board privatisation of public utilities and publicly
owned industries, reducing social spending on programs such as education, health and production
credits for poor farmers. Examples of some of the countries who were victims of the SAPs include
Ecuador. It got a loan in the 1960s and 30 years down the line its poverty had increased from 50 to
70 percent; unemployment from 15 to 70 percent, the public debt from $240 million to $16 billion
and resource allocation to the poor had decreased from 20 percent to six percent. By 2000, 50
percent of its budget was allocated to pay its ever increasing debt. Elsewhere, Bolivia privatised its
water utility which generated inflationary bills and resulted in uproars in the country. The Philippines
after borrowing reached a point where 44 percent of the country’s total budget was going to service
the debt while only three percent was allocated to health. Poverty increased to 70 percent of the
population. Through these loans the IMF was instrumental in budget allocation for the countries in
debt, leaving less funds for environmental protection and development. Cornia et al (1987) state
that Unicef reported in the 1980s that these SAPs of the World Bank had been responsible for
reduced health, nutrition and educational levels for tens of millions of children in Asia, Latin America
and Africa.

Inflation rate remained relatively high. Malawi’s economy continued to face challenges emanating
from poor tobacco earnings and rapidly depreciating kwacha. High inflation and high interests
dampened consumers and business confidence. It was largely triggered by high prices of both
imported goods and basic need commodities. This placed a heavy burden on the poor and it eroded
purchasing power, negatively affected women and the rural and urban poor. According to Ularo
(2007) the real price of maize in Malawi has increased by 141 percent during SAPs and has been
arising along with the food prices of many other commodities over this period. This has subsequently
led to continuous price escalation of staple food like Irish, maize, potatoes and led to hunger and
food insecurity.

Furthermore, UNDP( 1996) revealed that the SAPs through the immoral system of modern day
colonialism created by the IMF, contributed to the devaluation of national currencies to make
exports cheaper and the freezing of wages. Through the prioritization of export production as
recommended by the IMF, countries shifted their focus from food production for local consumption
to production of export crops destined for the wealthy countries. These and more measures only
contributed to the increase in poverty leaving women and children hard hit; and reduced countries’
abilities to develop their own strong domestic economies while damaging the local environment. In
Ivory Coast, the increased dependency on cocoa exports led to the loss of two-thirds of the country’s
forests. Furthermore, the loan Argentina received had conditions of reduction of salaries for doctors
and teachers and decreases in social security payments. Thus IMF made elites from the Global South
more accountable to First World elites than their own people, thereby undermining the democratic
process. Cobb (2002) explains that the SAPs proved to be an extremely effective instrument in
accomplishing the basic purpose of the Washington consensus, that is, the movement toward a
single global market. The IMF has used its influence to plunge developing countries into deeper crisis
while gaining from the fiasco. In 1979, Liberia, whose economy largely depended on rice farming,
was advised to remove subsidies to farmers and import rice from the US. Immediately after the
subsidies were stopped, rice prices went up leading to serious rice riots as the majority of the
population could no longer afford their staple food. The agriculture system had been destroyed
through bad advice from IMF. This further led to the 26 year period of war and the country got loans
which were used to buy weapons from the US and more than 250 000 people died. Haiti too was
forced to open its market to imported rice and currently a US corporation called Early Rice sells
nearly 50 percent of rice consumed in the country. Moreover, the IMF and the World Bank have
been extensions of capitalist unsustainable banking system. Landes (1999) calculated that the
difference in income per head between the richest nation (Switzerland) and the poorest non-
industrial country (Mozambique) was about 400:1. The gap between the rich and poor has
continued to widen as a result of the capitalist nature of the institutions whose presence is dominant
in developing nations. According to Cobbs (2002) critics say that the IMF imposed the policies of the
Washington Consensus on countries without understanding the distinct characteristics of the
countries that made those policies difficult to carry out, unnecessary, or even counterproductive.
According to Stiglitz, for example, the economists of the IMF had a "one-size-fits-all" policy based on
their academic training, which focused on economic models with unrealistic assumptions about how
real-life economies work. They do not generally specialize in the economies of the countries whose
policies they oversee, often do not live in those countries and mostly work from Washington, D.C.
and have little appreciation for the political circumstances under which the governments operated.
When crises arise, therefore, says Stiglitz(2000), the IMF instinctively blames the governments of the
countries suffering the crises.

More so, Privatization of goods and services was also introduced in Malawi through the
implementation of SAPs in Malawi. The removal of fertilizer subsidies affected the subsistence
farming and negatively affected women farmers since in Malawi women are responsible for
producing subsistence maize while, men are responsible cash crops such as tobacco It led to
detrimental effects in the agricultural sector because agriculture is the backbone of Malawi’s
economy. This was detrimental to many peasant farmers who could not afford the annual acquisition
of costly inputs like fertilizers and patented seed varieties. The market liberalization of the
agriculture sector led to food crisis. This coupled land enclosures but however it was beneficial to
developed nations that desperately needed their market for agriculture inputs particularly the
United States and Canada (Most Developed Counties ) According to Roberts this forced the green
revolution on Malawi where heavy reliance on expensive industrial inputs was grossly unsuited to
the social and physical realities of African agriculture. This forced many peasant farmers off their land
into urban areas.

According Stiglitz (2000) to debt relief to poor African countries, the World Bank and IMF were the
main lenders to these poor countries because private lenders believed that these countries were too
risky. Realizing the magnitude of the problem, in 1988, the World Bank began to forgive some debt.
In the 1990’s, some major industrial countries started to cancel bilateral debt payments as well. By
1994, more than $15 billion of Africa debt was forgiven. Nonetheless the region still owed $235
billion to foreigners, including donor countries, regional banks and multilateral institutions. Cobbs
(2002) observed that in 1996, the World Bank and IMF created the Debt Relief for Heavily Indebted
Poor Countries (HIPC) Initiative, recognizing the need for debt relief from multilateral institutions.
Through this initiative, eligible countries are required to introduce specific economic reforms, such
as restructuring and privatization of state-run enterprises and creating a sound legal system, in
return for debt relief. The Initiative requirements were quite stringent and, by 1998, only two of the
40 eligible countries received actual debt cancellation. According to resources alternatives website
(2010), in 1999, the World Bank enlarged the program to encompass more countries and take into
account other ongoing efforts for poverty reduction in eligible countries. Stilglitz (2000) went on
state that critics were still not satisfied. Rallies, concerts and campaigns, sponsored by U2’s Bono,
and by NGOs, such as Oxfam, raised public awareness and pressured countries to respond. The G-8
meeting in 2005 brought 100 percent cancellations of debt owed to the African Development Fund,
the World Bank, and the IMF by 18 countries who were eligible for the HIPC initiative.
In addition, the structural adjustment programs account a failure of squandered loans. Singer H
(1995) some African groups and organizations are demanding that the debts must be cancelled
because the loans did not benefit the public of the borrowing governments. The bank did not meet
its expectations to the borrowing government as it states but is full of corruption and despotic to
African government. Some of the loans are conducted in secret where the World Bank directors will
conduct with the borrowing government is secret not including the media and public on those liable
to repay the loans.

However one should not override the fact that, as much as Structural Adjustment Programs were
detrimental in Africa, they were other success stories in Africa. The gross domestic product in Mali
and Uganda increased due to the implementation of SAPs. The Malian experienced growth due to
exogenous factors such as fluctuating international market prices for its export products. The rise in
foreign investment has been an important source of additional revenue has contributed to increasing
government revenue. According to Baines (2001) Uganda’s growth rate topped 5.5 with an inflation
rate of 7 percent which is an improvement. This helped to improve the infrastructure in the country
and the social being of the people. Health and education services improved and it helped to
minimize death rates.

Also Structural Adjustment Programs were mandated to liberalize the economies, promote the free
movement of capital and opening of national markets to international competition. After Zimbabwe
gained its independence from the colonial master Britain embarked on an Economic Structural
Adjustment Programe (ESAP) in 1991. This adjustment was aimed at promoting economic growth in
the country. The aim of the program were to de-regulate the domestic economy, de-regulate
wages, removal of foreign tariffs reduce public spending and government’s budget deficit. Subsidies
on basic food items were also aimed under the program. To add on, Malawi also implemented
adjustment programs as a way to revive its economy which was at its knees.

In a nutshell one can deduce that the SAPS had a great negative impact in the African states as it is
seen that instead of rebuilding the economic and social aspects of these countries, it lead to the
crumbling of most of these countries in terms of economy, social and even politically as noted on the
Zimbabwean and Kenyan issue.
REFFERENCES

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