Bank’s low-income sub-Sahara

The sub-Sahara's annual real growth in GNP per capita was virtually zero compared to positive growth in other LDCs between 1965 and 1992. Growth of food grain output per capita since 1963 has been positive in LDCs but negative in the sub-Sahara, which was the only world region where caloric intake, if equally distributed, was below FAO's minimum standards. Sub-Saharan Africa's commodity terms of trade and export purchasing power both fell 47 % between 1970 and 1990. The international balance of goods and services, which was negative since 1977, exceeded 20 % of exports after 1987.

Without debt rescheduling, chronic external deficits require macroeconomic stabilization or structural or sectoral adjustment imposed domestically or (usually) by the World Bank or International Monetary Fund. World Bank sectoral adjustment loans (SECALs) emphasize trade, agricultural, industrial, public enterprise, financial, energy, educational, or other sectoral reforms. To affect the supply side, structural adjustment loans (SALs) by the Bank/Fund support sectoral, relative price, and institutional reform to improve efficiency. By 1988, 33.8 % of SALs and SECALs, constituting $19. 9 billion (or 24. 1 %) of the Bank's lending, went to а low-income sub-Sahara.

The objectives of International Monetary Fund stabilization are to decrease demand in order to moderate inflation and to switch demand from foreign to domestic sources. In Africa, Bank/Fund lending to resolve external crises was usually linked to devaluation, decontrol of prices, reduction in social spending, privatization, and increased trade, but sequencing these adjustments often exacerbated the countries' predicament.

Africa is caught in an export trap because its primary product export growth faces competition from other LDCs who are also being required to expand exports. Moreover, DC protectionism limits primary product processing and light manufacturing export growth. (MAMDANI 1996 23-28) UNICEF data showed that from 1980 to 1985, when Bank/Fund adjustment limited sub-Saharan social spending, child welfare (nutrition, literacy, primary school retention, immunization, and survival) deteriorated. Tanzanian President J. K. Nyerere asked in 1985: "Must we starve our children to pay our debt?

" UNICEF 1989! Criticisms of adjustment lending (AL) include (1) insufficient coordination among the recipient country and its creditors; (2) too much policy dominance by the Bank/Fund; (3) neglect of both external factors (such as terms of trade) and local conditions; (4) too little attention to poverty abatement, nutrition, and education; (5) the secrecy of the Bank/Fund's letter of intent to а recipient country, which decreases internal dialogue; and (6) too little consideration of how conditionality may undermine а political leadership's legitimacy.

African finance officers want the Bank/Fund to emphasize employment, growth, and maintenance of social programs, rather than reducing government deficits, restructuring state-owned enterprises (SOEs), removing food subsidies, and liberalizing trade and exchange. Political leaders must consult all interested parties in designing the program and rely more on local institutions for policy analysis. Adjustment should be prepared by national planners rather than by foreign advisers and organizations. Africans had little experience during colonialism and neo-colonialism in directing their own economic plans and technical adaptation.

Technical change requires а prolonged learning process embodied in improved capital. Africans must direct, as the Meiji Japanese did, their development to capture technological learning gains. The distribution of benefits from AL shifts power, as in Tanzania in the late 1980s, where President А. H. Mwiyi, along with some economists, business people, and bureaucrats, supported Fund/Bank liberalization, from which they subsequently benefited. Moreover, World Bank loans, which usually specify many conditions, offer much opportunity for borrower discretion.

Since not all of the 50-plus conditions for Nigeria during its 1986 SAL mattered, the overloaded administration, which could choose priorities, used the program to favour certain individuals and departments and avoid some unwanted conditions. Are reforms sustained after completion of adjustment programs? Sometime World Bank insider Ann Krueger 1974 contends that programs tip money and political power toward those benefiting from liberalization. However, except for the shift to а flexible exchange rate, the overwhelming majority of policy reforms lasted no longer than the World Bank program. (Stephan 1999 58-74)a