The key effects of the SAP and ESAF

The key effects of the SAP and ESAF will be document and analyzed here, in addition to the results and statistics provided in the previous sections. According to Naiman and Watkins (1999) in a key study on the impact of IMF structural adjustment in Africa for CEPR, the Center for Economic and Policy Research, which resilies on the IMF’s own data, developing countries worldwide implementing ESAF programs have experienced lower economic growth compared to those who have not implemented ESAF programs.

More specifically, African countries subject to ESAF programs have fared worse than other countries pursuing ESAF programs, with these countries seeing a fall in their per capital incomes decline. Furthermore, per capital government spending on education in such countries declined between 1986 and 1996. Finally, Total external debt as a share of GNP for ESAF-program countries increased from 71. 1 percent to 87. 8 percent between 1985 to 1995, evidence that IMF-mandated macroeconomic policies have not sufficiently reduced the debt burdens of these countries.

They go on to state that efforts to increase economic growth, increase access to health care and education, as well as the reduction of the burden of debt repayments, are all likely to fail as long as the IMF control the economic policies of these countries in Sub-Saharan Africa. The specifics are as follows 1. 1. Data on growth in countries with ESAF programs shows that annual real per capita GDP growth averaged 0. 0 percent. for all ESAF countries over the period 1991-1995. Non-ESAF developing countries experienced an average growth of 1. 0 percent annually in real per capita GDP.

Sub-Saharan African countries implementing ESAF programs had experienced an average decline of 3 percent annually in real per capita incomes over the period of IMF adjustment (1991-1995) The proposed cause behind this is that ESAF programs reduced public spending, reduced credit access through higher interest rates and eliminate food and other subsidies. These reduced aggregate demand, and hence income and output. The World Bank projects that it will take years for Africa to reach 1980s levels of per capita income, with growth in per capita incomes being 1.

2percent annually for the next decade in Sub-Saharan Africa. (1997). However, it must be noted that this trend of negative to zero real per capita GDP growth was reversed from 1996-1998, to 2. 5% annually, according to a Status Report by the IMF (August 30 1999). 1. 2. Social Spending Naiman and Watkins records that in 1995, in Sub-Saharan Africa, the adult literacy rate was 66percent for men and 47 percent for women, with 47 percent for women, with primary school enrolment being 61 percent for boys and 57 percent for girls, over the period 1993-1997.

Only 44 percent of the population had access to safe drinking water and 31 percent of children under five were underweight between 1990 and 1997. And in 1997, the infant mortality rate for children below 5 was 17 percent. However, in many Sub-Saharan African countries with ESAF programs, these indicators are lower than the continental averages provided above. They thus argue for an urgent need for increased attention to the provision of basic social services, which is restricted by IMF structural adjustment programs.

These programs restrict access to health services and public educations by reducing household incomes and government spending. In African countries with ESAF programs, per capita education declined by 0. 7 percent on average annually, between 1986 and 1996, contrary to the IMF claims that countries worldwide with ESAF programs fared reasonably well in spending on education on average.

Furthermore, real per capita investment in health by these countries in Sub-Saharan Africa increased by only 2.5 percent a year during the same period, markedly slower than other non-African ESAF countries. However, according to the same status report in August 30 1999 by the IMF, health and education spending in per capita terms has been increasing since end 1997. 1. 3. External Debt As mentioned previously, total external debt as a share of GNP for all ESAF users increased from 71. 1 percent to 87. 8 percent between 1985 to 1995. This is in contrast to an increase from 34% to 39.

6% for developing countries overall in the same period, contradicting the stated goals of the IMF policy to reduce debt. In September 1996, the World Bank and the IMF introduced the Highly Indebted Poor Countries (HIPC) initiative, aimed at reducing the debt burdens of all eligible HIPCs sustainable levels, tied together with formal conditionality aimed at macroeconomic reform. However, this process of debt relief is extremely slow, with a country having to pursue structural adjustment programs for 3 years for donors to agree its debts to sustainable levels.

However, actual relief only comes after a further 3 years of reforms, with further delays being possible if the IMF declares a country to be off-track from its mandated reforms. Naiman and Watkin thus conclude that the reforms mandated by the IMF have failed to reduce the debt burden of African, and in some case, increasing the debt burden over the period of Adjustment. 2. Conclusion The main goal of SAP/SAF and ESAF has been to introduce macroeconomic reforms aimed at the creation and maintenance of macroeconomic stability as well as to remove structural and institutional impediments to growth.

In this sense it has succeeded, as evidence by recent data showing improvements in growth rates in per capita terms for indicators such as income, GDP and consumption, as well as increasing education and health spending together with improving social indicators. (IMF Status Report, August 1999) Far reaching reforms have been introduced in the exchange and trade systems of all sub-Saharan African countries and exchange rates have been brought closer to their equilibrium levels, a far cry from the considerable misalignment that were obvious in the early 1980s.

("Adjustment in Sub-Saharan Africa," 1995) However, the effects of external debt reforms leave much to be desired. Together with existing large fiscal imbalances, these are key issues that need to be looked into and addressed by the IMF regarding it’s ESAF programs.

References

Adjustment in Sub-Saharan Africa. World Economic Outlook, (1995). 98+. Belshaw, D. & Livingstone, I. (Eds. ). (2002). Renewing Development in Sub-Saharan Africa: Policy, Performance, and Prospects. London: Routledge.