NGOs want impact studies on SAPs

by Gumisai Mutume

Washington, 23 Oct 2000c (IPS) -- Non-governmental organisations, encouraged by similar pronouncements by the International Monetary Fund (IMF), are pressing for comprehensive impact assessment studies to be carried out on structural adjustment programmes (SAPs).

IMF Deputy Director of Policy Development and Review, Masood Ahmed, recently announced that the IMF was establishing mechanisms to carry out such impact assessments. These mechanisms should be in place before year-end. The IMF also recently issued a discussion document that proposes more selective and limited conditions be attached to funding under the Poverty Reduction and Growth Facility (PRGF) which last year replaced the Enhanced Structural Adjustment Facility.

Officials at the World Bank, the IMF’s sister organisation, are not talking about their participation in the analyses, which are dependent on the Bank because of the institution’s expertise in research.

For about two years now, the Bretton Woods institutions have been promising to conduct the studies. Typical responses to the slow progress have included the lack of good and adequate data in developing countries.

“It is a problem if, after 20 years of structural adjustment programmes, there is no good data,” says Sara Grusky, co-director at the non-governmental Globalisation Challenge Initiative.

“What we want to see done is a disaggregation of the impacts of reforms being pushed in the areas of agriculture, financial policy, trade and the social sectors ... to identify the kind of conditions that have the potential of having negative social effects.”

A Fall 2000 newsletter produced by the non-governmental World Development Movement, the Center of Concern and Globalisation Challenge Initiative notes that impact assessments could provide an “early warning system” to ensure that loans with potential adverse social and environmental consequences are changed or discontinued.

The studies could also muster the support of civil society and the media for IMF/Bank programmes if these are publicly perceived as operational and beneficial to a country.

Before 1980, the Bank devoted a negligible amount of lending to SAPs.  But the last financial year saw 53 percent ($15 billion) of new Bank lending going to adjustment. The IMF’s adjustment lending before 1980 was limited to short-term financing to stabilise exchange rates. Now, almost all IMF funding in poor countries goes to adjustment.

Many people affected by SAPs do not understand the basis of these programmes nor do they know how they work. They also do not make any inputs into the development of the programmes, a feature the Bretton Woods institutions promise will change under the PRGF.

NGOs working in the area, such as Friends of the Earth US, charge that even the implementers, the Bank and Fund, have very little in-depth understanding of the social and environmental effects of their policies on developing countries. They say country-by-country assessments could assist in identifying countervailing measures to offset temporary adverse effects on the poor or determining the pace and levels of liberalisation for differing economies.

“Questions that need to be asked include, what is the public perception and support of adjustment programmes?” an IMF insider who supports the assessments as a new way of channelling adjustment lending told IPS.  “Should we, for instance, postpone privatisation of an electricity power plant in favour of liberalisation in another sector until public support has been won?”

In a discussion document titled “Key Features of PRGF-Supported Programmes”, the IMF notes that under the new approach, agencies providing external assistance will need to change the way in which their programmes support the efforts of national authorities. For instance, it calls for the development of “transparent monitoring systems to improve efficient delivery of public services”, and at the point of policy implementation they should indicate what prior work had been done and how this had influenced the policies.

According to Gita Bhatt of the IMF, there is no timeline yet and the method of study still needs to be worked out with the Bank. The studies would include all low-income countries taking part in the PRGF process.  Responding to charges that the Fund and Bank have in the past promised to carry out impact assessments but have not delivered, Bhatt says “we have put it down on paper” and all that remains is to carry it out.

Bank and IMF programmes have increasingly come under fire for their perceived aggravation of poverty in developing countries. The majority of economies undergoing SAPs remain poor and critics charge that it is primarily because they are implementing SAPs that they are not growing.  In last year’s “Annual Review of Development Effectiveness”, the Bank admitted that poverty increased and prospects for growth dimmed in the bulk of developing countries under review. It noted that in 54 percent of poor countries surveyed, the people experienced stagnating per capita income, rising poverty, declining life expectancy, or a combination of these.

But the Bank and Fund are always quick to point out that it is not their policies that are responsible for the poor economic performance of these countries.

On the other hand, critics of IMF and Bank policies remain suspicious because critical SAP documents remain secret. There are four key documents - the Country Letter of Development Policy sent to the Bank by the borrowing government, the IMF Letter of Intent sent to the Fund, the World Bank President’s Report, which outlines the final adjustment programme, and the PRGF Arrangement. Only the Letter of Intent is disclosed to the public.

Also, the conditions of SAPs have multiplied since the 1980s, requiring governments to comply more and more with free-market-related and governance demands whose effects are untested. Some of these conditions include capital account liberalisation, domestic financial liberalisation, trade and market reforms, budget austerity and privatisation. Apart from being required for SAPs, these conditions are also prerequisites for governments to obtain bilateral donor assistance, loans, trade credits or debt relief.

A paper released this year, titled “Governance-related Conditionalities of the IFIs”, by Harvard professors Devesh Kapur and Richard Webb says the greatest burden rests on sub-Saharan Africa. It notes that in the case of the Bank, the average number of conditions per country rose from 32 between 1980 and 1983 to 56 by the end of the decade.

An analysis of the institutions’ arrangements with 13 sub-Saharan African countries last year revealed an average of 114 conditions, of which 82 were governance-related. Tanzania had the biggest share of conditions in Africa, with a total of 150.

Kapur and Webb note that while conditions prior to 1980 were aimed at ensuring loan repayments, they have become “a means for governmental and social engineering by creditors”.