Benefits |
Challenges |
SAPs typically involve measures such as trade liberalisation, fiscal austerity, deregulation and currency devaluation. For example in Nigeria, SAP policies helped to restore economic growth, without inflation, and reached 5% GDP. SAP policies helped to reduce Nigeria's dependency on oil and imports by diversifying the productive base of the economy through revival of its agricultural sector
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Reduced public spending on health, education, and social services, leading to increased poverty, inequality, and human suffering. For example, in Zambia, the SAP policies resulted in a 50% drop in health spending per capita and a rise in child mortality from 111 to 191 per 1000 live births between 1980 and 1990
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SAPs help to shrink government budget deficits, eliminate hyperinflation, and maintain debt-payment schedules. For example, SAPs in Bolivia and Uganda reduced their fiscal deficits and inflation rates and improved their debt servicing ratios in the late 1980s and early 1990s
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Increased vulnerability to external shocks, such as fluctuations in commodity prices, exchange rates, and interest rates. For example, in Mexico, the SAP policies exposed the economy to the volatility of the global financial market and triggered the peso crisis of 1994-1995, which caused a severe recession and social hardship
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SAPs aim to attract foreign investment by reducing inflation and exchange rate volatility, which increases investor confidence and reduce uncertainty. Also, by strengthening governance, rule of law, and anti-corruption measures, SAP policies can improve the transparency, accountability, and credibility of the institutions, which can reduce corruption, bureaucracy, and political risk for foreign investors
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Loss of policy autonomy and sovereignty, as the IMF and the World Bank dictate the economic agenda of the borrower countries. For example, in Argentina, the SAP policies forced the government to adopt a fixed exchange rate regime and to relinquish control over its monetary policy, which contributed to the economic collapse of 2001-2002
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SAPs aim to achieve long-term or accelerated economic growth by restructuring the economy and reducing government intervention. For example, SAPs in Ghana and Tanzania led to higher GDP growth rates and increased private sector investment in the 1990s
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Erosion of domestic industries and agriculture, as cheaper imports flood the market and undermine local production. For example, in Ghana, the SAP policies led to a decline in the share of manufacturing in GDP from 15% to 10% and a loss of 300,000 jobs in the sector between 1983 and 1989
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SAPs facilitate the process of global economic integration by liberalising trade and investment policies and promoting exports. For example, SAPs in Mexico and Chile opened up their markets to foreign competition and increased their export earnings in the 1980s and 1990s
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Increased social unrest and political instability, as the population protests against the harsh measures and their negative consequences. For example, in Bolivia, the SAP policies sparked widespread demonstrations and riots in 1985, 2000, and 2003, which challenged the legitimacy of the government and threatened social cohesion
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