You will prepare and submit a term paper on Structural Adjustment Programs and Debt Crisis as Causatives of Poverty. Your paper should be a minimum of 1750 words in length.
The structural adjustment programs included tax reforms, flexible interest rates, deregulation, property rights, trade liberalization, a favorable environment for foreign direct investment, competitive exchange rates, reduced public expenditure and reordering of government priorities, and fiscal discipline and end to deficits. These policies may sound impressive at a glance but they have underlying limitations.Reordering of state priorities is aimed at recovering costs from basic services and makes people pay highly for health and education.
Reduction in public spending means reducing subsidies for foodstuffs, public transport among others. This increases the prices for these commodities leading to a high poverty level. Tax reforms are always implemented equally among the rich and the poor thus lowering the tax burden for the rich and increasing the tax burden for the poor. This leads to an increase in the gap between the rich and the poor.Flexible interest rates in most cases lead to increasing interest rates leading to a reduction in credit facilities for the small and medium firms.
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This leads to an increase in the unemployment rate. Privatization favors the few rich and transnational organizations that grab the opportunity and amass a lot of wealth. Foreign direct investment, from experience, leads to the joining and acquisitions of existing companies. this leads to the reduction of the workforce. Property rights are rarely realized by the informal sector where they are more important (George, 2007).In conclusion, it can be said that the structural adjustment program has led to poverty among the majority in the concerned countries because they are only beneficial to a few.
IMF and World Bank need to enforce policy review on these conditions if they sincerely want to redeem the concerned countries from the chains of poverty.The presence of increased aid from China has greatly undermined the power of OECD donors to insist on specific conditions linked to international aid. This has led to calls on China to .