Structural Adjustment Policies Seeks to enhance the role of markets so as to promote development Make the economy more stable (↑ interest rates; ↓ gov’t subsidies; ↓ exch. rate; all to reduce inflation & put free market in charge) Structure the economy so it can participate in the global marketplace (privatisation; fiscal discipline) Free up trade to enhance benefits from comparative advantage (reduce protectionism & liberalise trade, liberalise capital markets and movement of investment funds)
Repercussions of Struc. Adj. Policies Harsh macroeconomic conditions for citizens – cuts in gov’t subsidies, unemp., expensive imports, etc Gov’t expenditure cuts may be in health, infrastructure, etc Reduction of protectionism may give country a very narrow and high risk economic base (eg. a few crops) Trade liberalisation may not be reciprocated Basic market conditions may not be in place to take up from where gov’t left off
Read this section in the Web Guide, Unit 5b; Edexcel!