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!