Structural adjustment programmes
Also called: SAP · Topic: The Making of a Global World · NCERT: Beyond NCERT
Meaning
Structural adjustment programmes (SAPs) were conditions that the IMF and World Bank attached to their loans from the 1980s onwards. Countries that borrowed had to cut government deficits (spending more than they earn) and devalue their currencies, which means lowering their value. They also had to sell state firms to private owners (privatise) and open their markets to foreign trade and investment. SAPs mattered most for indebted countries in Africa and Latin America, where critics said the cuts deepened poverty.
Example
In the 1991 balance-of-payments crisis, India had too little foreign exchange to pay for its imports and took an IMF loan. India then adopted reforms of this type under the New Economic Policy of 1991. These included devaluing the rupee, cutting the fiscal deficit and opening the economy to trade and investment.
Don't confuse with
- Washington Consensus: This is the broad set of free-market ideas behind these loans. SAPs are the actual loan conditions that put those ideas into practice in a particular country.
Related concepts
- Bretton Woods Conference
- Bretton Woods system
- International Monetary Fund
- World Bank
- Fixed exchange rate
- Marshall Plan
- General Agreement on Tariffs and Trade
- Multinational corporation
- Group of 77
- New International Economic Order