In the s, however, a number of factors led to renewed interest by national governments and international development agencies in the local government level of developing countries. These factors included globalization, economic crisis and structural adjustment, and democratization, as well as local and domestic forces such as rapid urbanization, strengthened ethnic identities, etc. This paper focuses on African countries—without precluding occasional references to other developing countries—in order to make the discussion more manageable. While the relationship between adjustment and democratization, and the institutionalization of local government in Latin America and the Eastern European countries has been the subject of systematic research and analysis, decentralization policies have remained poorly analysed and developed in African countries.
Select this link to see the table of contents for this issue. Select this link to order this issure of ATF. Structural Adjustment is the Wrong Policy F. Why do Structural Adjustment Programs lack growth elements, and what should be done to stimulate rapid development? The objectives of a Structural Adjustment Program are largely the same for most African nations, because the world bodies presume that African economies are at the same level of development and are experiencing similar problems.
The stated objectives of the Nigerian SAP are to: Nigeria has implemented SAP for almost a decade now, but none of the objectives has been achieved, and there is no indication that any of them can be achieved using the chosen program instruments.
Indeed, all that is still conspicuously present in Nigeria is the foreign exchange market and the ceremonies associated with it. They point out that Nigeria had become indebted and seemed unable to repay because it had been involved in indiscriminate importation and had also neglected non-oil export as potential foreign exchange earners.
To these economists, the solution to the problem lay in a mechanistic manipulation of the import-export equation, which dictates that a country must export or earn more than it imports spends to generate a positive balance of trade. Foreign exchange markets, as part of structural adjustment programs, served to increase the cost of imports and hence reduce import spending.
The indirect impact of this instrument affects all sectors of any economy in which it operates. The implications of FEM in African countries are especially harsh. The effect of mandatory foreign exchange markets has been to erode the value of the local currency over time.
Most countries undergoing adjustment have seen their currency values plummet in relation to international currencies.
Earnings from primary commodities, the mainstay of African economies, have been decreasing for over a decade. The United Nations publication "Africa Recovery," reported recently that the prices of most export commodities, already at record low levels in the s, have continued to fall every year in the s.
Multinationals have taken advantage of the situation, even reverting to over-invoicing in certain instances. Inthe World Bank also reported deliberate overpricing deals in steel imported by African nations from Europe over a year period, leading to capital flight estimated to be over 12 billion naira.
This is an important false devaluation pressure in African FEMs, unduly reducing the purchasing power of local African currencies. SAP by its nature is inflationary because it increases the amount of the local currency used in buying a unit quantity of local goods and imports.
SAP is also inflationary because it is based on the fallacy that capital is the primary basis of economic growth, which by extension implies that the mere establishment of banks in an artisan economy automatically transforms it into a monetized and advanced economy. All the African nations implementing SAP have seen a rapid increase in the number of new banks.
At the end ofNigeria had 32 approved commercial banks of which 25 were functioning with a national network of 11, branches, there were 10 merchant banks and 22 development banks, including savings banks.
Similar increases in the number of financial institutions were experienced in Ghana, Zambia and Tanzania. Monetizing African economies by the mere establishment of banks only increases speculation and discourages production and development.
The effect of increased speculation is to increase the value of the inflation index and reduce the purchasing power of the local currency. Endless devaluation All the African nations implementing SAP are today experiencing increasing indebtedness and budget deficits because they are not growing; a growing economy realizes budget surpluses and pays its debts.
All the African nations implementing SAP are also experiencing mass unemployment in all categories. While this artificial demand is estimated at over 2 billion dollars every two weeks, it is doubtful if goods worth more than million dollars return to Nigeria. When SAP began later that year the dollar exchanged for 1.
As the dollar exchanged for more naira, companies became cash-strapped; they could not get enough naira to exchange for dollars. The dollar exchanged for 4. Early ina new Ph. A family size loaf of bread at the time sold for 2. Ineight years later, a fresh Ph. Today, one dollar exchanges for over a thousand cedis.most intense and recurrent application of structural adjustment pro- grammes over the past two decades without making much progress in either poverty alleviation or development.
5. The Structural Adjustment Program (SAP) by its nature is inflationary because it increases the amount of the domestic currency required in exchange for a unit quantity of local goods and imports.
borrower)—with 26 structural adjustment loans Cote d’Ivoire represents the traditional transaction for structural adjustment loan users. The World Bank describes the Cote d’Ivoire Loan stating that, “The loan would be in support of the Government’s program of structural adjustment.
The failure of structural adjustment has been so dramatic that some critics of the World Bank and IMF argue that the policies imposed on African countries were never intended to promote development. On the contrary, they claim that their intention was to keep .
Under World Bank and International Monetary Fund (IMF) tutelage, the MMD government embarked upon the most far-reaching market-led economic reforms ever seen in Zambia, under the Structural Adjustment Program (SAP).
Climate Change and Sustainable Development Tariq Banuri and Hans Opschoor Tariq Banuri is Director, Future Studies Program, Stockholm Environment Institute, SEI-Boston.