What Is a Structural Adjustment Program (SAP)?

A structural adjustment progওram (SAP) is a set of economic reforms that a country must adhere to in order to secure a loan from the International Monetary Fund or the World Bank.

SAPs often consist of economic policies such as reducing government spending and opening up to free trade, among others. Proponents argue that SAPs encourage economic sufficiency, while opponents criticize them for imposing austerity on already 📖poor nation🌺s.

Understanding SAPs

Structural adjustment programs (SAPs) are commonly thought of as free market reforms, and they are made conditional on the assumption that they will make the nation in question more competitive and encourage economic growth. The International Monetary Fund (IMF) and 澳洲幸运5官方开奖结果体彩网:World Bank—two Bretton Woods institutions that date from the 1940s—have long imposed conditions on their loans. However, the 1980s saw a concerted push to turn lending to crisis-stricken poor countries into springboards for reform.

SAPs have demanded that borrowing countries introduce broadly 澳洲幸运5官方开奖结果体彩网:free-market systems coupled with fiscal restraint or occasionally outright 澳洲幸运5官方开奖结果体彩网:austerity. Countries have been required to perform some comb🌞ination of the following: 

• Devaluing their currencies to reduce balance of payments deficits. 
• Cutting public sector employment, subsidies, and other spending to reduce budget deficits.
• Privatizing 澳洲幸运5官方开奖结果体彩网:state-owned enterprises and 澳洲幸运5官方开奖结果体彩网:deregulating state-controlled industries.
• Easing regulations in order to attract investment by foreign businesses.
• Closing tax loopholes and improving tax collection domestically.

Controversies Surrounding SAPs

To proponents, SAPs encourage countries to become economically self-sufficient by creating an environment that is friendly to innovation, investment, and growth. Unconditional loans, according to this reasoning, would only initiate a cycle of dependence, in which countries in financial trouble borrow without fixing the systemic f💞laws that caused the financial trouble in the first place. This would inevitably lead to further b൲orrowing down the line.

SAPs have attracted sharp criticism, however, for imposing austerity policies on already-poor nations. Critics argue that the burden of SAPs faಞlls most h꧟eavily on women, children, and other vulnerable groups.

Critics also portray conditional loans as a tool of neocolonialism. According to this argument, rich countries offer bailouts to poor ones—their former colonies, in many cases—in exchange for reforms that open the poor countries up to exploitative investment by multinational corporations. Since these firms' shareholders live in rich countries, the colonial dynamics are perpetuated, albeit with nominal national sovereignty for the former colonies.

Enough evidence had been built from the 1980s to the 2000s showing that they often reduced the standard of living in the short-term within countries adhering to them, that the IMF publicly stated that it was reducing SAPs. This appeared to be the case through the early 2000s, but the use of SAPs grew to previous levels again in 2014. This has again raised criticism, particularly that countries under SAPs have less policy freedom to deal with economic shocks, while the rich lending nations can pile on public debt freely to ride out global economic storms that often originate in their markets.

The Bottom Line

Structural adjustment programs (SAPs) are those in which the International Monetary Fund or the World Bank provide loans to countr꧂ies while requiring economic policy reforms. Common poli♔cies including privatization of industry, devaluation of currency, or reductions in public spending. Proponents of SAPs argue that they encourage self-sufficiency, while opponents charge that they impose austerity.