Essay About Structural Adjustment And World Bank

Imf and Pakistan
Structural adjustment, as measured by the number of adjustment loans from the
IMF and World Bank, reduces the growth elasticity of poverty reduction. I find no
evidence for a direct effect of structural adjustment on growth. The poor benefit less from
output expansion in countries with many adjustment loans than in countries with few
adjustment loans. By the same token, the poor suffer less from an output contraction in
countries with many adjustment loans than in countries with few adjustment loans. Why
would this be? One hypothesis that adjustment lending is counter-cyclical in ways that
smooth consumption for the poor. There is evidence that some policy variables under
adjustment lending are counter-cyclical, but there is no evidence that the cyclical
component of those policy variables affects poverty. I speculate that the poor may be illplaced
to take advantage of new opportunities created by structural adjustment reforms, just
as they may suffer less from the loss of old opportunities in sectors that were artificially
protected prior to reforms.For its part, the World Bank headquarters has built into its lobby wall the slogan “our
dream is a world free of poverty.” The recent East Asian currency crisis and its aftershocks
in other countries generated intense concern about how the poor were faring under
structural adjustment programs supported by the Bank and the Fund. The poverty issue is
so red-hot that IMF and World Bank staff began to feel that every action inside these
organizations, from reviewing public expenditure to vacuuming the office carpet, should be
justified by its effect on poverty reduction.This paper examines