Issue Brief: Conditions for debt relief (May 1999)

...what the World Bank and IMF require, and how it hurts the poor
The World Bank and IMF adopted new rhetoric about reducing poverty, and linking debt relief primarily to poverty actions in the fall. But countries entering the debt relief process are still facing the same old conditions that have nothing to do with poverty reduction, and can actually increase the hardships of the poor.

Guinea - Conditions for debt relief include: privatization of energy, privatization of telecommunications, deregulation of petroleum prices, removal of subsidies for public transportation (December 1999).

Honduras - Conditions for debt relief include: privatization of telecommunications, liberalization of mining sector, implementation of bank service fees (November 1999).

Here is what these kinds of "structural adjustments" have done, and are still doing, to the poor:

Cote D'Ivoire - Told in 1994 to liberalize the labour market, decontrol prices, and privatize state-controlled operations.

Result: Real wages fell, consumer prices went up, unemployment went up. Rural people negatively affected by taxes on coffee and cocoa exports. The incidence of poverty in 1995 was three times that of 1985, and had widened to affect more socioeconomic groups. User fees introduced in health care; spending on health care and education shifted further away from service to the poor.

Malawi - Told in 1988 and again in 1995 to undertake agricultural reform.

Result: Rise in consumer price of maize hurt the poorest 40% of smallholders of land, who did not produce enough for their own needs. Reforms favoured the better off, who produced enough maize to make a profit (but estate workers' incomes fell by 50% in 1994-1995).

Zambia -Told in 1991 and in later adjustment agreements to shift from subsistence agriculture to cash crop production, liberalize the domestic financial market, privatize. Subsidies on maize production and fertilizers eliminated, bank credit slashed. Cuts in social expenditures.

Result: Increased prices (500% inflation in 1992). Urban formal sector employment decreased by one-fourth relative to the urban workforce. Smallholder income and urban wages fell. Overall standard of living fell. Malnutrition increased among smallholders. Cuts in social expenditure and introduction of user fees for basic health care hurt the poor particularly hard. Quality of education fell.

Zimbabwe - Told to deregulate labour market, privatize health care.

Result: Employment and real wages declined. Reduction in the manufacturing sector meant over 12,000 jobs lost between 1991 and 1996, while real wages fell 26%. Food prices rose by 36% relative to all consumer prices. The IMF predicted a 8% rise in per capita consumption, but it actually fell by 37%.

Public expenditure on health care declined, and health care became inaccessible to the poorest people. Drug shortages became commonplace. Prior to IMF involvement, infant mortality was declining; then between 1988 and 1994 infant mortality quadrupled. (Although declining health indicators were largely a result of AIDS, the disease was spreading at a time of reduced health care spending).

Tanzania - Told in 1991 and 1996 to privatize the public sector and downsize. Agriculture was deregulated, government subsidies ended. Rural development bank was privatized in 1996.

Result: Prices of fertilizer and other agricultural inputs increased. There is a shortage of credit for small-scale farmers; credit from private commercial banks is directed at export crop productions. The cost of living has gone up and there is a limited accessibility of food, so food intake has stagnated or decreased.

Guatemala - Told to privatize communications. Result: 2,500 workers immediately laid off, despite promises of job security. Many of the poor use public phones, but these were converted so that they no longer accepted coins, but required pre-paid cards costing a day's wages or more.