UNIT 5
There are twenty-one paragraphs, which can be divided into five
I groups. Put these groups in order, saying which paragraphs make
I up each group.
The effects on the poor of adjustment policies
The study's recommendations
The worsening situation
The form of present adjustment policies
The causes of the worsening situation
in paragraphs:
Read the first part of the article,
and note down the following:
the four problems concerning ill
health;
the problems in the field of
education;
the five examples of problems in
the health services;
reasons why the morale of
health workers is low.
Compare notes with other
students.
Note the three typical elements
of IMF adjustment policies,
with the objectives of each and
the measures included in each.
Clarify your notes by arranging
them in a diagram.
In what ways do such policies
make things even worse for the
poor;
6 What are the recommendations
of the study?
makes things worse
Developing countries also had to
contend with the huge deht accumu-
lated in the 1970s which, for the third
world as a whole, had grown to
$888 billion by the end of 1985, while
debt service payments — payments
owed on past borrowing — exceeded
$130 billion, representing nearly a
quarter of their export earnings.
The resulting imbalances led to a
need for major economic adjust-
ments in many countries — but unfor-
tunately the form of the adjustment
policies adopted has frequently con-
tributed to worsening conditions
among vulnerable groups, especially
in the short run-
IMF adjustment policies typically
include three elements: first, policies
to cut demand, especially govern-
ment expenditure, so as to lower im-
ports, improve the trade balance, and
reduce the budget deficit; secondly,
policies to improve the allocation of
resources so as to increase the pro-
duction of exports and of substitutes
for imports; and thirdly, policy
reforms designed to improve the
long-run efficiency of the economy.
In the first category, adjustment
packages almost invariably include
limits on government expenditure,
with cuts in subsidies being a priority,
and controls over domestic lending.
In the second category, policies
include exchange rate devaluation
and increased producer prices to
boost agricultural production.
In the third category, a typical ad-
justment package includes reforming
financial markets and increasing in-
terest rates, liberalising imports, and
privatising state-owned assets. Res-
trictions on demand — or deflation —-
dominate all conventional adjust-
ment packages while the other ele-
ments occur in the majority of cases.
There are three major mechanisms
by which adjustment policies tend to
worsen conditions for the most
vulnerable, at least in the short run:
by reducing employment, and earn-
ings from employment, for low-
income households; by increasing the
price of basiccommodities, especially
food; by reducing government expen-
diture on basic services — especially
health, education and sanitation ...
Between 1979 and 1983 expendi-
ture per head on health at constant
prices decreased in nearly half the
African countries for which data
exist, and in 60 per cent of the coun-
tries in Latin America. Education
expenditure per head declined in a
third of African countries and 59 per
cent of Latin American countries ...
No adjustment programme is ac-
ceptable which allows children to be
sacrificed for the sake of financial sta-
bility. Yet this has happened, and it
need not happen. Alternatives
exist. What is needed now is to con-
vince decision makers at all levels —
both in national governments and
international institutions — to take
appropriate action quickly. Many
children will die; and many of the sur-
vivors suffer permanent damage
because of failure to act now.
Debts should be rescheduled.
Very poor countries need to have at
least some of their debt cancelled.
Aid flow needs to be more sub-
stantial, they should be redirected to
measures which benefit those at risk,
and they must be guaranteed over the
medium term.
Almost all developing countries
need greater access for their exports
to the markets of developed
countries.
Adjustment with a human face Volume I
edited by G. A. Cornia, Richard Jolly and
Frances Stewart, Oxford University
Press; adapted for The Guardian
51
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