Question

1. What are structural adjustment loans, and how have they affected LDCs, women, and the poorest groups in LDCs?
2. How has the World Bank tried to change its approach to development, and how successful has it been?

Answer 1

Structural adjustment loans are loans are type of loans to developing countries. It is a set of economic reforms that a country must adhere to, in order to secure loans.Or in other words, these are some economic policies introduced as certain conditions for gaining a loan from World Bank.

Let us see what are these conditions to be eligible for getting a loan from IMF:

Cutting government spending to reduce the budget deficit, controlling of inflation, privatization, encouraging free trade by reducing tariff barriers etc are some of the conditions. Economists arise certain criticizams against Structural adjustments. IMF policies need to be implemented otherwise there can be a heavy financial penalty. This gives foreign bodies great influence over key economic issues in developing economies. Selling of  raw materials is a boon to developing countries but , this prevents economy diversifying. Developed countries impose tarrifs on agricultural exports while developing gave to go free trade with them for their exports.    

Adjustment loans and LDCs:

The economic reform process in developing countries depend on the initial conditions in which efforts at structural adjustments are launched. Economic liberalization does not deliver developmental integration into the world economy as far as poor countries are concerned. It is said that both the adjusting country and the doner should support the adjustment process.

Adjustment loans and women.

Since World Bank is an international agency, it also should ensure the representation of women. But women are not represented, and in such a case, how can it ensure gender equality? It should ensure the participation of women to achieve the goals. There are many detrimental effects on the poor , especially on women, due to structural adjustments program.

It is argued that the Bank charges a very high rate of interest on loans and also an annual commitment charge on undistributed balances and front end fee. It has also been criticized for its failure to meet the financial needs of the developing countries fully. The bank has not been successful in raising the productivity and standard of living of the people. The bank's lending procedure is faulty because it lays emphasis on the repaying capacity of the borrowing country before granting any loan, such a condition is very harsh and discriminatory for developing or poor countries, which are need financial help at a large scale.It has been also criticized for its purpose wise and region wise assistance to its members. The lending policy of the Bank should be directed more towards the poor countries and for the development of agricultural and rural development, energy transportation, communication, water supply, sewage etc. Only then we can say structural adjustment loan and World Bank has been a powerful booster to the economic development of poor countries.