Causal Analyses of Public Debt and Structural Adjustment

Causal Analyses of Public Debt and Structural Adjustment

John Pastor Ansah (Duke-NUS Graduate Medical School, Singapore, Singapore)
Copyright: © 2017 |Pages: 17
DOI: 10.4018/IJSDA.2017010102


The impact of structural adjustment program on the economic situation in many African countries can not be overemphasised. Over two decades of implementing neo-liberal economic policies by the Bretton Woods institution, it is of great importance to document the lessons learnt. This paper elicits the structural mechanism representing the intended effect of structural adjustment policies and the unintended effects observed from the implementation of the structural adjustment policies. The assumptions and hypotheses implicit in the main structural adjustment policies, as well as the observed unintended effect of the policies are clearly elicited with a causal loop diagram.
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2. Structural Adjustment Program

Structural adjustment is a policy package of “free market” economic reforms sponsored by IMF and World Bank, by which lending to developing countries facing balance of payment problems is based on certain conditions—implementing SAP policies (Mohan 2000). SAP was designed to enable the adjusting countries to change the structure of its economy in order to meet its long-term need of efficient utilization of factors of production to ensure sustained growth (Woodward 1992). Thus, SAP refers to the process whereby the economies of the adjusting countries are reshaped to be more market oriented. The introduction of SAP was influenced by a shift in intellectual opinion away from the earlier structuralist view of economic development. The structuralist approach, first hypothesized in the 1950s by Paul Rosenstein-Rodan (1943), Ragnar Nurkse (1953), and W. Arthur Lewis (1954), attempts to identify specific rigidities, lags, and other characteristics of the structure of developing economies that affect economic adjustment and the choice of development policy.

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