Structural Adjustment

Topics: Balance of trade, International economics, World Bank Pages: 2 (444 words) Published: May 6, 2013
Structural adjustments are the policies implemented by the International Monitory Fund (IMF) and the World Bank in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund (IMF) or World Bank, or for obtaining lower interest rates on existing loans. Conditionalities are implemented to ensure that the money lent will be spent in accordance with the overall goals of the loan. The Structural Adjustment Programs (SAPs) are created with the goal of reducing the borrowing country's fiscal imbalances. The bank from which a borrowing country receives its loan depends upon the type of necessity. The SAPs are supposed to allow the economies of the developing countries to become more market oriented. This then forces them to concentrate more on trade and production so it can boost their economy. Through conditionalities, Structural Adjustment Programs generally implement "free market" programs and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Countries which fail to enact these programs may be subject to severe fiscal discipline. Critics argue that financial threats to poor countries amount to blackmail; that poor nations have no choice but to comply. Definition of 'Current Account Deficit'

Occurs when a country's total imports of goods, services and transfers are greater than the country's total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world.

'Current Account Deficit'
A substantial current account deficit is not necessarily a bad thing for certain countries. Developing counties may run a current account deficit in the short term to increase local productivity and exports in the future.

Current Account
The difference between a nation's total exports of goods, services and transfers, and its total imports of them. Current...
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