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7/23/2019 imf6.pdf http://slidepdf.com/reader/full/imf6pdf 1/6 1 The World Bank and its sister organization, the International Monetary Fund, were created at Bretton Woods, New Hampshire, USA in 1944. Together they are referred to as the Bretton Woods Institutions or BWIs. Originally created primarily to finance the reconstruction of war-torn Europe, the World Bank has become the primary financier of development projects in the Third World. It has also become the Third World’s largest creditor. Together the countries of the Third World owe the World Bank more than US$160 billion. The International Monetary Fund The IMF’s original mandate sets forth three main objectives: 1. To promote international monetary cooperation; 2. To facilitate t he expansion of international trade; 3. To promote exchange rate stability. The IMF achieves these objectives by advising member countries on their economic policies and by providing conditional assistance to member countries experiencing balance of payments problems. The IMF often escapes close scrutiny by groups who tend to focus their advocacy efforts on the World Bank. Yet, the IMF has played a very significant, if not more important, role in exacerbating the impoverishment of developing countries. Critics argue that the IMF has strayed far from its original mandate of providing member countries with funds to alleviate short-term balance of payments crises and stabilizing exchange- rates. The IMF is increasingly under attack for its The Political Economy of the Bretton Woods Institutions Challenges before IMF and World Bank in the Era of Globalization inappropriate role in exacerbating the economic crisis in Africa during the 1980s and for the fiasco surrounding Mexico’s recent collapse. The IMF played a significant role during the 1980s in “bailing out the commercial banks.” By providing IMF credits to developing countries, essentially to service commercial debt, the IMF took upon itself the role of “gatekeeper” for creditors, forcing highly indebted countries to adopt SAPs (Structural Adjustment Programms) as a condition not only for receiving IMF credits, but as the “stamp of approval” debtor countries needed as a condition for receiving further grants and aid from all donor sources. By disbursing funds to developing countries in the 1980s to service commercial debt, an most recently to Mexico, the IMF essentially postponed the debt crisis by providing short term funds on very hard terms for what was essentially a structural problem of insolvency which required long-term solutions. It is widely believed that the IMF financed the “recovery” with the wrong resources and the wrong approach. Consequently, the IMF is now in the position of extracting large net transfers of resources, especially from those countries which can least afford it. Discuss the role of World Bank in development of the backward countries? What role does the World Bank play in favour of developed countries? How will you distinguish between the nature and role of World Bank and IMF? What was IMF’s help to the world in 1980s? Who is called ‘gatekeeper’ for creditors among nation? What is SAP and how it’s related to the IMF? •Under whose leadership World Bank grew dramatically and when?  Relevant for Civil Services Pre & Main

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The World Bank and its sister organization, theInternational Monetary Fund, were created at BrettonWoods, New Hampshire, USA in 1944. Together theyare referred to as the Bretton Woods Institutions orBWIs. Originally created primarily to finance thereconstruction of war-torn Europe, the World Bank hasbecome the primary financier of development projectsin the Third World. It has also become the ThirdWorld’s largest creditor. Together the countries of theThird World owe the World Bank more than US$160

billion.The International Monetary Fund

The IMF’s originalmandate sets forth threemain objectives:1. To promote

international monetarycooperation;

2. To fac il it at e t heexpansion ofinternational trade;

3 . To promote exchangerate stability.

The IMF achieves these objectives by advisingmember countries on their economic policies and byproviding conditional assistance to member countriesexperiencing balance of payments problems.

The IMF often escapes close scrutiny by groups whotend to focus their advocacy efforts on the World Bank.Yet, the IMF has played a very significant, if not moreimportant, role in exacerbating the impoverishment ofdeveloping countries. Critics argue that the IMF hasstrayed far from its original mandate of providingmember countries with funds to alleviate short-termbalance of payments crises and stabilizing exchange-

rates. The IMF is increasingly under attack for its

The Political Economy of the Bretton Woods Institutions

Challenges before IMF and

World Bank in the Era of Globalization

inappropriate role inexacerbating theeconomic crisis inAfrica during the 1980sand for the fiascosurrounding Mexico’srecent collapse.

The IMF played asignificant role duringthe 1980s in “bailing

out the commercialbanks.” By providingIMF credits to developing countries, essentially to

service commercial debt, theIMF took upon itself the roleof “gatekeeper” for creditors,forcing highly indebtedcountries to adopt SAPs(Structural AdjustmentProgramms) as a conditionnot only for receiving IMFcredits, but as the “stamp ofapproval” debtor countries

needed as a condition for receiving further grants andaid from all donor sources.

By disbursing funds to developing countries in the1980s to service commercial debt, an most recently toMexico, the IMF essentially postponed the debt crisisby providing short term funds on very hard terms forwhat was essentially a structural problem of insolvencywhich required long-term solutions. It is widelybelieved that the IMF financed the “recovery” with thewrong resources and the wrong approach.Consequently, the IMF is now in the position ofextracting large net transfers of resources, especially

from those countries which can least afford it.

• Discuss the role of World Bank in development of the backward countries?

• What role does the World Bank play in favour of developed countries?

• How will you distinguish between the nature and role of World Bank and IMF?

• What was IMF’s help to the world in 1980s?

• Who is called ‘gatekeeper’ for creditors among

nation?

• What is SAP and how it’s related to the IMF?

• Under whose leadership World Bank grew

dramatically and when?

 Relevant for Civil Services Pre & Main

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The World BankThe World Bank is

currently the largest multi-national lending andtechnical agency dealingwith Third Worlddevelopment. As theworld’s leadingdevelopment agency, theWorld Bank has a wide-ranging mandate, fromconsolidating loans for large-scale developmentprojects to providing structural adjustment loans andsectoral adjustment loans to developing countriesexperiencing balance of payments problems. In the1970s, under the presidency of Robert McNamara, the

World Bank grew dramatically in size and scope. Inthe 1980s, in large part owingto the debt crisis, the Bankincreasingly served as a debt-management institution,lending in some cases asmuch as 50% of a developingcountry’s portfolio towardstructural and/or sectoral adjustment lending. Theprimary feature of this kind of lending was to restore atroubled economy’s debt servicing capacity by urgingindebted countries to adopt major economic reformsknown as Structural Adjustment Programmes (SAPs).

But over the past decade, the World Bank has comeunder increasing criticism from a wide range of groupsin the North and South. Environmental groups argue thatmany World Bank projects have had a disastrous effecton the environment. The World Bank often finances largeinfrastructure projects; including dams, open pit mines,and road construction. In case after case these projectshave been proven economically unsound, havedestroyed pristine rainforests, rivers and estuaries, andhave uprooted the livelihoods of millions of Third Worldcitizens who are affected by them. World Bank-fundeddevelopment projects have forcibly resettled millions andmillions of people since its inception.

It is noteworthy that by the end of the BrettonWoods conference, the World Bank and the IMF hadbeen founded and the groundwork was laid for theGeneral Agreement on Tariffs and Trade (GATT), andeventually, in 1995, the creation of the World TradeOrganisation. Although their roles evolved, their over-arching purpose remained. As Jose Louis Jamarillo, theformer Columbian Ambassador to GATT and Presidentof the Group of 77, declared after the birth of the WTO,what we have created is “an institutional trinity whichwill dominate all economic relations across the worldin the interests of the strongest”. The decision-making

structures of all three institutions continue to ensure

that the major industrialized countries, led by theUnited States, and influenced by their corporations, setthe agenda. In the process, the poor are often activelyundermined.

  Superficially the Bank and IMF exhibit manycommon characteristics. Both are in a sense owned anddirected by the governments of member nations. ThePeople’s Republic of China, by far the most populousstate on earth, is a member, as is the world’s largestindustrial power (the United States). In fact, virtuallyevery country on earth is a member of both institutions.Both institutions concern themselves with economicissues and concentrate their efforts on broadening andstrengthening the economies of their member nations.Staff members of both the Bank and IMF often appearat international conferences, speaking the samerecondite language of the economics and development

professions, or are reportedin the media to benegotiating involved andsomewhat mystifyingprograms of economicadjustment with ministers offinance or other governmentofficials. The two institutions

hold joint annual meetings, which the news mediacover extensively. Both have headquarters inWashington, D.C., where popular confusion over whatthey do and how they differ is about as pronouncedas everywhere else. For many years both occupied thesame building and even now, though located onopposite sides of a street very near the White House,they share a common library and other facilities,regularly exchange economic data, sometimes present joint seminars, daily hold informal meetings, andoccasionally send out joint missions to membercountries.

Despite these and other similarities, however, theBank and the IMF remain distinct. The fundamentaldifference is this: the Bank is primarily a developmentinstitution; the IMF is a cooperative institution thatseeks to maintain an orderly system of payments andreceipts between nations. Each has a different purpose,a distinct structure, receives its funding from differentsources, assists different categories of members, andstrives to achieve distinct goals through methodspeculiar to itself.

PurposesAt Bretton Woods the international community

assigned to the World Bank the aims implied in itsformal name, the International Bank for Reconstructionand Development (IBRD), giving it primaryresponsibility for financing economic development. TheBank’s first loans were extended during the late 1940sto finance the reconstruction of the war-ravaged

economies of Western Europe. When these nations

• What does the World Bank finance for?

• What is the importance of Bretton Woods in

history of World Bank?

• How is WTO related to World Bank?

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recovered some measure of economic self-sufficiency,the Bank turned its attention to assisting the world’spoorer nations, known as developing countries, towhich it has since the 1940s loaned more than $330

billion. The World Bank has one central purpose: topromote economic and social progress in developingcountries by helping to raise productivity so that theirpeople may live a better and fuller life.

The international community assigned to the IMFa different purpose. In establishing the IMF, the worldcommunity was reacting tothe unresolved financialproblems instrumental ininitiating and protracting theGreat Depression of the1930s: sudden, unpredictablevariations in the exchange values of national currencies

and a widespread disinclination among governmentsto allow their national currency to be exchanged forforeign currency. Set up as a voluntary and cooperativeinstitution, the IMF attracts to its membership nationsthat are prepared, in a spirit of enlightened self-interest,to relinquish some measure of national sovereignty byabjuring practices injurious to the economic well-beingof their fellow member nations. The rules of theinstitution, contained in the IMF’s Articles ofAgreement signed by all members, constitute a code ofconduct. The code is simple: it requires members toallow their currency to be exchanged for foreigncurrencies freely and without restriction, to keep the

IMF informed of changes they contemplate in financialand monetary policies that will affect fellow members’economies, and, to the extent possible, to modify thesepolicies on the advice of the IMF to accommodate theneeds of the entire membership. To help nations abideby the code of conduct, the IMF administers a pool ofmoney from which members can borrow when they arein trouble. The IMF is not, however, primarily a lendinginstitution as is the Bank. It is first and foremost anoverseer of its members’ monetary and exchange ratepolicies and a guardian of the code of conduct

Size and Structure

The IMF is small (about 2,300 staff members) and,unlike the World Bank, has no affiliates or subsidiaries.Most of its staff members work at headquarters inWashington, D.C., although three small offices aremaintained in Paris, Geneva, and at the United Nationsin New York. Its professional staff members are for themost part economists and financial experts.

The structure of the Bank is somewhat morecomplex. The World Bank itself comprises two majororganizations: the International Bank forReconstruction and Development and the InternationalDevelopment Association (IDA). Moreover, associatedwith, but legally and financially separate from the

World Bank are the International Finance Corporation,

which mobilizes funding for private enterprises indeveloping countries, the International Center forSettlement of Investment Disputes, and the MultilateralGuarantee Agency. With over 7,000 staff members, the

World Bank Group is about three times as large as theIMF, and maintains about 40 offices throughout theworld, although 95 percent of its staff work at itsWashington, D.C., headquarters. The Bank employs astaff with an astonishing range of expertise: economists,engineers, urban planners, agronomists, statisticians,

lawyers, portfolio managers,loan officers, projectappraisers, as well asexperts intelecommunications, watersupply and sewerage,

transportation, education, energy, rural development,

population and health care, and other disciplines.Funding

The World Bank is an investment bank,intermediating between investors and recipients,borrowing from the one and lending to the other. Itsowners are the governments of its 180 member nationswith equity shares in the Bank, which were valued atabout $176 billion in June 1995. The IBRD obtains mostof the funds it lends to finance development by marketborrowing through the issue of bonds (which carry anAAA rating because repayment is guaranteed bymember governments) to individuals and privateinstitutions in more than 100 countries. Its concessionalloan associate, IDA, is largely financed by grants fromdonor nations. The Bank is a major borrower in theworld’s capital markets and the largest nonresidentborrower in virtually all countries where its issues aresold. It also borrows money by selling bonds and notesdirectly to governments, their agencies, and centralbanks. The proceeds of these bond sales are lent in turnto developing countries at affordable rates of interestto help finance projects and policy reform programsthat give promise of success.

Neither wealthy countries nor private individualsborrow from the World Bank, which lends only tocreditworthy governments of developing nations. Thepoorer the country, the more favorable the conditionsunder which it can borrow from the Bank. Developingcountries whose per capita gross national product(GNP) exceeds $1,305 may borrow from the IBRD. Incontrast, all member nations, both wealthy and poor,have the right to financial assistance from the IMF.Maintaining an orderly and stable internationalmonetary system requires all participants in thatsystem to fulfill their financial obligations to otherparticipants

World Bank OperationsThe World Bank exists to encourage poor countries

to develop by providing them with technical assistance

• How are the IMF and World Bank funded?

• Briefly describe and assess World Bank

operations?

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and funding for projects and policies that will realizethe countries’ economic potential. The Bank viewsdevelopment as a long-term, integrated endeavor.

During the first two decades of its existence, two

thirds of the assistance provided by the Bank went toelectric power and transportation projects. Althoughthese so-called infrastructure projects remain important,the Bank has diversified its activities in recent yearsas it has gained experience with and acquired newinsights into the development process.

The Bank gives particular attention to projects thatcan directly benefit the poorest people in developingcountries. The direct involvement of the poorest ineconomic activity is being promoted through lendingfor agriculture and rural development, small-scaleenterprises, and urbandevelopment. The Bank ishelping the poor to be moreproductive and to gain accessto such necessities as safewater and waste-disposal facilities, health care, family-planning assistance, nutrition, education, and housing.Within infrastructure projects there have also beenchanges. In transportation projects, greater attention isgiven to constructing farm-to-market roads. Ratherthan concentrating exclusively on cities, power projectsincreasingly provide lighting and power for villagesand small farms. Industrial projects place greateremphasis on creating jobs in small enterprises. Labor-

intensive construction is used where practical. Inaddition to electric power, the Bank is supportingdevelopment of oil, gas, coal, fuel wood, and biomassas alternative sources of energy.

The Bank provides most of its financial andtechnical assistance to developing countries bysupporting specific projects. Although IBRD loans andIDA credits are made on different financial terms, thetwo institutions use the same standards in assessingthe soundness of projects. The decision whether aproject will receive IBRD or IDA financing depends onthe economic condition of the country and not on thecharacteristics of the project.

IMF OperationsThe IMF has gone through two distinct phases in

its 50-year history. During the first phase, ending in1973, the IMF oversaw the adoption of generalconvertibility among the major currencies, superviseda system of fixed exchange rates tied to the value of gold,and provided short-term financing to countries in needof a quick infusion of foreign exchange to keep theircurrencies at par value or to adjust to changingeconomic circumstances. Difficulties encountered inmaintaining a system of fixed exchange rates gave riseto unstable monetary and financial conditions

throughout the world and led the international

community to reconsider how the IMF could mosteffectively function in a regime of flexible exchangerates. After five years of analysis and negotiation (1973-78), the IMF’s second phase began with the amendmentof its constitution in 1978, broadening its functions toenable it to grapple with the challenges that havearisen since the collapse of the par value system. Thesefunctions are three.

First, the IMF continues to urge its members to allowtheir national currencies to be exchanged withoutrestriction for the currencies of other member countries.As of May 1996, 115 members had agreed to fullconvertibility of their national currencies. Second, inplace of monitoring members’ compliance with theirobligations in a fixed exchange system, the IMF

supervises economic policiesthat influence their balanceof payments in the presentlylegalized flexible exchangerate environment. This

supervision provides opportunities for an earlywarning of any exchange rate or balance of paymentsproblem. In this, the IMF’s role is principally advisory

Over the past few years, in response to an emerginginterest by the world community to return to a morestable system of exchange rates that would reduce thepresent fluctuations in the values of currencies, the IMFhas been strengthening its supervision of members’economic policies. Provisions exist in its Articles of

Agreement that would allow the IMF to adopt a moreactive role, should the world community decide onstricter management of flexible exchange rates or evenon a return to some system of stable exchange rates.Measuring the success of the IMF’s operations over theyears is not easy, for much of the IMF’s work consistsin averting financial crises or in preventing theirbecoming worse. Most observers feel that merely to havecontained the debt crisis of the 1980s, which posed therisk of collapse in the world’s financial system, mustbe counted a success for the IMF.

Cooperation between Bank and IMFAlthough the Bank and IMF are distinct entities,

they work together in close cooperation. Thiscooperation, present since their founding, has becomemore pronounced since the 1970s. Since then theBank’s activities have increasingly reflected therealization that the pace of economic and socialdevelopment accelerates only when sound underlyingfinancial and economic policies are in place. The IMFhas also recognized that unsound financial andeconomic policies are often deeply rooted in long-terminefficient use of resources that resists eradicationthrough short-term adaptations of financial policies. Itdoes little good for the Bank to develop a long-term

irrigation project to assist, say, the export of cotton, if

• What are the areas of co-operation between

the World Bank and IMF?

• Briefly describe and evaluate IMF Operations?

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the country’s balance of payments position is sochaotic that no foreign buyers will deal with thecountry. On the other hand, it does little good for theIMF to help establish a sound exchange rate for acountry’s currency, unless the production of cotton forexport will suffice to sustain that exchange rate overthe medium to long term. The key to solving theseproblems is seen in restructuring economic sectors so

that the economic potential of projects might be realizedthroughout the economy and the stability of theeconomy might enhance the effectiveness of theindividual project.

The Bank and the IMF have distinct mandates thatallow them to contribute, each in its own way, to thestability of the international monetary and financialsystem and to the fostering of balanced economic growththroughout the entire membership. Since their founding50 years ago, both institutions have been challenged bychanging economic circumstances to develop new waysof assisting their membership. The Bank has expandedits assistance from an orientation toward projects to the

broader aspects of economic reform. Simultaneously theIMF has gone beyond concern with simple balance ofpayment adjustment to interest itself in the structuralreform of its members’ economies. Some overlapping byboth institutions has inevitably occurred, makingcooperation between the Bank and the IMF crucial.Devising programs that will integrate members’economies more fully into the international monetaryand financial system and at the same time encourageeconomic expansion continues to challenge the expertiseof both Bretton Woods Institutions.

The 50th anniversary of the founding of the BrettonWoods institutions in 1994 prompted a flood of

initiatives aimed at assessing the role played by the

World Bank and the International Monetary Fund anddebating their future. Most of such reassessments beginby stressing how much the world has changed in the 50years since both organizations were established. Fromthe collapse of the Soviet Union to the communicationsand transportation revolution, and from the radicaltransformation of financial markets to the populationexplosion, the inventory of the new conditions underwhich the Bretton Woods institutions have to operate iscertainly long. The implication, of course, is that theinstitutions should adapt their goals and policies to thenew realities and then reorganize accordingly.

In the case of the World Bank, the lack of consensusabout its basic mission, limitations in its governancesystem and other conditions have led to a proliferationof goals-which in turn has had importantorganizational repercussions. Furthermore, the size,complexity and relative independence of the Bankcreate a substantial margin for inconsistencies amongits environment, its strategy, and its organization.Usually, competitive pressures do not leave decision-

makers much choice but to adapt goals and strategiesto environmental changes and to make the necessaryinternal adjustments to support the new strategy. But,without intense competition, or other externalchallenges, organizations like the Bank-large, complex,relatively autonomous, and with a significant capacityto influence its environment-can postpone, or evenavoid, the difficult decisions required to minimizeincongruities between strategy and internalorganization. They can often afford the added costsand inefficiencies that result from the ineffectivenessof an internal structure whose objectives and policiesdo not respond adequately to the new external threats

and opportunities.

The International Monetary Fund and the World Bank at a Glance

 World Bank• seeks to promote the economic development of the

world’s poorer countries• assists developing countries through long-term

financing of development projects and programs• provides to the poorest developing countries whose

per capita GNP is less than $865 a year specialfinancial assistance through the InternationalDevelopment Association (IDA)

• encourages private enterprises in developingcountries through its affiliate, the InternationalFinance Corporation (IFC)

• acquires most of its financial resources by borrowingon the international bond market

• has an authorized capital of $184 billion, of whichmembers pay in about 10 percent

• has a staff of 7,000 drawn from 180 membercountries

International Monetary Fund• oversees the international monetary system• promotes exchange stability and orderly exchange

relations among its member countries• assists all members—both industrial and

developing countries—that find themselves intemporary balance of payments difficulties byproviding short- to medium-term credits

• supplements the currency reserves of its membersthrough the allocation of SDRs (special drawingrights); to date SDR 21.4 billion has been issued tomember countries in proportion to their quotas

• draws its financial resources principally from thequota subscriptions of its member countries

• has at its disposal fully paid-in quotas now totalingSDR 145 billion (about $215 billion)

• has a staff of 2,300 drawn from 182 membercountries

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The World Bank’s failure to achieve its primarymission of poverty alleviation is now acknowledged atthe most senior levels of the Bank itself, as well as bythe Canadian Auditor General. Evidence of project and

portfolio failures haveled to increasing callsfor a comprehensivereview of the WorldBank and the IMF, themost recent call comingfrom the countries of theG-7 in the communiquéfrom their 1994 Naplessummit. The Bank‘sdubious logic of linkingglobalization andintegration to lower

poverty and inequalityhas been challengingfrom years. After itspromotion of ‘openness’and the ‘evidence’ citedof a large swathe ofcountries having ‘open’economies and thusgrowing fast (the AsianMiracle and the WorldDevelopment Reports),other academics wholooked at these noted

that the various countrystudies used such aloose definition of‘openness’ thatcomparisons acrosscountries andgeneralised conclusionswere faulty anderroneous and notwarranted at all. TheBank view of the EastAsia miracle came underchallenge, including insome UNCTAD researchwork and its Trade andDevelopment Reports.

The current form ofglobalization, which isseen, is unaccountable,corporate-led, and non-democratic. It furthershows the links betweentremendous odious debtand poverty in the developing countries with the effectsof the current forms of globalization that marginalizesa vast majority of people around the world. While not

the only part of the global financial system that has

been destructive for most people of the world, the IMFand World Bank policies have been a major instrumentto structure the global economy (via structuring thenational economies of developing countries) to allow

a form of neoliberalglobalization to bepursued that has led tothe criticisms mentionedabove. Critics also pointout that the beneficiarieswill be largely thewealthy people inwestern nations and thet r a n s - n a t i o n a lcorporations, while themajority of people in the

world will not benefit.So it is crystal clearthat there are numerouschallenges before IMFand World Bank.The policies likeglobalization andStructural AdjustmentPrograms of theseinstitutions have notachieved their objectivesand hence have beenfailing so far in fulfilling

their promises andclaims. Contrary to theirproclamations, theseinstitutions and theirpolicies have playedhavoc with thedeveloping countries andits people. Not onlyhuman life but everysector of an economy hasbeen badly devastated bythem. Their criticismcannot be refuted until

they stand by theirclaimed objectives andpromises. Both in formand essence the politicaleconomy of these BrettonWoods institutionsshould be in the interestof the Third WorldCountries and its people.

And, undoubtedly, this is the challenge before themthat is to be tackled in the era of globalization – the eraof growing economic inequality.

Criticisms of the Structural AdjustmentProgrammes/Policies (SAPs)

The effect of Structural Adjustment Programmes/

Policies on poor countries has been one of the most

significant criticisms of the World Bank. The 1979 energy

crisis plunged many countries into economic crises. The

World Bank responded with structural adjustment loans

which distributed aid to struggling countries while

enforcing policy changes in order to reduce inflation

and fiscal imbalance. Some of these policies included

encouraging production, investment and labour-intensive manufacturing, changing real exchange rates

and altering the distribution of government resources.

Structural adjustment policies were most effective in

countries with an institutional framework that allowed

these policies to be implemented easily. For some

countries, particularly in Sub-Saharan Africa, economic

growth regressed and inflation worsened. The

alleviation of poverty was not a goal of structural

adjustment loans, and the circumstances of the poor often

worsened, due to a reduction in social spending and an

increase in the price of food, as subsidies were lifted.By the late 1980s, international organizations began

to admit that structural adjustment policies were

worsening life for the world’s poor. The World Bank

changed structural adjustment loans, allowing for social

spending to be maintained and encouraging a slower

change to policies such as transfer of subsidies and price

rises. In 1999, the World Bank and the IMF introduced

the Poverty Reduction Strategy Paper approach to

replace structural adjustment loans. The Poverty

Reduction Strategy Paper approach has been interpreted

as an extension of structural adjustment policies as it

continues to reinforce and legitimize global inequities.Neither approach has addressed the inherent flaws

within the global economy that contribute to economic

and social inequities within developing countries. By

reinforcing the relationship between lending and client

states, many believe that the World Bank has usurped

indebted countries’ power to determine their own

economic policy.