Should my Country Take out a Loan to Help its Development?

For a country to develop, it is important for them to have enough money to invest in important programs. To help those less developed countries get the money they need, international groups like the World Bank and the International Monetary Fund were created. They offer loans, often under the condition that structural adjustment programs (SAPs) are carried out.

WHAT ARE SAPs?

SAPs are sets of policies that countries need to follow in order to get loans from the World Bank or International Monetary Fund.

The idea behind SAPs is that having developing countries follow certain rules will help them make the most of the money lent to them and increase growth so that they can pay that money back.

But opponents of SAPs say that they are unfair to developing countries since they have to follow rules made by other countries, when the developing countries should be allowed to make their own decisions.

WHAT ARE THE RULES?

Generally, SAPs want to make countries more open and business friendly, while encouraging paying off national debt, and fighting corruption. They want to make the economy stable, and encourage outside investment.

Making the currency worth less, decreasing wages, spending less on public programs and giving more control over the country’s economy to outside businesses and governments are all steps that have had to be taken to achieve the goals of the program.

HOW DOES THIS AFFECT ME?

As of today, more than 34 countries in Africa have implemented Structural Adjustment Programs, and they have had different impacts on different countries.

If the country is growing quickly enough that they can easily pay back the loan and put it to good use, they can avoid the potential downsides. In these cases, SAPs can be a very good thing. International organisations are always working on SAPs to make them as helpful as they can.

But if the country is not sufficiently prepared for the SAPs, they can be less effective. Local businesses are put in competition with big international businesses, which can force them to close. Politically, citizens might have less of a say in how their country is run than rich investors as their countries try to become more business friendly. In order to pay back their loan, governments sometimes have to stop spending on public programs such as roads, phones, schools or hospitals.

CONCLUSION

It is clear that these Structural Adjustment Programs and the loans from the International Monetary Fund and the World Bank have been very important in helping many African countries develop. But they can also have some negative impacts, and as the African continent continues to develop it is important to take both the good and the bad into account for the future.

ELLEN HENDRY

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