ABSTRACT
Having examined fiscal, financial and trade policies separately, we shall now discuss policy reforms that bring all these policies together. Structural adjustment programs (SAPs) are such sets of policies that focus on several economic goals, in particular economic stability, efficient use of resources, internal and external balance. The components of structural adjustment programmes are best described by their objectives. Economic stabilization focuses mainly on internal balance, meaning price stability and high employment. External balance means the continuous provision of foreign exchange for imports, as well as the avoidance of financial crises. Both objectives require macroeconomic policies, whereas the goal of efficient resource use is essentially micro economic in nature. Structural adjustment in a narrower, and microeconomic, sense involves structural change by way of changing relative prices and other incentives. An important link between the micro and macro policies is the exchange rate, which plays the double role of influencing both macro variables and relative prices. A further component of SAPs is privatization, which has the ultimate goal of increasing the efficiency of resource allocation, while also affecting the fiscal balance and thereby internal and external equilibrium. We discuss first the macro issues of stabilization, external and internal balance, and then deal with structural adjustment in the narrower micro economic sense. The chapter is completed by discussing the role of the International Monetary Fund (IMF) in structural adjustment programmes and by an attempt to evaluate the progress in structural adjustment in the context of Sub-Saharan Africa.
