Characteristics and effects of saps, Financial Management

CHARACTERISTICS AND EFFECTS OF SAPS

Although SAPs differ somewhat from country to country, they typically have the following features:

Reduction in Trade Barriers
SAP’s require the removal of barriers to imports, including tariffs, to facilitate integration into the international market. In practice, these measures allow cheaper imports to flood the country, depressing local industry and agriculture and leading to massive unemployment.

Currency Devaluation
By making imports more expensive and exports cheaper, neo-liberal economist (such as McKinnon (1973) and Shaw (1973)) asserts that devaluation will reduce trade imbalances, freeing more resources for debt repayment. In practice however, devaluation makes essential imports like medicines and oil far more costly, placing a strain on the poor countries.

Price Liberalisation
Price controls and subsidies are removed to eliminate artificial disincentives for production. In theory, this encourages food production. What is certain is that these measures increase the price of food and basic services, making life difficult for the poor.

Export promotion
Priority is given to production for export since this earns the country hard currency needed for debt repayment. As a result, more and more land is used for cash crops and food production falls. Pesticide use and deforestation increase, leading to ecological destruction. Labour laws are weakened to drive down wages and increase foreign investment in assembly plants for export products.

Posted Date: 12/11/2012 5:29:54 AM | Location : United States







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