Effects of Structural adjustment in Accra, Ghana

 

Outline

• Introduction
• In this section, I will discuss the different perspectives that people have regarding the impact that structural adjustment programs have and the impact they have on a country when implemented.
• Structural adjustment policies
• This section will focus on the policies that a country has to fulfill in order to qualify for a loan from the IMF. I will also focus on the challenges that countries must overcome in order to fulfill the requirements set by the IMF and World Bank.
• Impact on country
• This section will focus on the impact that Ghana’s involvement with the IMF and World Bank have had on its citizens. Despite the desire to speed up development and improve the living standards of its citizens, Ghana ended up alienating some of its citizens and this further fueled the spread of inequality in the country.
• Argument
• Despite the negative outcomes, the involvement with the IMF and World Bank had some positive outcomes for Ghana. I will however discuss how the benefits that emerged did little to unite the country but rather led to the spread of inequality.
• Conclusion
• The conclusion will summarize the impact that the policies from the IMF have had on Ghana and why involvement with the two organizations caused a lot of disunity in Ghana.

 

 

 

Effects of Structural adjustment in Accra, Ghana

Introduction

Structural adjustment is a process that involves the implementation of programs often provided and funded by the World Bank and the international monetary fund to help overcome an economic crisis or speed up the pace of development. However, in order to qualify for the loans and monetary support provided, countries seeking assistance from these organizations are required to abide to various economic policies structured by IMF. The assistance provided the two organizations is based on the idea that the challenges that citizens in third world experience is as a result of the impact that state intervention has on the economy of a country. The state involvement includes the expansive social service programs implemented by the state and also the control that they have over manufacturing enterprises. In their defense, the World Bank and the IMF argue that a free market is the best solution for helping to boost the economy and help people in third world countries to raise themselves out of poverty. Through the activities engaged in, the IMF and World Bank try to bridge the gap between the rich and the poor and in so doing, reduce the disparity that exists between urban and rural areas. Although the structural adjustment programs implemented by IMF and the World Bank help developing countries overcome some of the challenges they face, their use in countries in the global south have greatly contributed to the inequality that exists in countries like Ghana.

            When implemented correctly, the structural adjustment projects implemented by IMF and the World Bank greatly help in preparing a country for growth and in so doing, raise the living standards of its citizens. The intervention of the two organizations take control from the state and this helps to reduce the problems caused by the government’s involvement (Ericksen, 2015). A good example is the case where the state tries to assist people in the rural sectors. In Ghana, the states involvement before the implementation of the structural development programs from IMF led to a decline in market opportunities especially in the agricultural sector (Ericksen, 2015). The approach taken by the state involved lowering the price of agricultural products in an attempt to make them more affordable to local resident. This however had a negative impact on the farmers and agricultural industries and this led to deterioration of the people’s living standards. After the implementation of the structural adjustment programs, the regions experienced steady growth as the rural markets were deregulated and employment opportunities were created as a result.

            While the involvement by the IMF and World Bank could create great opportunities for growth, the success of the structural adjustment programs is greatly challenged by the organization’s determination to look after their own interest (Barry et al, 2016). Although the structural adjustment programs are designed to help the developing countries recover from a crisis or speed up development, the World Bank and IMF also benefit from the relationship established with countries in the Global South. Before deciding on what region to offer monetary support to, the two organizations also take into consideration the benefits that can be achieved from associating themselves with a country that is still developing (Barry et al, 2016). Added precautions in the form of structural adjustment policies are undertaken to ensure that the interest of the World Bank and the IMF are addressed as well. It is through these structural adjustment policies that the IMF and World Bank gain the foothold needed to influence and control the countries they give loans to.

Structural adjustment policy          

In order to qualify for the loans provided by the IMF, a country must follow the directives given by the organization and implement several policies. A good example of the policies that a country has to implement is the directive to cut government spending in order to reduce the budget deficit within the country (Palavi, 2016). While it is difficult for any external organization to influence the government of another nation, the IMF is able to do so by exploiting the country’s need for assistance. The IMF also requires the government of the country seeking financial assistance to raise tax revenues and further improve the efficiency of the tax collection methods used. While such an approach would be ideal in already developed countries, raising taxes in a country that is already undergoing a financial crisis makes it difficult not only for the government, but also the people expected to pay the taxes (Pallavi, 2016). Since the structural adjustment process is continuous, citizens have to bear with the harsh consequences of raised taxes before being able to benefit from the opportunities that will be created if the structural adjustment programs are successful.

            In order to abide to the provisions of the IMF, Ghana opted to privatize enterprises that were owned by the state and further reduced government expenditure by implementing cuts in social services. The country further increased the production of staple products like timber and cocoa meant for exports (Shah, 2012). In return, the World Bank provided funds needed to fund the country’s economic reform programs and while there were various advantages achieved as a result, the association with the World Bank and IMF did little to reduce inequality in the country.

The positive change brought about by the IMF and World Bank could not resolve the issue of inequality as the parties involved differed on what was sought after when Ghana was trying to speed up the pace of development (Logan, 2015). For starters, the IMF and World Bank considered development as positive economic growth and a good GDP. However, the state of a country does not necessarily reflect the state of the people and a good GDP was in no way a reflection of the citizens’ well-being. The structural adjustment programs mainly focused on reducing poverty and enhancing the country’s trade (Saprin, 2013). While their involvement did promote trade, the IMF and World Bank failed to reduce poverty in Ghana and this did little to curb inequality in the region including the capital city, Accra.

Despite the efforts made by the IMF and the Ghanaian government, the poverty levels went even higher after implementation of the structural adjustment programs even in the capital city. Despite recording a 75 percent increase on the minimum wage a within the first three years after the structural adjustment programs were implemented, the citizens could not enjoy the positive change due to the burden of implementing the needed changes (Hatchful, 2002). The country suffered from a rise in food prices and citizens were forced to pay high fees in order to receive social services. The cost of water was raised by 150%; electricity by 80%; and health by 1000 percent (Adutayo, 2015). While those living in poverty could not enjoy the opportunities created by the association with IMF, those below the poverty line found it difficult to afford basic necessities such as food and water (UN, 2017). Rather than seeking solutions that suited all citizens equally, the positive change only favored those that could afford it and thus creating a bigger divide between the rich and the poor.

Inequality was thus intensified as those in a position to enjoy the benefits of the structural adjustment programs had an advantage over those that were too poor to even afford the basic human needs. The wealthy in Accra had more opportunities to grow their businesses and engage in international trade by exporting their products to other countries (Bank, 2001). Even when taxes were raised and food became expensive, the profits gained through trade meant that the rich could afford the expensive lifestyle brought about by the policies introduced by the IMF and World Bank. Inequality was not only limited to people but also to communities living in different regions. Those in urban areas got the most out of the positive changes brought by the structural adjustment programs. Since the rich lived in different neighborhoods from those occupied by the not so well off, their communities grew for the better (Soludo, 2003). Those living in rural areas for instance could not fully benefit from the ventures undertaken as development was focused on regions that could bring about economic development. The living conditions were different in the urban areas compared to areas occupied by the poor and this further promoted inequality.

Transformation of inequality

The regional variation caused a lot of inequality in Ghana and its consequences were felt years after implementation of the structural adjustment programs. Ten years after its implementation, cities like Accra failed to benefit from the development promised by the IMF. It was estimated that half of the people living in the urban areas were living below the poverty line. In addition, the urban areas were yet to benefit from the opportunities sought after through the structural adjustment programs (Donkor, 2019). Wages were still relatively low, citizens lacked employment and access to good quality health care was still hard for majority of Ghanaians. The geography of the region added on to the inequality especially because 80 percent of people live in the rural regions. Furthermore, Ghana is divided into three savannah regions namely; the north, upper east, and upper west (Sembene, 2015). The savannah region is home to 12 percent of Ghana’s population, 18 percent of which are poor and 35 percent extremely poor (Adutayo, 2015). While the structural adjustment programs did promote trade through exports to other countries, those living in poverty could only produce food to be sold locally and therefore failed to benefit from the opportunities created. While those in the urban areas got a major boost from trade, the poor were not as lucky and this further increased the rift between the rich living in the urban areas and the poor in the rural regions.

In their defense, the World Bank and IMF argued that the advantages that would have been reaped from allocating resources to help develop rural regions would not create enough gains to bring about positive development in those regions. The structural adjustment programs therefore left out rural farmers despite the role they played in feeding the country as the rest of the population sought after the opportunities created from exporting goods to other countries (Adutayo, 2015). The IMF and World Bank were not only wrong in opting to leave out specific regions but also failed to fully understand the advantages that could have been achieved had the programs sought to help those in rural areas as well. Other than reducing the vulnerability of the farmers in regions left out by the structural development programs, including them could have benefited the whole country and not just the poor (Adutayo, 2015). This is especially because small farmers operating from rural areas tend to have a higher level of production per acre of faming land compared to farmers operating in urban areas. In addition, small farmers carry out farming activities on their own compared to farming in urban regions where farms employ workers to look after the farms. The rural areas would have therefore lowered the cost of production as there would have been lesser need for expensive methods of production used in urban areas.

The programs implemented in Ghana in order to meet the criteria for receiving loans from the IMF and World Bank spatialised the transformation of inequality in the country especially through attempts made to improve the infrastructure. Similar to the approach taken when deciding which regions were most suited for aid to boost agriculture, the programs also selected specific regions to focus on instead on trying to develop the entire country equally. The structural adjustment programs led to geographical isolation as most of the funds provided were used to develop the urban areas (Adutayo, 2015). Inequality was made even more severe because those in the rural areas could not access or benefit from the improvements made on infrastructure as projects to improve infrastructure like railway lines and transport networks as they were in the urban areas.

An argument can be made that the programs enforced by IMF and the World Bank were in no way the cause for inequality in Accra and the rest of the country. This is especially because the projects had positive outcomes whenever implemented successfully. While this may be the case, the requirements to qualify for the loan resulted in further deterioration of the citizens living conditions especially those in the middle and lower classes (Adutayo, 2015). In order to qualify for the loan the government had to reduce its expenditure and improve on the level of performance from the public sector. To achieve this, cutbacks were implemented and a significant number of people lost their jobs. Unemployment rates rose as a result and more people lived in poverty following the implementation of the structural adjustment programs.

Conclusion

The programs implemented by the IMF and World Bank had the potential to improve the living standard of all the people in Ghana if well implemented. However, there were conflicts of interest as the IMF and World Bank sought to serve their own interests as well, sometimes at the expense of the country they were trying to help. The decision to spatialize development and focus on some regions more than others meant that some regions got better opportunities than others. The unequal development led to the existence and spread of inequality especially because some regions were more developed than others. Despite its attempts to help, the Structural adjustment programs greatly promoted inequality in Ghana.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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