Structural Adjustment Programmes (SAPs) were designed in the 1980s as a response by the major international creditor agencies, the World Bank (WB) and International Monetary Fund (IMF) to the growing economic crisis and balance of payments problems encountered by many developing countries subsequent to the two major oil shocks in the 1970s. Both World Bank and IMF concluded that short-term stabilisation policies, which were traditionally prescribed to address such crisis, had proved to be inadequate, ineffective and had lacked vision. There was a growing realisation at the Bank and the Fund that economic crisis of the type faced by majority of the developing countries in the 1980s originated from deep-rooted structural weaknesses. Consequently, this recognition influenced the Bank and Fund to design a new generation of 'stabilisation facilities and policy based loans', which together came to be known as Structural Adjustment Programme (SAP).

SAP had two major components: (a) macroeconomic stabilisation as a short term measure that was to be carried out in confluence with (b) structural reform measures which were of long-term and fundamental nature. IMF was given the task of implementing the first component through its Structural Adjustment Facility (SAF) and Enhanced Structural Adjustment Facility (ESAF) whilst the structural reform programme was underwritten by Structural Adjustment Loans (SALs) and Sectoral Adjustment Loans (SECALs) under the aegis of the Bank.

The stabilisation experience of the early-1980s revealed that short-term economic management through fiscal and monetary policies had serious limitations. Causes of macroeconomic disequilibrium were deep rooted in the structure of the economy. Such a realisation called for a review of the policies favouring government interventions at macro, meso (sectoral) and micro levels geared to achieving the twin objectives of high growth and macroeconomic balance. Reforms underwritten by the SAPs mainly concentrated on deregulation, decontrol and liberalisation of the economy, and they put major emphasis on market instruments as the main driving force behind the economy. SAPs were primarily targeted at three areas of interventions: (a) demand management; (b) structural policies; and (c) institutional policies.

Demand Management Policies were targeted at reducing aggregate expenditure by streamlining the aggregate demand. This was to be carried out through contractionary monetary policies implemented through credit control and fiscal policies with a view to curtail excess demand and balance the fiscal deficit. Improvement of long run productive capacities in the economy was to be achieved by stimulating savings and investment by means of allocative efficiency and productivity enhancement. A number of measures were to be put in place towards this: (i) financial liberalisation through deregulation of both lending and deposit interest rates; (ii) trade liberalisation through elimination of non-tariff barriers, reduction of tariff rates and their dispersion, and unification of tariffs aimed at reducing the effective rates of protection enjoyed by domestic industries; (iii) gradual removal of anti-export bias in the economy; (iv) rationalisation of the pricing policies of the state owned enterprises to reflect actual costs; and (v) elimination of price distortion to be effectuated through a policy of desubsidisation by phasing out subsidies on food and inputs and by removing output price supports.

Financial support underwriting the SAPs were made contingent upon pursuance of a set of reform agenda and from this perspective SAPs were high-conditionality, policy-based loans.

Greater reliance on market forces came under attack on the ground that markets were more prone to benefit the relatively stronger sections of the society, thus led to further marginalisation of the poor. It was felt that a minimalist state was not the solution; what was needed was an effective state. This assessment also came to be shared, at least in part, by the Bank and the Fund. The second-generation reforms promoted by these institutions put greater emphasis on civil service and judicial reforms, strengthening of the local government system, restructuring of central-local relationship and improvement of regulatory capacity in all tiers of the government.

Bangladesh was one of the very first countries amongst the 35 to receive structural adjustment assistance under SAF of the IMF. Initially, support under SAF was received for three years, for the period between 1986-89. Subsequently, a further three-year programme under the ESAF was negotiated to cover the period between 1989 and 1992. Bangladesh carried out a number of important policy reforms under SAF and ESAF in such areas as agriculture, industry and trade, public resource mobilisation, public expenditure, public enterprises, privatisation, financial sector, external sector, human resource and poverty alleviation, and environment.

SAPs in Bangladesh were also sustained by various sectoral adjustments and investment credits provided by the International Development Association. Between 1988/89 and 1995/96 a total of $1.76 billion was disbursed in Bangladesh as part of WB's adjustment lending which were channelled mainly through SAL and SECAL. Notable amongst these were Energy Sector Adjustment Credit (1989, SDR 137.0 million), Industrial Sector Adjustment Credit (1987, SDR 147.8 million), and Financial Sector Adjustment Credit (1990, SDR, 132.7 million). Reforms underwritten by SAF and ESAF in Bangladesh aimed at specific targets including (a) raising of annual GDP growth to 5%; (b) moderating the rate of inflation to 7%, (c) limiting levels of current account and budget deficit to 7% of GDP, (d) putting a ceiling on short term foreign debt; and (e) eliminating the spread between primary and secondary exchange rates. The SALs and SECALs set specific targets as regards sectoral performance in the Bangladesh economy. These were often accompanied by strict conditionalities.

SAPs came under intense criticism in many countries including Bangladesh, because of both the underlying conceptual assumptions and the design of the programme components. Many argue that SAPs put disproportionately more emphasis on market mechanism as a means of enhancing efficiency, growth and stability in the economy whilst not paying adequate attention to institutions, history and the distinctive characteristics of development of the individual countries. It was felt by many that SAPs have tried to impose a single model to address multifaceted issues, the nature of which were not similar in all countries. SAPs also came under criticism because of the pace with which adjustment reforms were carried out and for the lack of proper phasing and sequencing of the reforms.

One of the major weaknesses of SAPs is the lack of stakeholder participation in the design and implementation of the programmes. In a number of countries SAPs have led to further marginalisation of the poor and contributed to a growing inequality of income distribution between social groups giving rise to exclusion of large segments of the society. The World Bank and IMF, however, consider that the results are encouraging. According to them, reforms under the SAP play an important role in removing anti-export bias in the economy, ensuring more visible role for the private sector or the market forces in resource allocation and economic management and in general, developing a competitive environment for economic agents to function.

SAP played a critical role in defining the growth strategies of Bangladesh over the greater part of the 1980s and the 1990s. Key initiatives undertaken as part of SAPs in Bangladesh included, inter alia, (a) reduction of anti-export bias in the economy with relatively more emphasis on tradable sectors as against non-tradable sectors in the economy; (b) rationalisation of tariffs, import liberalisation and reduction of effective rates of protection enjoyed by domestic industries; (c) denationalisation, privatisation and divestiture; (d) flexible, market-driven exchange and interest rate regime; (e) desubsidisation; (f) restraint on public sector expenditure; and (g) sectoral reforms including reforms in agriculture, trade and finance, manufacturing and the energy sector. The degree of openness of the Bangladesh economy has gone up considerably which has resulted in both a greater degree of susceptibility to external shocks and also greater scopes for accessing opportunities originating in the global market place.

The Country Assistance Review (CAR), while evaluating WB's assistance to Bangladesh for the period from 1980 to 1996 concluded that although not spectacular, Bangladesh achieved considerable progress in different sectors (higher primary enrolment, reduced fertility, higher longevity, robust export sector performance), in opening up of the economy and in food self-sufficiency. Weaknesses remained in terms of food security, chronic aid dependence and fragility of the eco-system. According to the evaluation, the inability of Bangladesh to achieve many targets lies not so much in the design of the programmes as in absence of good governance and lack of adequate capacity to implement the reforms. Critics of the SAP, however, hold that the targets set for achieving robust growth rates and macroeconomic balance through demand management had remained largely unrealised. The outcome of SAPs in Bangladesh was at best mixed and they have not been successful in removing many of the structural weaknesses, in ensuring sustainable growth and in arresting further marginalisation of the poor.

A growing apprehension about negative impacts of SAPs gave rise to a call for adjustment with a human face. This subsequently led to important changes both in terms of pace as well as emphasis of the SAPs, although critical programme correlates continued to remain largely unchanged. In 1999, a global initiative was undertaken to carry out a civil society audit of the implications of SAPs which is called Structural Adjustment Participatory Review Initiative (SAPRI). This initiative, of which Bangladesh is also a partner, is expected to come out with a comprehensive review of the impact of SAP on key sectors of the economy and also their implications for various social groups within countries. [Mustafizur Rahman]