Question

One of the responses to the last world financial crisis has been to impose fiscal austerity measures. Many of the multilateral organizations like the World Bank or the IMF have also imposed fiscal austerity measures as a condition of further lending to help developing countries to recover and manage their debt levels. What are these "austerity measures" and what do you think their impact is on developing economies? Does it really help to "recover economically"?

Answer 1

These austerity measures are the reduction in government spending, less expenses on development programs and less attention to the given to the expenses as a part of transfer payments among the others. These austerity measures will make reduction in expenses and it will make budget to be more balanced in nature. As a result of the austerity measures, these institutions demand the governments spend on those programs that can facilitate the liberalization and opening up of the economy.

These austerity measures causes governments of these developing economies to reduce spending on those programs that are meant for the welfare of people. It adds to the suffering of these people while governments apply the agenda of these institutions such as IMF.  It may help liberalization, but does not help local people as they are unable to meet their basic needs and government does not help them. So, these measures don't help the economy and it does not recover properly.