Question

Outline three ways through which the international financial institutions stave off the legitimacy crisis created by the structural adjustment programme through the 'poverty governance ' mechanisms.

Answer 1

                                    Structural adjustment programme refers to the process where International financial institutions like IMF and the World Bank provides loans to those countries that experiences huge economic crises. The programme is aimed at poverty reduction and bringing the economy of those countries to the stable level at the earliest with the provision of loans to those sectors that are needy. But, the Structural Adjustment Programme has been severely criticised for implementing generic free market policies and the lack of involvement from the foreign country. The introduction of such measures in a particular country must be only up to the stage where the economy would remain stable or else it would affect the international market and competitive market practices as a whole. Thus, the following are the major measures that are being taken so as to stave off the legitimacy crisis that could have resulted from the Structural Adjustment Programme

· The borrowing countries are expected to implement certain policies like privatization, liberalising the foreign trade and foreign investment and also balancing the government deficit

· To increase the involvement of the developing country, they are instructed to draw Poverty Reduction Strategy Papers which would help in tracking the progress that are being made by the Structural Adjustment Programme [SAP]

· They emphasise on maintaining a balanced budget and austerity programmes

· Proper tracking mechanisms are implemented to make sure that the borrowing nation is utilising the money in the concerned sectors and to make sure that the assistance is up to maintenance of economic stability alone so as to make sure that the competitive practices of the market are not lost

                                                     Thus, with proper tracking and restrictions, it is made sure that the borrowing nation makes use of the money effectively and thus does not negatively influence the international market.