Describe origins, content success and failure of structural adjustment policies (SAPs) in developing countries particularly in Tanzania

STELLA MARIS MTWARA UNIVERSITY COLLEGE

(STEMMUCO)

(A constituent College of Saint Augustine University of Tanzania)

                                                          

FACULTY OF EDUCATION

DEPARTMENT:                                ECONOMICS

COURSE TITLE:                                INTERMEDIATE MACROECONOMICS ANALYSIS II

COURSE CODE:                               EC 222

INSTRUCTOR:                                  SIR. JUMA MASHAURI

NATURE OF WORK:                       GROUP ASSIGNMENT

 ATTEMPTED BY:                            GROUP No. 1

SUBMISSION DATE:                        23^rd May, 2019

No	NAME	REG  No	SIGNATURE
1.	BAHATI S. CHENGA	STE/BAED/163625
2.	JACKSON CHITANDA	STE/BAED/163179
3.	MASHILI MAKAYA	STE/BAED/163502
4.	NDALAHWA NDONJE	STE/BAED/162972

TASK:     Describe origins, content success and failure of structural adjustment policies (SAPs) in          developing countries particularly in Tanzania

INTRODUCTION

Structural adjustment is a term that is used to explain policy that are driving change in countries Economic relationships especially the World Bank and International Monetary Fund (IMF) towards developing countries. In one way or another are among the condition imposed by the international organization, thus Structural Adjustment Programs (SAPs) these are programs implemented by IMF and World Bank in what is said as helping developing countries to survive in their economic failure but with conditions to abide to.

The main objective of structural adjustment programs (SAPS) is to make economic changes to Governments of developing countries but with conditions the IMF and World Bank grants loans to developing countries to make these economic changes in their Economies. Initially Structural Adjustment Programs (SAPs) was created as a method of economic recovery from the second world war (WWII) it was a mechanism for dealing with the balance of payment (BOP) problems that resulted from the second world war which its effects in world economies as there was massive economic recession of late 1970`s and 1980s by this time many developing countries were adopting socialist or command economy, therefore IMF and World Bank aim was to change these countries to the other form of economy that is change these countries to free market economy or commonly known as laissez fair it was not easy for the IMF and World Bank to change these countries as there could be resistance to change that is why the World Bank and IMF decided to implement these policies. ( Ahuja, 2008)

The main tools for economic changes which the IMF and World bank were implementing consisted of major changes in countries economic, the conditions imposed in order for the developing countries to get loans included the following:-

·         Devaluation of currencies in relation to us dollars,

·         Cutting or removing subsidies on products and services,

·         Price controls on consumer goods or minimum wage labor laws are often removed (Bakker 1994),

·         Liberalization of trade and privatization of public sectors,

·         Encouraging Least Developed Countries (LDC`S) to invite multinational companies to invest in these least developed countries (LDC`S)

·         Political changes from single party to multiparty political system late 1980`s

Those were the main changes which the World Bank and IMF were implementing towards the developing countries which I am going to explain it more later, in general I am trying to gather more information to gain confidence about the contribution of Structural Adjustment Programs (SAPs) towards these developing countries that is why I’m conducting this study to assess the contributions of Structural Adjustment Programs (SAPs) towards the economy of Tanzania. At the end of this study leaders will be able to understand more about Structural Adjustment Programs(SAPs) and its contribution in the economy of least developed countries(LDC`S) especially for the case of Tanzania.

THE ORIGIN OF STRUCTURAL ADJUSTMENT PROGRAM IN TANZANIA

Structural Adjustment Programs (SAPs) started in 1986 it was welcomed by the new political leader, it is when Ali Hassan Mwinyi was a president after 24 years of the rule of Mwl Julius K Nyerere the new Government adopted a three year ERP (1987/88-1989/90, the main objective of ERP was to increase growth rate per capital income, a Gross Domestic Product (GDP) target growth of 4.5% and reduce inflation below 10%.

Tanzanian economy and Structural Adjustment Programs(SAPs) can be traced from when Tanzania got independence in 9th December 1961 when it was under the reins of late Mwl, J K Nyerere By this time Tanzania was under socialist economy, under socialist leadership from 1961 to 1985 enjoyed a peaceful socioeconomic environment however Tanzania is composed of many ethnic background but both were united by the national language of Kiswahili introduced by the late father of the national Mwl,J K Nyerere.

In the late 1970`s and 1980`s there was economic failure in many developing countries especially Tanzania, making Tanzania among the poorest country in the world thus this is where IMF and World Bank started to provide conditionality to least developed countries(LDC`S) so that they can recover their economy.

THE SUCCESS OF STRUCTURAL ADJUSTMENT POLICIES (SAPs) IN DEVELOPING COUNTRIES PARTICULARY IN TANZANIA

Following the above explanations I will now turn my focus by discussing the success of Structural Adjustment Programs (SAPs) to the economy of Tanzania; the introduction of structural adjustment programs (SAPS) in Tanzania has a lot of advantages and disadvantages to the national economy. Starting with the Economic recovery program (ERP) of 1987/88-1989/90 financial year of Structural Adjustment Programs (SAPS) the following are the Advantages of structural adjustment programs (SAPS) in Tanzania.

Improvement in agriculture

One of the objective of Structural Adjustment Programs (SAPS) in 1985/86 was to increase the output of food and export crops that is to say cash crops this was possible by improving the market structure for these crops not only this but also providing more incentives for production. Today even in the past ,agriculture is still the back born of our national economy thus improving agriculture was the only way to help Tanzanians because about 80 percent of the population of Tanzania are living in rural area where agriculture is taking place thus many Tanzanians could benefit much from this program. Initially the Gross Domestic Product (GDP) responded positively gross domestic product increased from 21.8 to 25.3 to 40.6 percent during 1990-1992.

From the above agricultural sector contributes 552 of the gross domestic product Percent, from the above figure it shows gross domestic product falls much in 1994 because of the government reduced effort to implement the structural adjustment programs(SAPs).

Improvement in infrastructure of Tanzania

Early 1986 structural adjustment programs (SAPS) through Economic Recovery Program the IMF and World Bank started among other measures to improve the Tanzanian infrastructure through rehabilitation of the existing infrastructure which were inherited from the colonial government, there were need for improving these infrastructures because they were in bad conditions, and they included roads, railway, airports and harbors. The main importance of infrastructure is for fostering the economic development in our country together with making the country more accessible in all regions.

Road infrastructure helps to make transport and communication so smooth in a country, making agricultural activities to grow and expand the market from rural areas to urban areas and together with making exportation of cash crops abroad so easy. As Tanzania was transforming its economies from command economy to free market economy that is privatization in place where private investors are increasingly investing in the country, infrastructure is one of the ingredients of the national economy. These infrastructure were improved in this phase from 1995-2000 and 2001-2005 Tanzania transport network have improved significantly. Today if you want to travel from any part of Tanzania you can reach without any problem this is the success of structural adjustment programs (SAPs) and the Government at large because structural adjustment programs (SAPs) cannot be able to run itself.

Providing greater support for primary education and basic health services

One of the major areas which the structural adjustment programs (SAPS) contributed to the national economy was for funding for these basic needs of human beings, providing education and health services is one way of developing the nation and making the country more productive, furthermore is the way for preparing the country for future development.

If we compare from when the country got independence, now primary education have changed a lot even the number of primary school and secondary school have increased in 1980`s we were speaking of one school in each district by those years they were known as middle schools but nowadays every ward is having at least two secondary school as from 2005 to date and a lot of primary schools approximately every village is having its primary school in Tanzania today, this is also the contribution of structural adjustment programs(SAPs).

Trade liberalization and privatization of public sectors

Starting from 1985/86 among conditionalities imposed by the IMF and World Bank was to change the country economy that is change to free market economy together with privatization of public sector in Tanzania, privatization lead to many advantages some of them includes, recovery of dead industry increase national output as I remember in 1978/79 Tanzania experienced a lot of Economic problems as the country were coming from the war with Uganda.

Generally the world economy was down, trade liberalization was like an incentive to attract many external and internal investors to come and invest in Tanzania indeed the number of investors increased and the national output increased too, not only that but also trade liberalization lead to removal of many trade barriers such price and market reforms, tariffs, embargoes, custom duties and other duties.

Trade liberalization was preparing Tanzania and other developing countries to the system of open market where the forces of demand and supply are the only determinant of price in the market, therefore the government is not supposed to interfere in any matter, farther more, it also lead to freedom of expression which later I am going to discuss, through freedom of expression the country also lead to change in the political system from single party system to multiparty political system which I see as development.

Transformation of political system

In 1985 Tanzania changed its political system from socialist economy to free market economy this decision come as a result of structural adjustment programs (SAPs) in order to make the economy more free from government intervention, the transformation went together with trade liberalization. The political transformation was successful in 1985 but the first election under multiparty election was in 1995 were the first president elected was Benjamin William Mkapa who were the first president to implement the Structural Adjustment Programs(SAPs) seriously than any other president.

By transforming the political system it had many merits including the country performed poor the public could question about what went wrong, not only that but also it introduced in the country the rule of law and freedom of expression both of these are very important ingredients of economic development in any country, rule of law and freedom of expression are the foundation of peace and security in any country failure to have rule of law and freedom of expression it can lead to retardation in countries economic development. Thus the current economic development is a result of the peace and security

Globalization of the world market

Trade liberalization of 1980`s lead to the world market as a single market that is to say globalization is the process of making the world as a single village where through technology communication makes integration and linkage in the world market wherever you are you can be able to communicate and make business by using your mobile phone, as evidenced today many people have mobile phone, to date a lot of transactions are done using a mobile phone, including bank transactions, saving money for any emergency (Vodacom and Tigo service known as M-Pesa and Tigo Pesa).

Today you can transact via mobile phone, all these are the results of Structural Adjustment Programs (SAPs) through the effort of IMF and World Bank is through liberalization which attracts foreign investors to invest in developing and developed country as a result of integrations in the world market it also lead to the growth of industrial and financial sector. At the same time Structural Adjustment Programs (SAPs) creates conditions for developed country to exploit by the process known as neo-colonialism.

THE FAILURES OF STRUCTURAL ADJUSTMENT POLICIES IN TANZANIA

Structural Adjustment Programs apart from having advantages it has a lot of negative consequences of which the SAPs measures and conditionalities imposed to developing countries including Tanzania perhaps that is why our late Mwl.J K Nyerere was reluctant to implement the Structural Adjustment Programs (SAPs).

The following are the negative consequences of Structural Adjustment Program (SAPs) in Tanzania today:-

Removal of input subsidies

Before the introduction of structural adjustment programs in Tanzania late 1970`s farm inputs were highly subsidized making these inputs available at a cheaper price and even the agricultural produce were available at low price, but after introducing structural adjustment programs in 1980`s, things changed subsidies were removed in 1984 they were not permanently eliminated but they were eliminated in phases but in 1995 subsidies were completely eliminated, soon after this elimination farm input such as fertilizers in combination with inflation lead to increase in prices and even farm produce shoot up unexpectedly.

Dependence theorem and government debt

Introduction of structural adjustment programs in one way or another was the way of making least developed countries to become dependent instead of independence as seen from all these countries few African countries are independent, this is the evidence of those conditionalities imposed by the IMF through structural adjustment programs of 1986 in Tanzania.

Perhaps this is a source of today’s massive national debt, no country could say no to structural adjustment programs, as doing that was meaning that loosing the grants, loans and any other assistance from donor countries, thus the only way was to accept those conditionalities in order to survive from the economic problems. Generally structural adjustment programs are making conditions so that these countries are supposed to follow on the other hand it makes developing countries to have no say to developed countries.

Devaluation of Tanzanian shillings

The main aim of devaluation of currency was to encourage exportation of farm production, but on the other hand devaluation of currency was affecting those farmers who were producing not for exportation and not only that but also the value of Tanzanian shillings in relation to other currency it was depreciating, the depreciation of currency has some big impacts to Tanzanians as it goes together with inflation in the country. Higher inflation in the country means harming the economy as the inflation of 1992 it caused a lot of problems to farmers as farm inputs were so high and even prices of goods and services were very high.

Elimination of government control on the economy

Structural adjustment programs through privatization of public entities to private sector lead the government to have little control of the national economy that is to say the decision about the price of goods and services are now left in the hands of the forces of demand and supply that is market mechanism to decide one of the major weakness to leave the market to decide is that the government have no power to decide on economic variables, even to control monopolies and other market failure, it does not mean that the government have no control it have control but not as much as it had during socialist economy, this is evidence that Tanzania inflation is increasing every year the government have failed to control this inflation.

CONCLUSION

From the explanations about structural adjustment programs (SAPS) contribution to the national economy of Tanzania we can be able to draw our conclusion by saying that structural adjustment programs have contributed much to the national economy where it was able to bring up new technology in our country in Swahili we call it “UTANDAWAZI” was possible to come in our country as a result of trade liberalization and privatization of the public sector.

REFERENCES

Robert, L. (1996). Structural adjustment in Sub- Saharan Africa. Longman

Sanjaya, L. (1995). Structural Adjustment and African Industry. World development

Jauch, H. (1999). Structural Adjustment Policies. Labor Resource and Research institute                                        Namibia   

Dr. Ahuja, H. L (2008). Modern Economics; 18^th revised Edition. India: Chand and Company                              PVT. Ltd.