Economic Reform Program

Abstract: Economic Reform Programs for third world countries especially in Sub-Saharan Africa have been supported by International Financial Institutions like IMF and World Bank. Important considerations regarding the success of these economic reform programs are related to the structure, implementation and viability of these programs.

Structured Economic Reform Programs for third world countries have been supported by International Financial Institutions like International Monetary Fund and World Bank. Third world countries seeking to initiate economic reforms in their countries have benefited from these programs. The economic reform programs come with substantial financial aid from the IFIs along with specific clauses pertaining to liberalization and privatization of the economy under the reforms. Most of these economic reform programs have been adopted by the African countries. In the last two decades 45 Sub- Saharan African nations have adopted economic reform programs with the aid of International Monetary Fund (IMF) and World Bank.

Structure of Economic Reform Programs

The economic reform programs are both extensive and intensive in nature. They include essential policy considerations that are strategic to reforms, step by step approach to the reforms and implementation strategies. Although the structures of economic reform programs are different for different countries, certain policy factors are common to most economic reform programs -

Trade Liberalization.

Reducing government intervention in economic process.

Privatization of public sector units.

Relaxation of regulations concerning, trade, business and labor.

In keeping with these major policies, economic reform programs have been designed. Adoption of these programs has been encouraged by the IMF and the World Bank.

Implementation of Economic Reform Programs

The success of economic reform programs depends to a considerable extent on their proper implementation. Some third world countries especially in Sub-Saharan Africa have not been able to reap the benefits of economic reform programs due to improper or partial implementation of the reform programs. Opposition to implementation of economic reform programs is also experienced in many countries. Certain interest groups who enjoy certain fringe benefits in pre reform periods and are concerned about losing them due to reforms, put up resistance to the implementation of economic reforms. Political resistance to implementation of economic reform programs has also been witnessed in many countries.

In order to attain better implementation of economic reform programs, the IFIs have introduced certain adjustments to these programs. These include -

Reducing the number of conditions in economic reform programs

Making conditions more flexible.

Promoting ownership of economic reform programs

Viability of Economic Reform Programs

The viability of economic reform programs depends in a few factors -

First of all, the economic reform programs, drawn up by the IFIs, must be convincing in their structure and implementation plans. Otherwise governments will not be motivated to implement them. The concerned governments must be convinced that the reform program is the best way to lead their economy to a path of high growth.

Long term cost-benefit analysis plays in important role in the reform programs being viable. Also the economic reforms often create winners and losers. While losers are affected almost immediately with the implementation of reforms, the gains to the winner accrue slowly, over a period of time. If the socio-economic costs of pursuing the reform programs are too high, the specific country may not be able to sustain the reforms and the economic reform program will loose viability.

The IFIs while negotiating the reform programs with the respective countries, must on their part, be convinced that the economic reform programs will be implemented successfully. Generally these programs include substantial economic aid from the IFIs. If the IFIs are not convinced abou6t the successful implementation, they will be unsure of the repayment of the economic aid too. The repayment factor is also an important consideration in determining the viability of economic reform programs.