Social funds in the context of structural adjustment

Since the mid-1980s, the International Monetary Fund (IMF) and World Bank have promoted and supported Structural Adjustment Policies in sub-Saharan Africa (SSA). Aid from international financial institutions and a range of bilateral agencies is conditional to the implementation of these policies. The first generation of adjustment programmes were focused exclusively on macroeconomic issues, exchange rates and budget deficits, and the issue of debt repayments. Underpinned by a renewed commitment to neoliberal ideology, the World Bank explicitly argued that poverty reduction belonged to the future. In any case they argued that the ‘market’ would be more effective than state interventions and social programmes – structural adjustments of African economies would impact positively on poverty through ‘trickle down’ effects. Economic liberalisation – especially supply-side reforms such as trade liberalisation and sectoral reforms – would provide enhanced opportunities for expanding investment and employment. Beyond employment creation, liberalisation would also, according to the Bank, benefit the poor by reducing inflation following the increased volume of goods and services available in the market.

These adjustment operations and the deepening economic crisis in Africa led to a widespread critique of the World Bank's prescriptions for economic reform. Calls for a rethink and revision of policies came not only from African organisations and governments, but also from a range of non-governmental organisations (NGOs), UN organisations and a ‘likeminded group’ of Western donor countries. A major focus of the criticism was the perceived negative impact of the Bank's economic policies on poverty and insufficient attention to social issues, well captured in the landmark UNICEF report which called for “adjustment with a human face” (Cornia et al, 1987).

The first response to this criticism was the Social Dimension of Adjustment (SDA), a joint programme between the World Bank, the African Development Bank, UN Development Programme, and bilateral donors. The short-term goal was to alleviate poverty, while the long-term goal was to strengthen a government's capacity to do so. SDA emphasised social safety net programmes, but also provided funding for the collection and analysis of data on poverty in individual African countries. In a sense, the pendulum swung from direct poverty orientation with the basic needs approach to development in the 1970s, to a focus on economic growth and trickle down in the 1980s, and back to a position of renewed attention to social issues and poverty reduction. However, the perceived role of the state has varied enormously.