Structural adjustment and the Washington Consensus: are they things of the past?

22 November 2006 by Eric Toussaint

During the 1980s, the International Monetary Fund (IMF) and the World Bank earned themselves the highly justified but less than enviable reputation of being responsible for very unpopular measures forced upon governments of developing countries - in short, of being the bane of the poor. It must be said that the governments themselves, often in cahoots with the ruling classes, found it convenient to place the blame on these distant institutions located on 19th Avenue in Washington. This dangerous reputation spread like wildfire and newspapers in the South began to give it ample coverage. [1]

Accustomed to making blunt recommendations for cuts in social expenditure or the privatization of public companies, these two institutions came to realize that plain speaking did not serve their interests. Very quickly, people recognized their leading role in unfolding economic and human disasters. Very quickly, the riots that followed price increases in essential goods were coined “anti-IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
riots”. Very quickly, public opinion put pressure on governments to resist the decrees of the IMF or the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

. In short, it was becoming more and more difficult to get people to swallow such a bitter pill.
A major communication plan was therefore launched in the 1990s to deal with the serious and rightly deserved legitimacy crisis that the IMF and the World Bank were then facing (and still are). The argument focused on debt reduction and the fight against poverty. We have learned and we have changed, was the message. But the notorious ultra-liberal conditionalities that marked the structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

programmes of the 1980s are still being practised. A series of recent examples on every continent testifies to the contradictions of these two institutions and the resistance movements that have ensued.
In Sri Lanka, the government refused a $389 million loan conditioned on political reforms such as the restructuring of pension schemes and the privatization of water resources. [2]
In Ecuador, a popular uprising was responsible for the fall of President Lucio Guttierrez in April 2005. The government of the new president, Alfredo Palacio, has proved to be more touchy on the subject of economic sovereignty, much to the displeasure of the IMF and World Bank. It must be noted that in 2000, Ecuador ditched its domestic currency and switched to the US dollar, thus becoming totally dependent on Washington’s monetary policy. In July 2005, the government decided to reform the use of oil resources. Instead of being entirely earmarked for paying back the debt, part of those resources would now fund social programmes, notably for the often under-privileged Indian communities. To show its displeasure, the World Bank withheld a $100 million loan to Ecuador. Rafael Correa, the popular finance minister who had initiated the reform, stated: “It is an offence against Ecuador”, noting that “no one has the right to punish a country for changing its own laws [3]. In response, Ecuador looked for funding elsewhere: in Venezuela (where President Hugo Chavez, willing to support such measures, granted a $300 million loan) [4] and in China (whose flourishing economy requires increasing amounts of raw materials). This only highlighted the pressure exerted by Washington, ending in Correa’s resignation. He was replaced by Magadalena Barreiro, who accepted the position on the condition that Correa give her his public support.
In Haïti, during 2003, the IMF put an end to government-controlled fuel prices, thereby making them “flexible”. Within a few weeks, fuel prices rose by 130%. The consequences were dramatic: problems boiling water for drinking or cooking food; an increase in transportation costs, which small producers passed on to the market, thus increasing the price of numerous basic commodities Commodities The goods exchanged on the commodities market, traditionally raw materials such as metals and fuels, and cereals. . But as inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. is one of the IMF’s bugbears, it promptly imposed a salary freeze. The daily minimum wage plummeted from $3 in 1994 to $1.50, which, according to the IMF, would attract foreign investors. It also served geopolitical interests, weakening President Jean-Bertrand Aristide and leading to his departure from office on 24 February, 2004 - something the big powers had been pushing for. [5]
Even in oil-producing countries such as Iraq or Nigeria, the IMF imposed the same system of flexible pricing. Tariffs increased, leading to organized protests by the people affected, for example in Bassorah in December 2005.
In Ghana, former President Jerry Rawlings refused to adopt the Heavily Indebted Poor Countries Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
Initiative, but since John Agyekum Kufuor took power in January 2001, Ghana has been complying with conditions imposed by the IMF. One of these conditions - a significant one - concerned the water sector, for which the IMF demanded total cost recovery. In other words, households must bear the total cost of access to water, without the benefit of state subsidies. The price of a cubic metre of water had to be sufficient to recover total operating and management costs. Electricity was next in line and the same principle was applied. The goal was clear: to get the public company on an even keel before privatization... In May 2001 the price of water rose by 95%, and it didn’t stop there. The populations seriously affected by this measure formed the National Coalition against the Privatization of Water. With one out of three Ghanaians having no access to drinking water, the World Bank made another fateful move: in 2004, it granted Ghana a $103 million loan in exchange for the privatization of the water supply to its main cities - awarding this prize to a multinational corporation. The privatization process is under way, but the people’s struggle continues, backed by numerous international activist organizations.
In Mali, the cotton industry is in the line of fire. For decades, the entire cotton sector was controlled by the Compagnie malienne de développement des textiles (CMDT), jointly owned by the Malian government (60%) and the French company Dagris (40%). The CMDT, the real backbone of the Malian economy, was the biggest currency earner for the Malian state through profits and taxes. Its role extended beyond the mere production of cotton. It provided public services, from maintaining rural roads or eliminating illiteracy among rural communities, to the purchase of agricultural tools or the construction of vital infrastructures. Until 1999, production was constantly on the increase: 200,000 tonnes in 1988, 450,000 in 1997, 520,000 in 1998, 522,000 in 1999. But CMDT’s dubious management and very low prices triggered unrest among peasants, who refused to harvest in 1999/2000. Production that year fell by almost 50%. The cotton sector’s forum, the Etats généraux de la filière cotonnière, was held in April 2001, where it was decided to introduce a series of drastic reforms, including a 23% reduction in total expenditure on wages, partial or total debt cancellation for smallholders, layoffs (500 to 800 people out of 2400), freeze of a planned 7% increase in salary, increase in the guaranteed price paid to farmers from 170 FCFA/kg of cotton to 200 FCFA/kg, opening up of capital, re-centering of activities and progressive withdrawal of the Malian state from the CMDT. In spite of the failed privatizations in the neighbouring countries (in Benin or in Ivory Coast), the World Bank advocates outright privatization, causing great concern among the affected villagers. The first reorganizations, notably in the transport and management of fertilizers and pesticides, have already led to massive disruptions, seriously penalizing Malian producers and putting harvests at risk in 2003 and 2004. [6]
In order to accelerate the process even more, and dissatisfied with the CMDT’s guaranteed price of 210 FCFA/kg, which it found too high, the World Bank put pressure on the government by freezing a $25 million aid payment. By so doing, it disregarded the two factors responsible for the success of the Malian cotton sector: a guaranteed minimum price and vertical integration. A World Bank study [7] published in May 2005 is explicit: “In order to implement this strategy the plan of action was to create 3 or 4 different cotton processing companies by selling the state-owned share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. of the CMDT to private investors.” But the Malian government asked for a reprieve until 2008, “so as not to be accused of dumping national industries in favour of foreign investors”. Pressure from the World Bank then increased: “the privatisation agenda is not set, the schedule is not clear and some decisions are made out of the blue, which is no guarantee of economic rationality or transparency”, and then calling for “open talks on reforming the sector, adopting a firm schedule and a reasonable scenario towards privatisation, as well as a plan to limit the impact of the company’s deficit on the budget”. Here too, the people continue their struggle in order to prevent the CMDT from paying the price of dubious management and the blindness of international organizations - the IMF and the World Bank being at the top of the list.
Will the cotton industry go the same way as water and electricity? Maybe, and the example is interesting because Mali has just regained its majority share in EdM (Energie du Mali), which was privatized to the benefit of la Saur, a Bouygues subsidiary, five years ago. But the privatized EdM never fulfilled its contractual obligations (developing water and electricity networks by investing at least 600 million euros; reducing prices). [8] Advocated by the IMF and the World Bank, this privatization turned out to be a failure, even though it was presented as a showcase to neighbouring countries. Could re-nationalization be the way out?
In Niger. There was no period of grace for Niger following the re﷓election of President Mamadou Tandja in December 2004. In January 2005, on IMF instructions, a law amending finances was enacted increasing VAT to 19% on basic goods and services (wheat, sugar, milk, water and electricity). There was massive social mobilization. In March, the population, already impoverished by years of bad harvests (caused by droughts, invasions of desert locusts) and structural adjustment programmes (privatizations, cuts in social expenditure, layoffs and salary freezes in the civil service, etc.) took to the streets to express its dissatisfaction. The social movement, organized around three consumer organizations, succeeded in creating a large unified front for a “coalition against the high cost of living”, bringing together 29 organizations and the 4 trade union federations. After several days of “dead town” demonstration and arbitrary arrests by police, their mobilization forced the government to back down: the 19% VAT no longer applies to milk and flour, and water and electricity are only concerned in the highest consumption brackets. Only sugar is still affected, but at the price of fierce social struggles to counter the wishes of the IMF, dutifully passed on by Niger’s leaders.
In the Democratic Republic of the Congo (DRC), a parliamentary report published in February 2006 denounced the action of the World Bank with respect to the mining industry. Trouble broke out over the operation of a copper and silver mine in Dikulushi controlled by the Australo-Canadian company Anvil Mining. In October 2004, Mai﷓Mai militants occupied the neighbouring town of Kilwa, from where extracted minerals are sent to Zambia. The Congolese army then launched an operation to repress this uprising, causing the death of several dozens of individuals suspected of supporting the rebels (at least 100 people, according to the UN). Summary executions and plunder marked this strong-arm operation. It was against this background that the Anvil Mining company provided vehicles and equipment to the Congolese army, with a view to ensuring unhampered continuation of exports.
This did not prevent the Multilateral Investment Guarantee Agency (MIGA, an affiliate of the World Bank) from approving an insurance contract in April 2005 offering a guarantee of $13.3 million to cover political risks related to the expansion of this mining operation. Thus we see that the World Bank did not hesitate to support Anvil Mining’s dubious activities: a report by the Congolese National Assembly Special Commission, entrusted with examining the validity of economic and financial agreements, written by 17 Congolese MPs from different parties, and led by Christophe Lutundula, severely criticized “the policy of splitting up the mining portfolio of the State” in which Anvil Manning was implicated, essentially “to satisfy the immediate financial needs of governments”. According to this report, the collusion between the Congolese authorities and Anvil Mining was flagrant: “tax, customs and para-fiscal exemptions were granted in an exaggerated fashion and for long periods, some 15 to 30 years. [...] The Congolese State has therefore been deprived of significant revenue resources indispensable to its development.” In spite of everything, control of Anvil Mining’s operations was destined to fail: “The public servants affected by the mining concessions were flagrantly being taken care of by the private operators whom they were supposed to audit. [...] These public servants also lacked full autonomy, independence and effectiveness.” To cap it all, until March 2005 a significant shareholder of Anvil Mining was First Quantum, a Canadian company (17.5% of shares), exposed in a 2002 UN report on the DRC for not respecting OECD OECD
Organisation for Economic Co-operation and Development
OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.
guidelines governing multinationals. How can the World Bank, via MIGA, continue to offer guarantees Guarantees Acts that provide a creditor with security in complement to the debtor’s commitment. A distinction is made between real guarantees (lien, pledge, mortgage, prior charge) and personal guarantees (surety, aval, letter of intent, independent guarantee). to a company that has demonstrated how little it respects the fundamental rights of the people of the Kilwa region? To offer a guarantee in such circumstances is to make oneself a direct accomplice of the reprehensible actions of Anvil Mining.
In Chad, since the start of the project, numerous ecological, human rights and international solidarity organizations have been concerned by World Bank support for the construction of a 1,070 kilometre pipeline linking the oil-producing region of Doba (Chad) to the maritime port of Kribi (Cameroon). From the outset, the ecological, human and financial risks were so great that Shell and Elf preferred to pull out. However, the final consortium consisting of Exxon Mobil, ChevronTexaco (U.S.A) and Petronas (Malaysia) have carried the 3.7 billion dollar project through, thanks to powerful strategic and financial support from the World Bank.
To justify its support, the World Bank committed to a pilot programme designed to allow Chadians to benefit from the profits made. In making this investment - the largest in Sub-Saharan Africa - it imposed its conditions: the Chadian President, Idriss Déby, must devote 90% of the revenues earned from oil sales to social projects selected with its approval and to investments in the Doha region. The remaining 10% must be reserved for future generations: they were deposited in a blocked account at Citibank London, under World Bank control.
This arrangement failed since Déby appropriated the sums allocated for future generations: it is estimated that he helped himself to at least $27 million. Moreover, he changed the rules of the game by including security expenses in the definition of priority sectors to be financed by oil revenues. Weakened by high social tensions, attempts to overthrow him and army desertions, Déby sought to reinforce his military and repressive machine. In December 2005 the World Bank reacted by blocking existing loans to Chad, pretending to discover the authoritative and corrupt nature of the regime, whereas this project, supported by the Bank for a decade already, has allowed Déby to strengthen his power base and bolster his personal fortune.
While the big winner in Chad-based oil operations is the consortium, Chad earns 12.5% in royalties on direct oil sales, as well as various taxes and bonuses paid directly into the Treasury. Out of the first bonus, deposited in advance, $7.4 million were misappropriated. A further $4.5 million were diverted by the president’s son for the purchase of helicopters. The World Bank, aware of the situation but heavily involved in the project, turned a blind eye.
All the bombast by World Bank experts on good governance, corruption and reducing poverty is a dismal farce. It was clear from the beginning that this project would end up allowing a notorious dictator to get even wealthier, with total impunity. Each side did just what was expected of it. The World Bank enabled the construction of a pipeline that allows oil multinationals to help themselves to a natural resource and their shareholders to reap juicy profits. Meanwhile Chad’s president helps himself to the wealth that belongs to the people.
Corruption and dictatorship in Chad must be denounced and fought, but that will not be enough. The World Bank is the determining element in a project that places a heavy burden of debt on Chad, increases corruption and poverty, damages the environment and allows a natural resource to be abusively exploited. In short, in Chad as elsewhere, the World Bank knowingly supports a predatory model and a corrupt dictatorship.
HIPC. The announcement in June 2005 by the G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. Finance Ministers [9] regarding the cancellation of a $40 billion debt owed by 18 poor countries to the World Bank, the African Development Bank (ADB) and the International Monetary Fund (IMF), was also a consequence of this logic. Erasing the debt of a small number of countries (representing only 5% of the people in the 165 developing countries) is no gift: it is merely a compensation for the neoliberal strait jacket that has been imposed on them for years through the HIPC Initiative. For at least 4 years, these 18 countries have had to implement neoliberal economic reforms strictly in line with structural adjustment policy: increased schooling costs, higher health care costs, increased VAT, and the removal of subsidies for basic goods - four measures which particularly affect the poor; privatization, liberalization of the economy and the creation of unfair competition between local producers and transnationals. In other words, it’s the carrot of debt cancellation after the stick of structural adjustment, which today still takes a heavy toll.

Translation : Bertrand Declercq and Gillian Sloane-Seale, Coorditrad, with the collaboration of Judith Harris.

Copyright Eric Toussaint 2006


[1The source for this chapter is a document co-written by Damien Millet and the author at the beginning of 2006, as well as various CADTM press releases.

[2See the Sunday Observer (Sri Lanka), 6 November 2005,

[3Quoted by Le Figaro, 11 August 2005

[4It should be said in passing that after the April 2002 coup d’état in Venezuela, which brought Carmona to power for less than two days, the IMF, through its spokesperson, Thomas Dawson, immediately offered assistance to this illegitimate government: (“We would hope that these discussions could continue with the new administration, and we stand ready to assist the new administration in whatever manner they find suitable.” (

[6See Millet D, L’Afrique sans dette, CADTM/Syllepse, 2005.

[7Craig D (World Bank Director of Operations for Mali), The Present Situation of Challenges and Issues of the Cotton Industry in Mali.

[9Canada, France, Germany, Great Britain, Italy, Japan, the US and Russia

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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