Abstract

This case study of Malawi illustrates a practical approach for assessing the impact of structural adjustment policies on poverty. Malawi initiated a structural adjustment program in 1987, which, since mid-1988, has been supported by the IMF through an arrangement under the Enhanced Structural Adjustment Facility (ESAF), the first such program with an IMF member country. The pervasive nature of poverty in Malawi was recognized in formulating the ESAF-supported program. Social and demographic indicators for Malawi are shown in Table 10.1. Five principal factors were viewed as obstacles to poverty abatement in Malawi: (1) limited employment opportunities; (2) low physical productivity of land and labor, leading to low agricultural output; (3) poor health and educational services, which undermined the development of efficient and productive human capital; (4) rapid population growth, which created severe pressure on land resources; and (5) minimal income transfers. The macroeconomic objectives of the ESAF-supported program—the resumption of high-quality sustainable economic growth, the maintenance of a viable external position, and price stability—were aimed at providing impetus to improved economic welfare, which would benefit all groups in the economy, including the poor. Similarly, the program’s structural policies—most notably import liberalization, tax reform, and reforms of the agricultural and financial sectors—were intended to improve efficiency and longer-term economic growth across a wide spectrum of the economy and provide a stimulus to employment, including jobs for the poor. At the same time, it was recognized that the process of economic adjustment and structural change could have short-run adverse effects across the economy, including ramifications for the poor and disadvantaged who were less able to cope. These concerns required giving consideration to modifying policy instruments, or perhaps taking specific remedial measures to ease the burden of adjustment for certain population groups.

Issues and Recent Experience
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