For over 10 years, the IMF has supported adjustment and reform programs in many of its low-income members through two facilities established specifically for that purpose - the Enhanced Structural Adjustment Facility (ESAF) and its precursor the Structural Adjustment Facility (SAF). By the end of 1994, 36 countries had availed themselves of these facilities, in support of 68 multi-year programs. This study summarizes the findings of a review of the experience under these programs and of economic developments in the countries that undertook them.

© 1997 International Monetary Fund

Cataloging-in-Publication Data

The ESAF at ten years : economic adjustment and reform in low-income countries / staff of the International Monetary Fund — Washington DC : International Monetary Fund, 1997.

p. cm. — (Occasional paper, ISSN 0251–6365 ; 156)

ISBN 1-55775-693-7

1. Structural adjustment (Economic policy) — Developing countries. 2. International Monetary Fund. 3. Economic assistance — Developing countries. I. International Monetary Fund. II. Occasional paper (International Monetary Fund); no. 156.

HC59.7.E83 1997

Price: US$18.00

(US$15.00 to full-time faculty members and students at universities and colleges)

Please send orders to:

International Monetary Fund, Publication Services

700 19th Street, N.W., Washington, D.C. 20431, U.S.A.

Tel.: (202) 623–7430 Telefax: (202) 623–7201

E-mail: publications@imf.org

Internet: http://www.imf.org

article image



I Overview

II Initial Conditions and the Setting for Adjustment

  • Initial Conditions

  • The Adjustment Strategy

  • The Setting for Adjustment

III What Has Been Achieved?

  • Macroeconomic Stabilization

    • Fiscal Consolidation

    • Inflation Control

  • Structural Reform

  • Openness

  • Economic Growth

  • External Viability

IV Lessons for Program Design

  • Growth-Enhancing Fiscal Adjustment

    • The Tax Burden

    • Capital Spending

    • Social Spending

    • Other Current Spending

    • Expenditure Management

  • More Decisive Disinflation

    • Potential Costs of Disinflation

    • Implications for Program Design

  • Advancing Structural Reforms

    • Public Enterprise Reform

    • Restructuring Banking Systems

  • Sustaining Programs

Appendix. Annual Arrangements Under the SAF and ESAF





  • 1. The Enhanced Stuctural Adjustment Facility

  • 2. The Countries Under Review


  • 3. Adjustment in ESAF-Supported Transition Economies

  • 4. Indices of Structural Reform

  • 5. Defining Progress Toward External Viability


  • 6. Strengthening Tax Systems




  • 1. Economic and Social Indicators in ESAF and Other Developing Countries


  • 2. Progress on Inflation Since the Pre-SAF/ESAF Period

  • 3. Per Capita GDP Growth in 1991–95: Differentials Relative to Non-ESAF Developing Countries

  • 4. External Debt: Some Long-Run Comparisons

  • 5. Net External Flows to ESAF Countries

  • 6. Indicators of Progress Toward External Viability


  • 7. Deviations from Inflation Targets, by Net Domestic Assets Performance

  • 8. Financial Policies and Inflation Performance, 1993–95




  • 1. The External Environment


  • 2. Fiscal Trends in ESAF Countries

  • 3. Fiscal Adjustment in SAF/ESAF-Supported Programs: Averages by Region

  • 4. Fiscal Adjustment in SAF/ESAF-Supported Programs: By Initial Conditions

  • 5. Composition of Government Spending

  • 6. Inflation Trends by Region

  • 7. Inflation Targets, by Degree of Initial Inflation

  • 8. Inflation Targets and Outturns

  • 9. Status of Structural Reform in ESAF Countries

  • 10. The Pace of Structural Reform

  • 11. Share of Trade in GDP and Exchange Rates

  • 12. Trends in External Trade

  • 13. Real Per Capita GDP Growth

  • 14. Growth, Saving, and Investment

  • 15. Social Indicators of Development

  • 16. Explaining Increases in Growth Since the Early 1980s

  • 17. Balance of Payments Developments

  • 18. Alternative Measures of the Debt-Service Burden

  • 19. Growth of Export Volume and of Real GDP, and Change in Fiscal Balance During the SAF/ESAF Period


  • 20. Association of Real Per Capita GDP Growth with Log Inflation

  • 21. Real Per Capita GDP Growth in SAF/ESAF Programs

  • 22. Inflation Performance With and Without Anchors

  • 23. Frequency Distribution of Changes in the Fiscal Balance

  • 24. Targeted Change in Fiscal Balance in Interruptions Affected by Policy Slippages

The following symbols have been used throughout this paper:

  • ... to indicate that data are not available;

  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • – between years or months (e.g., 1994–95 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

  • / between years (e.g., 1994/95) to indicate a crop or fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.


Since 1986, the IMF has been supporting the adjustment and reform programs of its low-income member countries with financial resources on highly concessional terms through the Structural Adjustment Facility (SAF) and Enhanced Structural Adjustment Facility (ESAF). As their names suggest, these facilities were intended to back fundamental reform in the structure and institutions of the economies concerned, as well as strong macroeconomic policies, with the objectives of promoting higher economic growth and external viability in a balanced manner.

This paper is a summary of the latest periodic review of experience under SAF-and ESAF-supported programs (the last comparable study was published in 1993). It provides an overview of policies and economic developments in 36 countries during 1986–95, pulls together the main lessons from this experience, and sets out proposals for strengthening the design and implementation of future programs. The report draws on a number of background studies, which will also be published shortly. The review was directed by Susan Schadler, Senior Adviser in the Policy Development and Review Department, under the general guidance of the department’s Director, Jack Boorman. The principal author of the summary report was Hugh Bredenkamp, Chief of the Policy Review Division. The staff team comprised Sharmini Coorey, Jorg Decressin, Louis Dicks-Mireaux, Zia Ebrahimzadeh, Ali Ibrahim, Kalpana Kochhar, Jean Le Dem, Mauro Mecagni, Steven Phillips, and Tsidi Tsikata. A background study on revenue and expenditure policies in SAF- and ESAF-supported programs was prepared by staff of the Fiscal Affairs Department, under the direction of George Abed, Senior Adviser.

The authors are grateful to numerous colleagues in the Fund for detailed comments on the paper; to Kirsten Fitchett, Emmanuel Hife, and Kadima Kalonji for research assistance; to Lourdes Alvero, Julia Baca, and Olivia Carolin for secretarial assistance; and to Esha Ray of the External Relations Department for editorial assistance.

The opinions expressed in the paper are those of the authors and do not necessarily reflect the views of the IMF or of its Executive Directors.

Economic Adjustment and Reform in Low-Income Countries