The conditional measures are found in the Structural Adjustment Programs, commonly called SAPs, and there are numerous conditions that may be imposed: such as reducing government spending, freezing wages in the civil services, retrenchment (layoffs) in the public sector, reducing the level of credit to the government, etc.

There is considerable controversy over how such a restructuring should be accomplished, though the need for restructuring is generally accepted. The problem is that the conditions often hinder, more than help.

Critics of the conditional measures and SAPs in general argue that they correct financial imbalances and improve economic conditions at the macro level for the short and intermediate run, but fail to improve the standard of living and the welfare of the average person. The conditions fail to address the long run sustainability of developing economies.

As an economist who specializes in development economics, I have seen in my own country, Ghana, that SAPs do not work well.

Ghana launched its Structural Adjustment program in 1983 in the form of an Economic Recovery Program (ERP). In the late 1980s, Ghana's program was perceived as "the model" by the IMF and the World Bank. Today, the IMF and the World Bank are very reluctant to refer to Ghana as their model.

Too often, restrictions on domestic spending tend to reduce output and employment. This is what happened in Ghana. Under the ERP in Ghana, measures were taken to re-deploy the civil service personnel by 5 percent. This resulted in about 150,000 civil servants being laid off each year from 1986 to 1989. This happened because a standard set of reforms was prescribed, this being one, irrespective of Ghana's particular situation.

Subsidy removals, another common prescription, increase prices and devaluation tends to increase the domestic price of imports, which is eventually passed on to the consumer, causing high inflation rates. In Ghana, Inflation averaged about 30 percent in the 1990s, but wage adjustments always lagged behind the rate of inflation, thus reducing the purchasing power of wage earners.

Market liberalization, which SAPs often demand, results in very high interest rates. Lending rates in Ghana averaged about 36 percent between 1998 and 2000, making the cost of borrowed capital extremely expensive. This stifled investment and growth.

SAPs have also left a huge debt over-hang in many developing countries. Ghana's foreign debt rose from about US$1 billion in 1983 to about US$6 billion in 2000. Many developing countries, including Ghana, have been identified as Heavily Indebted Poor Countries (HIPC) by the IMF and the World Bank in order for them to qualify for some debt relief. However, the conditions for financial assistance in the SAPs still hold in the HIPC initiative. A requirement in the HIPC initiative is that accrued savings from debt relief be directed towards poverty alleviation and investment in the social sector. As much as this is welcome news, it is an admission by the financia institutions that SAPs have disproportionately affected the poor, and have had negative impact on the social sector in developing countries.

Solutions I think it very clear that SAPs ignore policies and measures for sustained growth in the long run. A "gradual approach" to correcting the economic problems of developing countries, rather than the "shock treatment approach," would be preferable.

Measures to address the structural bottlenecks on the supply side in order to increase domestic production should be given top priority. For example, in the agricultural sector, measures should allow for the modernization of agricultural production, a good and effective agricultural extension service, agricultural credit and price support programs.

Increases in government spending should be allowed, provided that they contribute to the development of supply side capabilities. An improvement in domestic infrastructures, especially the road network into the rural areas, would improve the marketing and distribution of agricultural output. The development of agricultural-based industries, for example, food processing and storage industries that provide linkages to the productive sector, should be given top priority. Credits should be readily available to viable domestic firms at reduced interest rates to help them expand and improve efficiency.

To improve managerial capabilities, capacity building in managerial skills should be an integral part of adjustment programs. Efforts should be made to diversify developing economies away from primary commodity exports. We should encourage industries to process or semi-process primary commodities for exports.

And social programs like health and education should at least be partially subsidized by the government to make it more affordable and accessible. Meanwhile preventive health care programs need to be intensified in the rural areas.

Lastly, even though the introduction of the HIPC debt relief initiative by the IMF and the World Bank would reduce the debt burden of developing countries in the short run, the IMF and the World Bank should reconsider the stringent conditions attached to the HIPC initiative, which are not different from those of Structural Adjustment Programs.

Dr. Baffoe teaches Economics at Nipissing University. He has acted as a consultant for the Canadian International Development Agency (CIDA) and the North-South Institute on the social and economic impacts of Structural Adjustment Programs on Ghana, and Zambia. He is currently a member of the Board of Directors of the Canadian Hunger Foundation-Partners in Rural Development.