STRUCTURAL ADJUSTMENT PROGRAMMES/137The international financial institutions refinanced old debts, and
this became a method for forcing Third World countries to pay back
their debts as well as overdue payments on these debts.
For example, after the brutal repression of riots in 1989, the
Venezuelan government had its 'bad debts' turned into shares
guaranteed by the international financial institutions. Not a cent
from this IMF and World Bank rescue package actually remained in
the country.
More recently, the IMF, World Bank and Asian Development Bank
loans made to South Korea, Thailand, Indonesia and the Philippines,
have been aimed at repaying the short-term debt owed by these
countries (above all their private companies) to the big speculators
and institutional investors from the North and from within the
region.
MACROECONOMIC REFORM AND THE STRUCTURAL
ADJUSTMENT PROGRAMME
Loans from international financial institutions (including the
regional development banks linked to the World Bank) are provided
as balance of payments support - that is, short-term loans for
financing imports and debt-servicing. These loans are usually
provided on condition that a certain set of policies be implemented.
In other words, these are political loans that are provided by the inter
national institutions on condition that the government in question
adopt a programme of economic stabilisation and structural
economic reforms in line with their demands.
Agreements for such political loans explicitly call for a scaling-
down of internal undertakings. Unlike conventional loans, these
loans are never linked to investment projects.
(Author's note: I have based this section, and Chapter 12's
description of the two phases of adjustment, on Michel
Chossudovsky's account in La Pauvrete des nations (CADTM, 1994)
and The Globalisation of Poverty (1997). I have supplemented his
analysis with my own, for which additions I am solely responsible.)
Invariably, substantial reforms must already be under way before
any structural adjustment loan can be negotiated.
Governments must prove to the IMF that they are 'genuinely
engaged in implementing economic reform' before loan negotiations
can begin in earnest.