THE TWO PHASES OF STRUCTURAL ADJUSTMENT/141In the run-up to these devaluations, the wealthy classes are given
enough time to convert their local currency into hard currencies
before the local currency is devalued. After the devaluation is carried
out, they convert their hard currency back into local currency. When
the CFA franc (currency used in 13 of France's former West African
colonies) was devalued in January 1994, those holders of capital who
had changed their money into hard currency in time saw the value
of their capital double in one fell swoop.
The short-term gains a country experiences after a devaluation
are inevitably erased once other competing Third World countries
are themselves forced to devalue. The Bretton Woods institutions
often demand a currency devaluation as a condition for entering into
negotiations on structural adjustment loans.
Budget Austerity
The IMF imposes very precise guidelines, taking stock of the budget
deficit and the breakdown of government spending. These guidelines
affect both operational spending and development spending. The
Bretton Woods institutions dictate the dismissal of public sector
employees and drastic cuts in spending on social programmes.
These austerity measures affect all categories of public spending.
When the debt crisis began, the international financial institutions
restricted their intervention to setting budget-deficit objectives that
would enable the country in question to meet its debt-servicing
obligations. Since the end of the 1980s, the World Bank has tightly
controlled the very structure of public spending through what is
known as the Public Expenditure Review. In this way, the breakdown
of each ministry's spending is supervised by the Bretton Woods insti
tutions. The World Bank recommends an 'effective transfer of costs'
from regular areas of spending to those 'with a specific objective'.
According to the World Bank, the goal of 'public spending
supervision' is to 'promote poverty reduction through effective and
efficient spending'.
The structure of investment spending is also forced to target a
'specific objective'. The Public Investment Programme, also under
the supervision of the World Bank, demands that governments
severely reduce the number of investment projects. The concept of
'investment to meet an imposed objective' is used to reduce spending
on basic economic and social infrastructure to the bare minimum.