THE TWO PHASES OF STRUCTURAL ADJUSTMENT/143devaluation, liberalisation measures boost the local price of imported
inputs (fertilisers, herbicides, seeds, equipment, and so forth) and
have an immediate impact on the price structure in most areas of
economic activity.
Setting the Price of Petrol and Public Services
The price of petrol is set by the state under the supervision of the
World Bank. Increases in the price of petrol and public services (often
by several hundred per cent) destabilise local producers. High
domestic prices for petrol - often pushed up higher than the world-
market price - are felt throughout the cost structure of domestic
industry and agriculture. As a result, production costs are inflated
well above prevailing local prices for goods, driving many companies
to bankruptcy.
Periodic World Bank-imposed jumps in the price of petrol and oil
products (implemented alongside import liberalisation for basic
goods) create an 'internal transit tax', whose goal is to cut local
producers off from their own internal market.
In many developing countries, the high cost of petrol paralyses the
transport of goods within the country. The high cost of transport -
imposed by the international financial institutions - is a key factor
preventing small local producers from selling their products in city
markets, where there is direct competition with agricultural products
imported from Europe and North America.
Furthermore, the World Bank has been pushing for all government
services to be offered at cost or transferred to the private sector. Not
only healthcare and education (see below), but also communica
tions: roads, electricity and water.
The fact that even the poor are entirely prepared to pay for most infra-
structural services, makes it all the more possible to charge fees.
Private-sector participation in management, financing and
ownership will, in most cases, be necessary to give a commercial
edge to infrastructure use. (World Bank, 1994) (emphasis mine)De-indexation of Salaries
The IMF imposes a reduction in real wages by de-indexing salaries
and liberalising the labour market. This means removing cost-of-