As earlier defined, structural adjustment programs are sets of policies designed to reduce and eventually eliminate unsustainable internal and external imbalances in economies. Structural adjustment policies seek to increase the flexibility of the economy to respond to changes, promote the efficiency of resource allocation and utilization, reduce trade deficits, and balance government expenditures and revenues.
The World Bank and the IMF consider structural adjustment to be a logical - and in many cases inevitable - means to achieve sustained economic growth and address long-term development needs. SAPs generally include the following elements:
Reduction of government expenditures and elimination of disequilibria in the budget deficit;
Currency devaluation to encourage exports and rectify the balance of trade;
Removal of restrictions on free currency exchange (convertibility);
Elimination of subsidies and price controls;
Privatization of state-owned enterprises and general reduction of government interference in the national economy (promotion of free market principles);
Free entry by foreign firms into domestic markets, elimination of import controls and other trade barriers;
Slimming down public bureaucracies and general downsizing of government;
Expansion of tax base and strengthening of tax collection mechanisms;
Implementation of fee-for-service regimes in education and health care;
Promotion of free market principles to stimulate efficient allocation of resources.