Fresh start in Africa : A.I.D. and structural adjustment in Africa

has been supporting the process of structural adjustment in Africa for six years, funding 42 separate policy reform programs in 22 countries. According to this evaluation, the record of these programs is much better than anticipated, and there is no clear evidence of general negative effects on the poor. The impact on prices has been mixed, and, although real wages have dropped, this has had little impact on the poor since they rarely participate in the formal economy. Also, there is no systematic evidence that adjustment has led to reduction in education and health spending; indeed countries undergoing adjustment are as likely to increase expenditures as to reduce them. Highlights of the programs include the following. Market liberalization has reduced marketing costs, which in turn has increased incomes of both producers and consumers. Moreover, most liberalized markets are competitive, with marketing margins reflecting real costs of transportation and assembly. The opening up of these economies has been especially important for smaller firms, particularly those in the informal sector, since protection has always favored the large and inefficient over the small and efficient. However, the formal economy may face short- run difficulties, as inefficient firms reduce operations or close while the newly competitive ones only slowly expand. The report concludes that, since the structural adjustment movement has not had mass support, its future remains in doubt. Recommendations for A.I.D. support are presented.