The Impact of International Monetary Fund (IMF) Structural Adjustment Policies (SAP) on the Philippines

Abstract

This paper investigated the impact of IMF structural adjustment policies (SAPs) on the Philippine economic performance. The study utilized critical analysis approach to evaluate secondary data from government statistics, the Bangko Sentral ng Pilipinas (BSP), World Bank, IMF and articles from online refereed journals. Analyses were focused on IMF prescribed SAP loan conditionalities pertaining to liberalization, export-oriented economic efficiency, privatization of estate owned assets, reducing government expenditures, and streamlining the bureaucracy. Findings revealed that trade liberalization implemented through stripping off restrictions of more than 900 items and reduction in nominal tariff protection fell short from the onset of global recession. Apparently, aggregate exports contracted instead of expanding while imports disproportionately increased when importers took advantage of the liberalized regime. This resulted to severe erosion of the Philippine industries which were left unable to compete in the open market. Government revenues, generated from the SAP driven privatization policy were redirected for debt servicing rather than being invested on productive programs and projects for economic development. This privatization policy even created local monopolies in the country’s capital market. Reduction in government expenditures through tightening of government budget, cuts in government subsidies and freezing the filling up of government vacant positions, failed to significantly impact on poverty alleviations and underpinned the much needed resources for basic health, education and social services delivery programs. In conclusion, the adherence by the Philippines to IMF loan conditionalities did not significantly benefit the country as manifested by the country’s sluggish economic development. The Philippines should never go back to the IMF loan portfolio, it should find other resources to propel growth and development away from IMF borrowing. Prudently however, it may continue to avail the Fund’s technical assistance program on monetary and international banking expertise without incurring external debt obligations from the Fund.