Environmentalists around the world have long been concerned about the impact of International Monetary Fund (IMF) structural adjustment policies on the global environment. While economic instability is a threat to the environment, the IMF’s approach to economic reform generally induces a blatant disregard for environmental impacts, even when the economic goals go hand in hand with environmental goals.

The result: too many economic policies that promote environmental degradation and too few policies that could promote positive environmental gains.

Pressure to Export
Structural Adjustment Programs (SAPs) treat natural resources as commodities, exported as cheap products to over-consuming markets in the Northern rich countries. Exports of natural resources have increased at astonishing rates in many IMF adjusting countries, with no consideration of the sustainability of this approach. For example, Benin, under SAPs since 1993, had sawnwood exports increase four fold between 1992 and 1998.(1)

Furthermore, it is often raw resource exports, whose prices are notoriously volatile, that are being promoted, rather than finished products, which would capture more value-added, employ more people in different enterprises, help diversify the economy, and disseminate more know-how.

Budget Cuts and Weakened Laws
Structural adjustment’s goal of balancing the government budget can also hurt the environment. In the effort to shrink budget deficits, cuts in government programs weaken the ability to enforce environmental laws and diminish efforts to promote conservation. Budget cuts in Brazil, Russia, Indonesia and Nicaragua have greatly reduced these governments’ ability to protect the environment. Governments may also relax environmental regulation to meet SAP objectives for increased foreign investment.

World Bank is no Example
The IMF explains that it relies on the World Bank to assess the environmental implications of its adjustment lending. Yet the World Bank has proven to be no help. A recent review found that fewer than 20% of World Bank adjustment loans included any environmental assessment.(2)

Another consequence of the IMF’s narrow approach to economic reform is that economic policies that could help promote environmental sustainability are being ignored. Tax policy, for example, could emphasize green taxes in order to generate revenue and discourage excessive resource use. In the IMF’s effort to build countries’ accounting systems and statistics capabilities, full cost accounting could be pursued to help both countries and international financial institutions realize the value of natural resources and would therefore encourage countries to use them prudently. Immediate steps must be taken to make sure that environmental protection is considered as a core component of economic policy reform.