The effects of World Bank and IMF structural adjustment programs on developing countries in Africa

The World Bank and IMF constitute the Bretton Wood institutes and have been engaged in improving the welfare of low income and developing countries since 1960s. These institutions offer aid to the developing countries in form of loans and grants aimed at economic development of these countries. World Bank and IMF which tend to have the same organizational structure offer assistance both technically and financially to the developing countries' economy growth enacted using Structural Adjustment Programs. However, the exact nature of effect brought about by these institutions has been strongly criticized and questioned. The main purpose of the study is to examine the effects of World Bank and IMF Structural Adjustment programs on the economic growth of developing countries using Kenya as a case study. A Data set of 41 years was used covering the years between 1975-2016 for Kenya, Uganda, Tanzania, Ghana, Zambia and Rwanda. A dummy variable was created to capture the years where SAPs were applied and Panel regression was used to test the relationship between economic growth and the Structural Adjustment Programs and other independent variables like inflation, Balance of payments, exchange rate, exports and government expenditure. The study concludes that SAPs had no effect on GDP.A significant positive relationship is seen between GDP and other independent variables like total exports, government expenditure and IMF loans on the fixed panel regression. However, when using the Driscoll-Kraay's estimator IMF loans did not have a significant effect on GDP.