Financial IGOs
Geography: Edexcel A Level, topic 11.4.4
Financial IGOs and the Developing World
Since the 1970s, tougher rules and strict conditions have been applied for large-scale lending, especially for developing countries. These have included the SAP and HIPC schemes:
SAPs
- SAP stands for Structural Adjustment Programmes. They are usually made up of loans from the IMF and World Bank.
- SAPs have made countries that receive lending follow specific routes to development, such as privatisation.
- Africa Action, an NGO, is critical of SAPs, claiming that the assumption that the market leads to benefits for the rich and poor is flawed.
- Ghana launched its structural adjustment plan in 1983. The IMF and World Bank say it is one of the most successful SAPs in Africa.
HIPC schemes
- HIPC stands for Heavily Indebted Poor Countries. There are 37 nations in this group, including Ghana, Ethiopia, Afghanistan and Senegal.
- HIPC schemes aim to make sure that no country faces an unmanageable debt burden (amount of debt).
- Under HIPC schemes, countries must reduce poverty over time and meet other criteria. If they meet all of these criteria, then they may have all their external debt cancelled.
- Chad achieved this in 2015.
- Some people argue that SAPs and HIPCs mean the sovereignty of these nations is questionable - are they perhaps neo-colonial?
Regional Trade Blocs
Regional trade blocs are intergovernmental groups that reduce the barriers to trade in their region.
European Union
- The European Union is a trade bloc made up of 28 European nations (as of 2018).
- The European Union is the most tightly integrated trade bloc, because it combines common external tariffs, with the free movement of labour and for many nations, a common currency in the Euro.
NAFTA
- The North American Free Trade Agreement (NAFTA) is a trade bloc made up of the USA, Canada and Mexico.
- NAFTA supports free trade between its three members. Removing internal quotas and tariffs is the aim of the organisation.
- NAFTA does not have common external tariffs on nations outside the 'customs union' or 'trade bloc'.
ASEAN
- The Association of Southeast Asian Nations is a trade bloc of 10 Asian countries, including Indonesia, Malaysia, Singapore, the Philippines, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam.
Mercosur
- Mercosur is an economic grouping of Argentina, Brazil, Paraguay and Uruguay.
- It was established by the Treaty of Asuncion in 1991.
- Mercosur does have an external tariff on goods from outside the trade bloc.
COMESA
- COMESA is a grouping of 19 countries in east and southern Africa.
- Its members include Kenya, Libya, Egypt, Madagascar, Mauritius and Zambia.
Test yourself on Financial IGOs
How many Heavily Indebted Poor Countries are there?
Which nation does the IMF promote as its most successful SAP in Africa?
What does the World Bank's SAP stand for?
Which of these nations are classified as Heavily Indebted Poor Countries?
Kenya, Libya, Egypt, Madagascar, Mauritius and Zambia are the members of what regional trade bloc?