Technocracy Questioned: Assessing Economic Stabilisation in Nicaragua

Abstract

— The Chamorro government (1990–1996) has finally achieved stabilisation in Nicaragua. At first sight, this government has been a classic example of technocracy, implementing stabilisation and structural adjustment policies as recommended by the IMF and the World Bank. The paper argues that the IMF and the World Bank did have a considerable influence on economic policies, but that these policies suffered from limitations. The priority of internal stabilisation implied that insufficient attention was paid to the external balance, and the liberalisations and privatisations did not create a competitive market economy, but tended to favour a small group. Furthermore, the foreign aid that accompanied the programmes permitted this discretionary government behaviour.

When Does Aid Conditionality Work?

“…While many examples of failed adjustment exist, and the long-term effects of structural adjustment programs are debatable, some governments have adopted adjustment policies as conditions for aid from the IMF and World Bank. In 1991, the Chamorro government of Nicaragua (1990Nicaragua ( -1996 adopted stabilization and structural adjustment measures after signing agreements with the Bretton Woods institutions, and Nicaragua's government deficit as a percent of GDP dropped from 20% in 1990 to 8% in 1996 (Dijkstra 1999). In 1986, the Paz Estennsoro government of Bolivia (1985Bolivia ( -1989 carried out fiscal reforms, including a wage freeze and job cutbacks in the public sector, with the initiation of adjustment lending from the IMF (Bird 1992;Solimano 1990).…”