Structural Adjustment

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DEFINITION

A type of credit facility that helps developing countries become more economically self-sufficient. Structural adjustments are intended to reduce the current account debt of a debtor nation, as opposed to financing a new project. They do this by allowing the debtor nation to reschedule principal payments to a later date.

INVESTOPEDIA EXPLAINS

Structural adjustments were first introduced by the World Bank in 1979. They usually take the form of multi year agreements, in which the borrower promises to instigate domestic economic growth through increased exports and economic diversity. Therefore, the borrowing country will be better able to make the payments later, when its economy is stronger.




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