Import Dependency and Structural Adjustment in Sub-Saharan Africa

Abstract

One of the effects of structural adjustment programs in Sub-Saharan Africa has been the reduction of imports in the face of scarce foreign exchange. This article takes the analysis of import demand beyond the traditional income and price determinants to account for factors likely to be important to Sub-Saharan African countries in the 1990s. First, the effect of demand on imports is reflected by the level of absorption rather than the less direct income variable. Second, because adjustment programs may cut government consumption and, through increases in interest rates, reduce investment, these components of absorption are also considered independently to assess their differential effect on imports. Third, import barriers are often set in dollar terms to limit the use of foreign exchange. Because reliable and complete data for import restrictions are not available, the ratio of exports to debt is included as an indicator of foreign exchange availability to reflect its effect on trade barriers and thus imports. The findings suggest that this more comprehensive assessment of import demand will be needed if the size and even direction of changes in import demand in response to policy reform is to be understood and anticipated.

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