Structural Adjustment and Forest Resources: The Impact of World Bank Operations

37 Pages Posted: 20 Apr 2016

See all articles by Kiran Dev Pandey

Kiran Dev Pandey

World Bank

David Wheeler

World Bank - Policy Research Department

Date Written: April 24, 2001

Abstract

Structural adjustment has not promoted domestic deforestation, but it has increased net imports of wood products, implying some displacement of pressure onto other countries' forest resources. Devaluations have significantly increased the exploitation of forest resources.

Over two decades, the World Bank has undertaken many structural adjustment operations with governments of developing countries. During negotiations for structural adjustment loans (SALs), partner governments agree to specific policy reforms whose implementation becomes a condition for disbursement of SAL funds. Conditionality varies with local circumstances but generally supports privatization of state enterprises, liberalization of the domestic economy, and openness in international trade.

Structural adjustment operations have often been controversial because they are explicitly political. Opposition or support reflects ideological perspectives, perceptions of who gains and who loses economically from a SAL, or beliefs about its environmental and social impacts. Environmental groups express particular concern about SALs' impacts on the rate of deforestation.

Debate about adjustment and deforestation has been fueled largely by anecdotes and a few country cases based on limited time-series data. Pandey and Wheeler broaden the analysis by combining a complete record of Bank SAL operations with a 38-year socioeconomic database for 112 developing countries.

They find that adjustment has greatly affected imports, exports, consumption, and production in many forest products sectors (such as fuelwood, sawnwood, panels, pulp, and paper). Some activities have increased and some have declined, but overall the effects have balanced each other. The net impact on domestic roundwood production, the authors' proxy for forest exploitation, has been almost exactly zero. Their results suggest that growth in roundwood production is explained well by population growth, urbanization, and world demand for forest products. Their findings suggest that adjustment has not promoted domestic deforestation, but it has increased net imports of wood products, implying some displacement of pressure onto other countries' forest resources.

They also find that devaluations have significantly increased the exploitation of forest resources.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to understand the links between economic development and environmental change.

Suggested Citation

Pandey, Kiran and Wheeler, David, Structural Adjustment and Forest Resources: The Impact of World Bank Operations (April 24, 2001). World Bank Policy Research Working Paper No. 2584. Available at SSRN: https://ssrn.com/abstract=632653

Kiran Pandey

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

David Wheeler (Contact Author)

World Bank - Policy Research Department ( email )

1818 H Street N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/dwheeler

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